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Duty to Defend General Contractors

Recently the 4th Circuit found a subcontractor’s insurance carrier owed a duty to defend the general contractor in the case of Capital City Real Estate, LLC v. Certain Underwriters, 2015 U.S. App. LEXIS 9662 (4th Cir. 2015). The salient facts were as follows: A common wall between two homes collapsed. One the one side, the homeowner’s carrier paid the damages, then brought a subrogation claim against only the General Contractor who was conducting repairs on the other side. The Complaint alleged that the General was negligent in the permitting process for the work.

The General entered into a subcontract where the Subcontractor did the foundation work on the wall in question. The subcontract required that the General be a named insured on the Subcontractor’s policy. That was in fact done, with the Sub’s carrier using the ISO standard Endorsement which provided coverage to the General if the Subcontractor’s actions caused “property damage … in whole or in part.”

The General, in defense of the tort action, tendered its defense to the Sub’s carrier and also brought a third-party claim against the Subcontractor, alleging it was the Subcontractor’s negligence that caused the collapse. When the Subcontractor’s carrier refused to defend, the General brought a DJ action against the Subcontractor’s carrier.

The 4th Circuit concluded a duty to defend existed. First, looking at the standard ISO Endorsement, the Court held that there was no limitation within the Endorsement to only defend the General against vicarious liability claims. In other words, the scope of the Endorsement extended to property damage caused by the Subcontractor, in whole or in part, regardless of whether the complaint alleged vicariously liable for the Subcontractor’s acts. Next, the Court looked to the potentiality of coverage issue. While the original complaint only named the General, it clearly raised issues with not only the permitting, but the actual construction / renovation work. As the Court observed, obviously obtaining the permit did not cause the wall to fall down. Because it was alleged in the 3rd party complaint that the Subcontractor was responsible for the collapse, that gave rise to the potentiality of coverage under the policy.

For more information on when a duty to defend may be triggered in the construction law context, contact the attorneys at Walker, Murphy & Nelson, LLP today.

Disclaimer: This article is for general informational purposes only. Nothing contained herein constitutes legal advice, nor does it create an attorney-client relationship. All persons reviewing this should consult counsel for advice regarding any specific legal questions and any unauthorized use of this information is expressly prohibited.