The question of whether a construction defect is covered by commercial general liability (“CGL”) insurance is a hotly contested issue throughout the United States. A recent construction law article identifies four states that have passed statutes to require construction defect coverage under CGL insurance policies. The article may be found here.
The states that have passed statutes are Colorado, Hawaii, Arkansas and South Carolina. The Colorado statute creates a presumption that a construction defect is an accident, and therefore is an occurrence within the meaning of the standard CGL insurance policy. Arkansas and South Carolina both require that the policy contain a definition of occurrence that includes property damage or bodily injury resulting from faulty workmanship. Hawaii’s statute simply states that its intent is to restore coverage prior to a recent Hawaii Supreme Court decision.
Pursuing coverage for construction defects in these states should now be easier. We will have to wait and see if other states follow this trend.