Court Decisions Raise Concerns About General Liability Policy Wording  

Insureds should be working with their broker to check commercial general liability (CGL) policy wording as recent court decisions in at least four states have taken aim at some basic policy components. The court cases represent a trend that appears to superimpose narrow, unconventional interpretations on longstanding policy language. Although the actions have all stemmed from cases involving construction contractors, they are now being interpreted against any business-to-business dealing and have the potential to affect all CGL policyholders.

Concerns include a significant alteration in the definition of “occurrence” as used in CGL policies. In the decisions at issue, courts have held that property damage in connection with an alleged breach of contract cannot be an “occurrence” as defined in many policies, no matter how inadvertent the alleged faulty workmanship. This presents insureds with a potentially significant reduction in coverage, although there has been no corresponding reduction in premium.

The decision specifics vary by state, but Marsh sees several common threads in the decisions of the Pennsylvania, Hawaii, California,  and  Colorado courts.

Risk management solutions to the issues presented by these cases will vary according to risk profile and policy language. Marsh’s Casualty Practice is at the forefront of working toward resolution with the insurer community. Marsh has successfully addressed the ambiguity of policy language with the carrier community for our clients. In addition, we are working with several carriers to find continued solutions to the issues raised by these rulings.

To obtain Marsh's analysis each of the four court decisions, please complete the form to your right.