Construction projects are inherently risky. From minor property damage to catastrophic injuries, the potential for legal disputes is high. This is where Commercial General Liability (CGL) policies come into play. These policies are vital risk management tools for all parties involved in a construction project, offering protection against a wide array of liability claims. Understanding their nuances is crucial for navigating the complexities of construction litigation.
What does a CGL policy cover?
CGL policies typically cover third-party bodily injury and property damage claims arising from the insured’s operations. Key coverages in the context of construction include:
- Premises Liability: This covers injuries to individuals who are on or near the construction site, such as subcontractors, visitors, or passersby.
- Operations Liability: This protects against claims for property damage or bodily injury caused by the insured’s construction activities, such as damage to adjacent buildings or injuries caused by falling debris.
- Products-Completed Operations: This coverage extends to claims arising after the project is completed, such as defects in workmanship that cause injury or damage.
- Contractual Liability: This can cover liability assumed by the insured under contracts, such as indemnification agreements common in construction.
How do CGL policies impact construction litigation?
CGL policies have a significant impact on construction litigation in several ways:
- Defense and Indemnification: The insurer has a duty to defend the insured against covered claims and to indemnify them for any resulting settlements or judgments. This can be a crucial lifeline for contractors facing costly litigation.
- Trigger of Coverage: Determining when a claim “triggers” coverage can be a major point of contention. Was it the date of the accident, the date of the alleged negligence, or some other point in time? Different “trigger” theories (e.g., manifestation trigger, continuous trigger) exist, leading to complex legal battles, particularly in cases involving long-tail claims like those arising from asbestos exposure or faulty construction that manifests years later.
- Additional Insureds: Construction contracts often require one party to add another as an “additional insured” on their CGL policy. This extends coverage to the additional insured for claims arising out of the named insured’s work. Disputes often arise regarding the scope of coverage for additional insureds, particularly regarding the meaning of endorsements and limitations in the policy.
- Exclusions: CGL policies contain exclusions for certain types of claims, such as those arising from pollution, intentional acts, or professional liability. Understanding these exclusions is critical, as they can significantly impact the availability of coverage.
- Policy Limits: The policy’s limits of liability can become a point of contention, especially in cases involving multiple claimants or extensive damages. Disputes may arise regarding whether the limits apply per occurrence, per claim, or in aggregate.
Strategic Considerations in Construction Litigation:
- Tendering Claims: Prompt and proper notice of claims to the insurer is essential to ensure coverage.
- Coverage Analysis: Thorough analysis of the policy language, including endorsements and exclusions, is crucial to determine the scope of coverage.
- Expert Testimony: Expert witnesses, such as insurance professionals or construction specialists, can provide valuable insights on complex coverage issues.
- Settlement Negotiations: Understanding the policy limits and the insurer’s potential exposure can inform settlement strategies.
Conclusion
CGL policies are essential for managing risk in the construction industry. However, navigating the complexities of these policies in the context of litigation requires a deep understanding of their terms and conditions. By carefully considering the coverage issues, exclusions, and potential disputes, parties can effectively protect their interests and achieve favorable outcomes in construction litigation.