SURVIVING A CASUALTY LOSS

1. INTRODUCTION
2. THE HYPOTHETICAL
3. THE 3 STEPS TO SURVIVAL
4. THE COVERAGE ISSUES
1. The First-Party Policies
1. Builders Risk Insurance
2. Commercial Property Policy
2. Third-Party Policies
1. Standards Applicable to CGL Policies
1. The Duty to Defend
2. The Duty to Indemnify
3. Contract Interpretation Principles
4. Burden of proof
2. Myths and Misconceptions Related to Insurance Coverage for Defective Construction Claims
1. The Insuring Agreement
1. The "Property Damage" Requirement
2. The "Occurrence" Requirement
2. The Exclusions
1. Exclusion a-The "Expected or Intended Injury" Exclusion
2. Exclusion b-"The Contractual Liability" Exclusion
3. Exclusion j(4)-"Care, Custody or Control" Exclusion
4. Exclusion j(5)-"Real Property Being Worked On" Exclusion
5. Exclusion j(6)-"Faulty Workmanship" Exclusion
6. Exclusion k-"Your Product" Exclusion
7. Exclusion 1-"Your Work" Exclusion
8. Exclusion m-"Impaired Property" Exclusion
9. Exclusion n-"Sistership/Recal1" Exclusion
3. Neither the "Business Risk" Rationale Nor the "Economic Loss" Rule Trumps the Actual Policy Language
1. The Business Risk Rationale
2. The Economic Loss Rule Does Not Trump the Actual Policy Language
4. Difference in Application of CGL Insurance Between a Named Insured and Additional Insured
5. THE DAMAGES CHART
6. SUBROGATION AND WAIVERS OF SUBROGATION
7. HINDSIGHT IS 20/20
8. CONCLUSION

The purpose of this paper is to provide a survival guide with respect to a casualty loss. For purposes of this paper, a casualty loss refers to a first-party loss under a builders risk or commercial property policy. Since it is quite commonplace-absent waivers of subrogation-for first-party losses to spawn third-party litigation against those that are allegedly responsible for the loss, this paper also will address CGL coverage issues that might arise out of a first-party casualty claim. The topic, as such, is very broad. Accordingly, in order to avoid a treatise-length paper, this paper will follow a hypothetical designed to address a number of the more critical issues that may arise in this context. Moreover, when relevant, the issues will be addressed from the perspective of both the Owner, the General Contractor, and the Subcontractor.

Of course, no hypothetical (other than those perhaps written by law professors and given to first year law students) can be all encompassing. And, anyone that has survived (or at least experienced) a casualty loss knows that there can be numerous twists and turns. Likewise, not every insurance policy nor every construction contract is standard. Accordingly, by necessity, this paper addresses certain issues in generalities and is designed to serve merely as a guide to handling a casualty claim vis-a-vis the insurance company.' Because of variations in policy language and construction contracts, it is always important to READ the particular policy and contract at issue in a claim. This is especially so with builders risk and commercial property policies, which are often written on manuscripted forms. Ultimately, whether one survives a casualty claim depends on the protections afforded by the construction contract, cooperation between the policyholder and the insurance company, the insurance coverages procured, and making sure that the insurer is not given an "excuse" to deny an otherwise covered claim.

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