SC Supreme Ct. Decision Insults Builders Seeking Construction Defect Coverage According To Construction Insurance Specialist

Source:, February 15, 2011
In the recently filed case of Crossmann v. Harleysville, The SC Supreme Ct. reinstated the controversial line of “no occurrence claim denials” for construction defect under a General Liability policy. This ruling subverts the intent of the drafter’s of the General Liability policy form and manages to insult professional builders along the way, according to construction insurance specialist, John Sadler.
In Crossmann v. Harleysville, Opinion No. 26909, filed on January 7, 2011, the SC Supreme Court ruled that faulty workmanship which results in property damage to a builder’s work is no accident. Instead, such property damage is intended, foreseen, expected, and a natural and probable consequence of the builder’s faulty workmanship. Therefore, faulty workmanship does not rise to the level of an “occurrence” and as a result is not covered by a builder’s General Liability policy.
According to John Sadler, President of Sadler Contractor Insurance, “The ruling in this case is an insult to the many professional builders that I’ve advised and insured over the past 25 years. For those builder clients that have had construction defect claims filed against them, to say that they intended and expected the construction problem to arise is not true in the majority of cases. Many of the claims were frivolous lawsuits where the true cause of the problem was lack of routine maintenance on the part of the homeowner such as lack of caulking. Other claims resulted from the use of synthetic stucco (EIFS) and similar products where the builder had no reason to believe that such products would ultimately be found to be inherently defective. However, the majority of the claims were caused by unknowing mistakes in the construction process where the builder certainly didn’t expect a problem to arise.”
“The ‘no occurrence claim denial’ line of cases subverts the intent of the drafters of the General Liability policy form because it cuts off all subsequent discussion of the property damage exclusions and special property damage endorsements. The proper way for insurance carriers to select the types of construction defects they do or do not want to cover is through the special property damage endorsements such as CG2294 and similar.”
For more detailed information on the Crossmann v. Harleysville decision and the “no occurrence claim denial” strategy, visit our blog on construction insurance and risk management issues.
About Sadler Contractor Insurance:
Sadler Contractor Insurance is a division of Sadler & Company, Inc. and specializes in insuring home builders, remodelers, light commercial general contractors, and trade contractors in the southeast. Policies written include Workers’ Compensation, General Liability, Builders Risk, Auto, Umbrella, and Property. John Sadler, President of Sadler & Company, Inc. is a contractor liability insurance specialist, risk manager, attorney, author, and speaker on issues relating to business insurance.

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