Michigan Supreme Court Decision on Case
MICHIGAN- The Michigan Supreme Court recently held that work performed by subcontractors that is unintentionally defective may be considered an “accident” for the purposes of commercial general liability (CGL) coverage in Michigan. The work can, therefore, lead to valid claims made under subcontractor’s insurance coverage.
The decision ends a $1.4 million lawsuit stemming from faulty subcontractor work performed on an HVAC system in a medical center. The subcontractor reportedly incorrectly installed the expansion joints. The mistake caused damage to various parts of the structure, including the heating system and concrete.
The insurance company rejected the contractor’s claim stating that the issue was not an “accident” based on the subcontractor’s CGL policy. In the policy itself, the company had neglected to define “accident.” The court found that the incident would qualify as an accident.
The court also stated, though, if the policy specified that defective work would not be covered, then the decision would not apply.
The decision is viewed as an indication that Michigan is a business-friendly state. The ruling is in line with similar decisions made in several other states, including Georgia, South Carolina, Florida, Mississippi, Indiana, and Texas. Federal courts deciding cases in Arkansas and Minnesota also issued rulings in line with the Michigan decision. However, a federal court came down with a different ruling in a case based out of Missouri. The Eighth Circuit Court of Appeals stated that construction defects are normal for the industry, and cannot be considered unexpected, which the term “accident” implies.
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