Georgia Supreme Court Reverses Decision Regarding General Contractor Claim Against Sub

Georgia is joining other jurisdictions regarding construction defect claims under commercial general liability (CGL) policies. In American Empire Surplus Lines Insurance Company v. Hathaway Development Company, the court allowed a claim by the general contractor against the plumbing subcontractor’s CGL policy. The key aspect to this case appears to be the definition of “accident” under the policy, according to J. Kent Holland, Jr., writing at ConstructionRisk.com.

Where a plumbing subcontractor installed water lines that did not meet the project specifications, and this caused damage to a neighboring property, the prime contractor sued the sub for negligent work and was entitled to recover its damages from the sub’s commercial general liability (CGL) policy because the court found the defective work constituted an occurrence and accident within the meaning of the policy.  The prime contractor obtained a default judgment against the subcontractor who failed to answer the complaint, and then sought payment from the sub’s insurer.  The insurer denied coverage, asserting that the defective work was not an “occurrence” defined under the policy as an “accident.”  The trial court agreed with the insurer’s argument and granted it summary judgment.  That decision was reversed on appeal.

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