AGC Successfully Defends Insurance Coverage for Construction Defects

Siding with AGC of America and the AGC of Alabama, the U.S. Court of Appeals for the Eleventh Circuit has unanimously held that the contractual liability exclusion to coverage under the commercial general liability (CGL) policies sold to AGC members across the country does not deprive these firms of coverage for claims that they are in breach of contract.  Consistent with the vast majority of the legal authorities on the subject, the court held that the exclusion is limited to claims for indemnification in accordance with a hold harmless or similar clause.

Many if not most claims for construction defects include claims for breach of contract.  If the courts construed the contractual liability exclusion to carve out and exclude coverage for any claim for breach of contract, AGC members would lose much if not most of their current coverage for such defects.  In 2010, in Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London, the Texas Supreme Court came very close to taking that controversial step, and since then, the insurance industry has been encouraging the courts to broadly construe the contractual liability exclusion.  The Eleventh Circuit’s decision marks a significant point in the construction industry’s effort to push back.

 For more information, please contact Mike Kennedy at 703-837-5335

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