A New Jersey appeals court set the stage for high-stakes battles between policyholders and their insurers over insurance for construction defect liability claims by ruling last week that coverage extends until the nature and scope of the property damage becomes apparent.
In an Oct. 12 opinion, a panel of the state Appellate Division vacated a trial court's ruling that Selective Insurance Co. has no obligation to defend or indemnify HVAC subcontractor Air Master & Cooling Inc. in litigation over alleged defects at a condominium building. The lower court had ruled in Selective's favor based on its conclusion that the purported damage predated the insurer's policy period.
The appellate panel applied the so-called "continuous trigger" theory, under which a policyholder can access coverage for gradual damage under every policy in effect from the dates it worked on a construction project through the time the alleged damage materialized. To set boundaries, the panel held that the "last pull" of the trigger — that is, the ending or manifestation point — is the date on which the "essential nature" and scope of the property damage first becomes known, or should have become known.
From a practical standpoint, though, insurance attorneys say it is not entirely clear what sort of evidence will satisfy the Appellate Division's standard for the "last pull" in construction defect coverage cases. As a result, it will be more difficult for either policyholders or their insurance carriers to quickly obtain summary judgment on the trigger issue, according to attorneys.
"It is an interesting ruling because it all but assures you are not going to have summary judgment motion practice on trigger, because the issue is so fact-intensive," said Lynda Bennett, chair of Lowenstein Sandler LLP's insurance recovery group. "It is a 'we'll know it when we see it' type of standard."
And as Anderson Kill PC shareholder Robert Chesler explained, the determination of the property damage's manifestation date can have major financial implications for policyholders.
"This is a critical issue," Chesler said. "If you push the manifestation date back, you would lose some valuable coverage."
To read the full article: NJ Court Tees Up Fights On Building Defect Coverage Trigger