Faulty Work and The Commercial General Liability Policy

December 26, 2018

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We all make mistakes (even if we don't like to admit to them always).  It is just a matter of what, when and how. 

We are human. Humans make mistakes.

Lives can be changed in a moment by a mistake that happens on or off the job site. Take Fred Merkle, for instance. Almost 100 years after the fact, just one mistake will be forever known as the Merkle Boner, the most controversial game in baseball history. 

It is the ninth inning and there are two outs and the score is tied with the Chicago Cubs. Fred Merkle stood on first base. His teammate was on third base. The hitter promptly singled, driving the the winning run and winning the pennant for the Giants. Or so Fred Merkle thought. 

The celebration began. Merkle went from first base to the dugout, never touching second base. An alert Cub player fought through the crowd, got the ball and jumped up and down on second base, getting Merkle out by a force play and nullifying the run. The game was declared a tie and had to be replayed. The Giants lost the replayed game and gave the pennant to the Cubs in 1908.  At the age of 19, Fred Merkle, had made a mistake that cost his team a World Series win. 

So what could this possible teach us about Commercial General Liability Insurance? Fred Merkle never intended or expected to be put out at second base or lose the game or pennant. It was an accident. This is the prime element of an "occurrence" as defined by a  Commercial General Liability (GCL) Insurance Policy. 

Bodily Injury

An occurrence must result in either property damage or bodily injury for the CGL to kick in. In this case, no one was physically harmed so no bodily injury happened.

Property Damage

Property damage requires more than just the loss of revenue or unexpected additional costs. Property damage requires physical injury to tangible property. The owners of the Giants certainly lost significant revenue but the Polo Grounds (the Giant's home field) was not damaged, so no Property damage occurred either.

Faulty Work

There is a strong trend that is going toward interpreting an "occurrence" to include property damage from faulty work.  It can be defined as any type of operation, including materials, parts or equipment which is done incorrectly. 

Faulty Work As An Occurrence

Whether faulty work is an occurrence is a threshold matter as respects CGL coverage. If faulty work is not an occurrence, the CGL will not apply. The CGL Coverage A insuring agreement responds only to bodily injury or property damage caused by an occurrence. For several decades, insurers have contended that faulty work is not accidental in nature if the resulting property damage is to the work itself as such damage is a foreseeable business risk—and thus not property damage caused by an occurrence.

In a nutshell, faulty work can be covered by the CGL policy. In most instances, it is no longer adequate for insurers to disregard the import of the "Damage to Your Work" exclusion and the subcontractor exception to that exclusion by asserting faulty work is never an occurrence in a CGL policy. Instead, properly determining coverage requires a detailed understanding of precisely what happened as well as a thorough understanding of how the property damage exclusions (and their exceptions) apply. Too often, coverage is denied without a good faith effort to ascertain the facts or by a less than careful reading of the CGL policy. While it may be easier and more expedient to deny coverage using buzz phrases, there has been a marked shift by a number of courts in how CGL policies are interpreted for the purpose of determining coverage arising out of a contractor's faulty workmanship. This trend is in favor of holding that such claims may arise from an occurrence. Don't let your mistakes (faulty work) change the history of your business.

Let' s make sure you are covered.


Keeping you protected.




All Access Insurance in Littleton, CO,  who represents multiple insurance companies as a “Broker”and provides products for auto, home,  commercial, workers compensation, and much more! Call us today for a free quote at (303) 932-1700.