McKenna Long & Aldridge LLP On A Roadmap For Determining Coverage For Construction Defect Claims In New York

   By Richard B. Friedman, J. Stephen Berry, and P. Michael Freed, Attorneys, McKenna Long & Aldridge LLP

In their commentary, McKenna Long & Aldridge LLP on a Roadmap for Determining Coverage for Construction Defect Claims in New York, by Richard B. Friedman, J. Stephen Berry and P. Michael Freed observe that New York law makes it difficult for general contractors to establish coverage for construction defect claims under their Commercial General Liability policies.  Insureds will seldom if ever find coverage when sued for defects in their own work.  The law is especially strict with regard to general contractors; according to George A. Fuller Co. v. United States Fidelity & Guaranty, 613 N.Y.S.2d 152 (N.Y. App. Div. 1994) and its progeny, their "own work" includes the entire project.

Significantly, New York courts will seldom find coverage where damage results from "intentional cost-saving or negligent acts only affecting [the property owner's] economic interest in the building."  When the original decision to cut costs is intentional, there can be no "accident" and thus no "occurrence."  Nor will courts find coverage where the claims against the insured are contractual in nature.

The commentary further notes, "While New York law is relatively restrictive with regard to coverage for faulty workmanship, it allows for relatively broader coverage when the defect at issue arises out of faulty materials.  However, coverage for general contractors remains constrained by the boundaries laid out in Fuller."

This commentary explores the leading case law in New York and provides bullet-point guidance that will help insurers and insureds alike quickly identify the crucial issues on which coverage for construction defects often depends.

Richard B. Friedman is a partner in the New York office of McKenna Long & Aldridge LLP.  He principally handles complex commercial and construction litigation, arbitration, and mediation matters for insurers and non-insurers in New York state and federal courts.  Rich is one of the dozen or so practitioner members of the Advisory Committee to the New York County Commercial Division on which he serves with the eight judges of that court.  The Commercial Division has become the venue of choice for many of the most sophisticated business disputes in the country.  Rich has published numerous articles on so-called "alternative" and other non-hourly rate fee arrangements as well as specific ways to improve the relationships between outside and in-house counsel.  Rich is also a frequent panelist and moderator on those topics at CLE programs.

Stephen Berry is a partner in the Atlanta office of McKenna Long & Aldridge LLP.  His practice is nationwide and focuses on the areas of insurance coverage and insurance bad-faith, with particular emphasis on general liability, construction defect, and catastrophic property damage claims.  Stephen is listed in Georgia Super Lawyers and has been listed in Best Lawyers in America, in the practice area of Insurance Law, every year since 2007.  He has published numerous articles on coverage for third-party construction defect and first-party property damage claims, and frequently speaks on those topics to public audiences and insurer in-house training seminars.

Michael Freed is an associate in the Atlanta office of McKenna Long & Aldridge LLP.  Michael's practice focuses on insurance coverage and insurance bad-faith litigation, law firm defense, and general commercial litigation.  Michael's insurance coverage practices include matters involving many types of commercial insurance policies with a particular emphasis on professional liability claims.  As part of his practice, Michael provides insurance coverage analysis and advice to several major insurance companies.  Michael has been recognized as a Georgia Rising Star in the area of insurance coverage law.  Michael has published numerous articles on insurance and professional liability issues.

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