|
|
Publications
Appellate Court Finds No Coverage Under CGL Policy for Construction Defects to New Home
Insurance Law Update
Appellate Court of Illinois, First District
In CMK Development Corp. v. West Bend Mut. Ins. Co., __ N.E.2d __, 2009 WL 3574977 (Ill. App. October 30, 2009), the Appellate Court of Illinois, First District, held that an insurer had no duty to defend its insured under a commercial general liability (CGL) policy against construction defect claims, rejecting the insured’s attempts to characterize the defects as damage to “other property.”
The insured, CMK Development Corporation, was a residential real estate developer involved in the construction of a new home in Chicago. One day before closing, the purchasers of the home submitted to the developer a list of 58 alleged defects. The developer tendered the purchasers’ claims to its insurer, West Bend, seeking a defense and indemnification, but West Bend denied coverage. After the purchasers sent an arbitration demand to the developer, the parties settled the matter for $47,500. In the subsequent coverage action against West Bend, the insured developer argued that three of the alleged defects consisted of damage to “other property” that triggered the duty to defend under the policy. These defects included scratches on a toilet and bathtub, water damage to outdoor concrete work and damage to a cork floor. The trial court ruled that the insurer had a duty to defend because one of the defects consisted of damage to other property.
On appeal, the Illinois Appellate Court recognized that CGL policies normally do not provide coverage for damage caused by defective workmanship. However, under Illinois law, there is an exception where the defective workmanship causes damage to the property of another, rather than to the project itself. Still, the court held that West Bend had no duty to defend on the basis that all three categories of damages consisted of damage to the project itself (i.e., the new home), rather than damage to any property of another. Importantly, the court stated that the insured was essentially asking the court to expand the definition of “other property” to include construction defects, but that to do so “would obliterate the existing definition and transform a CGL policy into a performance bond, something that our supreme court, and appellate court before us, have warned should not happen.”
|
Related People
Related Offices
Related Practices
|