In many states, courts have found that the faulty workmanship of a construction contractor that damages the contractor’s own work is not an accident and, therefore, not an “occurrence.” General Sec. Indem. Co. of Arizona v. Mountain States Mut. Cas. Co., 205 P.3d 529 (Colo.Ct.App. 2009); Auto-Owners Ins. Co. v. Home Pride Companies, Inc., 268 Neb. 528, 684 N.W.2d 571 (Neb. 2004) (faulty workmanship, standing alone, is not covered under a standard CGL policy); Oak Crest Const. Co. v. Austin Mut. Ins. Co., 329 Or. 620, 998 P.2d 1254 (Or. 2000) (no occurrence where insured sought cost of correcting subcontractor's deficient work); Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888 (Pa. 2006).

Construction companies generally do not expect to be targets of tort liability for the injuries of their employees.  They are protected by workers compensation laws against such claims.  It follows then that general liability insurance policies do not expect to insure the tort injuries of the insured’s employees, because the insured should have no tort liability for its employees’ injuries.  However, a quirk of the various contracts that are entered into between construction companies does allow for an employer to find itself paying for the tort injuries of its employees, in which case the employer’s liability insurer may foot the bill.  This strange quirk where an employee’s damages are ultimately paid by his employer and the employer’s insurer are known as “action over claims.”  This article explains what an “action over” claim is, and what steps insurers are taking to avoid insuring such claims. 

Reinsurance disputes arise when an insurer treats claims as multiple occurrences to force the insured to pay multiple retentions, but that same insurer treats the same claims as a single aggregated occurrence for purposes of reinsurance. In the past, reinsurers have found success when challenging aggregation by citing language in the reinsurance contract. However, in a recent New York case, the reinsurer was successful in challenging a cedent’s aggregation even without specific aggregation language in the reinsurance contract. The reinsurer was not required to follow its cedent’s fortunes.