Draft your Lawsuit to Trigger Insurance Coverage

As most people reading this blog post are aware, construction lawsuits can trigger seemingly countless insurance coverage issues. For example, were the alleged damages caused by an “occurrence” as defined in the contractor’s insurance policy? If so, did the damages begin and/or end during different years, thereby triggering multiple insurance policies? In addition, did the damages stem from more than one “occurrence,” thereby potentially leading to an increase in applicable policy limits?

Furthermore, the “exclusions” found in a contractor’s insurance policy can be critical. For example, most standard Commercial General Liability (CGL) policies exclude coverage for damages stemming from the insured’s errors or mistakes of a professional nature (e.g., damages which would likely be covered by an Errors & Omissions or other malpractice-type insurance policy). In addition, CGL policies typically exclude coverage for damage to “your work” or “your product.” 

When you are drafting a complaint, it is important to draft it in a fashion which triggers an insurer's duty to defend, if at all possible; some contractors are judgment proof so, in the absence of insurance, your client might not otherwise have any recourse from a practical standpoint. Insurance can be a game-changer. 

Of course, all claims must be asserted in good faith and there will be times when you cannot draft allegations sufficient to trigger insurance coverage. However, in many instances, a complaint can be pleaded properly and in good faith to trigger an insurer's broad duty to defend and corresponding duty to indemnify. For example, if you represent an owner suing a general contractor, you can avoid issues regarding the "your work" and "your product" exclusions by including allegations that the defendant's negligence caused damage to the work and/or product of another contractor(s) or caused damage to the owner's property. Sometimes, you must be creative; however, being creative can require you to take a close look at your allegations because they must be asserted in good faith and without violating your ethical obligations. In addition, you can trigger multiple insurance policies by alleging a continuing loss over several years. If you believe in good faith a loss started three or four years ago, plead it. Don't limit yourself. 

Furthermore, be careful with the manner in which you describe the defendant-contractor's actions. For example, coverage might be denied if you allege that the damages resulted from the contractor's decision to use a certain process or particular type of design or material, because the contractor's decision could be interpreted as an intentional act. If so, coverage might be denied due to the lack of an "occurrence" which is typically defined as an "accident," and might also be denied due to an "intentional acts" exclusion, which, as the name suggests, excludes coverage for damages stemming from an insured's deliberate actions. 

While each dispute is different, most if not all complaints should be drafted with an eye towards insurance coverage. It is much easier to draft a broad complaint and trigger coverage than it is to sue a contractor, find out its insurer denied coverage, and then try to amend your complaint to trigger the insurance policy. Do it right the first time.