On Dec. 21, 2012, ASA, ASA of Texas, and other construction industry trade organizations asked the Texas Supreme Court to respond to two certified questions about state law in a way that affirms legal precedent and prevents the erosion of insurance coverage provided by contractors’ CGL insurance coverage.
The two questions, posed to the court in the case of Ewing Construction Co. Inc. v. Amerisure Insurance Co., relate to (1) whether the “Contractual Liability Exclusion” of a CGL policy excludes coverage for damage arising out of a contractor’s defective work, and (2) whether that exclusion does not apply, according to other terms in such policies that reinstate coverage for “liability that would exist in the absence of contract.”
ASA, ASA of Texas and the other amici curiae told the high court that contractors are owed the coverage promised in their CGL policies in either case. “Applying the Contractual Liability Exclusion to property damage to an insured contractor’s work simply because that property damage may breach its contract has a profoundly negative effect on CGL coverage for the construction industry,” the associations told the court.
To decide otherwise would be “nothing short of a radical departure from the means by which CGL coverage has traditionally been provided by the insurance industry to contractors.”
The U.S. Court of Appeals for the 5th Circuit on Aug. 8, 2012, asked the Supreme Court of Texas to decide when exclusions to insurance coverage apply. The appeals court vacated an earlier decision in the Ewing case on the grounds that the state high court and not a federal court should decide the questions of state law.
Contractors in Texas and across the country are keeping a close eye on the outcome in the Ewing case. “An unwarranted over-extension of the Contractual Liability Exclusion to an insured contractor’s liability for property damage arising out of its own breach of contract is truly a game changer for the Texas construction industry and has potential ramifications well beyond that industry,” ASA, ASA of Texas and the amici curiae said. ASA tapped its subcontractors legal defense fund to finance the brief in this case.
For more information, visit http://www.sldf.net or contact ASA at SLDF@asa-hq.com.