10th Circ. Split Adds Wrinkle To NY Faulty Work Coverage Law


  • February 15, 2018

The Tenth Circuit recently held under New York law that general contractor Black & Veatch Corp.'s liability policy covers damages resulting from a subcontractor's shoddy work, wading into an unsettled area of Empire State jurisprudence and likely setting the stage for the state's highest court to weigh in on the issue.

In a 2-1 opinion issued Tuesday, a panel of the appeals court agreed with B&V that the company's $25 million umbrella policy with Aspen Insurance Ltd. and Lloyd's Syndicate 2003 — collectively referred to as "Aspen" in the decision — applies to claims alleging damage to a third party's property as the result of faulty work by its subcontractor and other lower-tier subcontractors.

The majority predicted that the highest court in New York — whose law governs B&V's policy — would likely follow a "clear trend" among state supreme courts holding that damages tied to a subcontractor's faulty work can constitute an occurrence under a commercial general liability insurance policy. Despite the massive volume of construction projects in New York, the state's high court, known as the Court of Appeals, has yet to issue a definitive ruling on the subject.

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