From Gerry's Desk - PA Supreme Court declines to hear appeal in Miller's Insurance vs. Gambone Brothers
January 29, 2009 - We would like to make our business partners aware of a recently announced and highly anticipated appeal that impacts insurance coverage for contractors in Pennsylvania.
The Pennsylvania Supreme Court has declined to hear an appeal in the case of Miller's Insurance vs. Gambone Brothers 941 A.2d 706 (Pa. Super 2007). The Miller's case challenged the decision made in Kvaerner Metals vs. Commercial Union Insurance Co (Kvaerner).
Prior to Kvaerner, the standard Gener al Liability policy provided coverage to the General Contractor for the faulty work of a subcontractor. In Kvaerner, the court held that the faulty work of a subcontractor does not constitute an occurrence. If there is no occurrence, the General Liability policy is not triggered.
Millers Insurance Company vs. Gambone Brothers (Gambone) challenged this logic. In the Gambone case, water damage due to the alleged faulty work by a subcontractor caused property damage to a customer's home. Gambone asserted that the water leak was the proximate cause of property damage and therefore was an occurrence. They argued that this occurrence triggered coverage in the General Liability policy because there was damage and the work was done by a subcontractor. The court disagreed with this logic and ruled that you cannot separate faulty work and the water damage caused by faulty work.
This ruling, absent any future precedence, makes Pennsylvania one of the most restrictive states with respect to insurance coverage for construction defect claims.
We hope this information will help you better understand some of the changing dynamics in today's insurance industry. The purpose of this message is to make you aware of a risk to the construction industry in the State of Pennsylvania. Now, more than ever, other risk mitigation techniques such as contractual risk transfer, quality control and certificate of insurance review programs are important for protecting a general contractor's assets from these types of claims.
If you have any questions or concerns about your particular circumstance, we recommend that you contact your attorney and have them review our interpretations prior to relying upon them.
If there are any claims that you are concerned about, feel free to contact KMRD at contactus@kmrdpartners.com.
Sincerely,
Gerry Sorge, Claims Advocate
KMRD Partners, Inc.
About KMRD Partners, Inc. – KMRD Partners, Inc. is a full service Property & Casualty broker serving the commercial property and casualty insurance market from offices in the Philadelphia, PA region. Their mission statement, “Making a difference by Managing the Cost of Risk”, is a unique approach that focuses not just on insurance placement, but coverage expertise, service accountability, client education and risk management.
2600 Kelly Road, Suite 300, PO Box 755
Warrington, PA 18976
1-866-957-KMRD (5673) Fax 267-482-8431
www.kmrdpartners.com
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