Protecting Against Faulty Workmanship Claims

Posted by Zoe Klein on January 17, 2011

Recent Pennsylvania court decisions have virtually eliminated any insurance coverage under commercial general liability policies for claims brought against general contractors arising from the faulty workmanship of their subcontractors.

Construction Executive.pngJonathan A. Cass, partner with Cohen Seglias Pallas Greenhall & Furman, PC, recently co-authored an article with Peter Stoll, Jr. and Mary Stoll Walter of The Stoll Agency, Inc. for the December 2010 issue of Construction Executive magazine, titled “Protecting Against Faulty Workmanship Claims” which dealt with this topic. The article discusses how courts in certain states have eliminated insurance coverage for claims arising from the faulty workmanship of subcontractors, and explains how general contractors can use, as an alternative to insurance coverage, performance and maintenance bonds to provide protection against such faulty workmanship claims.

To read the full article, please visit Construction Executive, and for more information please contact Jonathan Cass.

Pennsylvania Supreme Court Declares Insurance Defense Costs May Not Be Reimbursable

Posted by Elise M. Carlin on December 02, 2010

Jonathan A. Cass, senior counsel with Cohen Seglias contributed to this post.

Your company is sued as a result of an alleged constructive defect. You tender the claim to your insurance company and they hire and pay for a lawyer to defend your company. It is later determined that there is no insurance coverage for the construction defect claim. Can the insurance company force your company to reimburse it for all the costs that it spent in defending the action? The answer depends on the language contained in your insurance policy.

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Recently, the Pennsylvania Supreme Court determined that an insurer who assumes an insured’s defense is forbidden from seeking reimbursement of defense costs from the insured unless the policy specifically permits it to do so.

American and Foreign Insurance Company v. Jerry’s Sport Center, Inc.

In American and Foreign Insurance Company v. Jerry’s Sport Center, Inc., the Court held that even if a court ultimately determines that an insurance company had no duty to defend its insured, that insurance company generally cannot seek reimbursement of defense costs from the insured “absent an express provision in the written insurance contract.”

Jerry’s Sports Center (Jerry’s) was a sporting good store that sold firearms. It was one of eighteen firearms wholesalers and distributors sued by the National Association for the Advancement of Colored People (NAACP) and the National Spinal Cord Injury Association (NSCIA) who “sought to hold the firearms industry liable for injury, death, and other damages to association members through the negligent creation of a public nuisance by virtue of the industry’s failure to distribute firearms reasonably and safely.” The NAACP and the NSCIA alleged that the firearms dealers caused bodily injury to its members, and while it did not seek monetary damages to compensate individual members injured by the defendants’ actions, it did seek injunctive relief, along with monetary damages to “establish a fund for the education, supervision and regulation of gun dealers.”

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