Imagine a situation in which a commercial tenant keeps valuable inventory in a rented space, but because the property owner did not properly maintain the roof of the building, unforeseen water intrusion destroys the tenant’s inventory. Is the landlord covered under his standard form commercial general liability (CGL) policy if that tenant sues for damages?
This issue—whether property damage caused by defective construction work constitutes an accidental “occurrence” under the insurance policy—has been frequently litigated in recent years. The outcome of that coverage issue is largely dependent on which state’s substantive law applies.
This is because a majority of jurisdictions have found that defective or faulty workmanship can constitute an “occurrence” under standard form CGL insurance policies. A minority of jurisdictions, on the other hand, have found that construction defect claims do not, and cannot, give rise to an accidental “occurrence” within the meaning of the CGL insurance policy, and these jurisdictions therefore bar coverage for such construction defect claims.