BOSTON — A Massachusetts appeals court ruled Wednesday that a commercial insurer is not required to cover a contractor liable for various defects in a home he constructed, setting a precedent in defining “property damage” in construction disputes.
The case, which has drawn attention to liability and insurance practices in the construction industry, stems from a homeowner’s lawsuit against a contractor over alleged structural flaws and other defects in their newly built home. The contractor requested coverage from their commercial insurer, which was subsequently denied based on the terms of the policy.
The appeal was brought before the Massachusetts intermediate appellate court after a lower court sided with the insurer, stating that the policy did not cover the contractor’s defective work as it did not constitute “property damage” under the terms defined.
Legal experts say the court’s decision underscores the complexities of commercial insurance policies and their interpretation in construction cases, possibly influencing both future litigation and the drafting of contractor insurance policies.
The court detailed that property damage, within the purview of the policy, is meant to cover unforeseen damages, not poor workmanship or intentional shortcuts taken during construction. The ruling delineates between damages arising incidentally from covered risks and those born from faulty construction itself, which according to the policy, are the liability of the contractor.
“This ruling is likely to set a significant precedent,” according to Angela Hartley, a Boston-based attorney specializing in construction law. “It clarifies for insurers and builders alike where the lines are drawn regarding accountability and insurance coverage for construction defects.”
Amid rising concerns about building safety and homeowner protections, the decision is expected to influence contractors and their insurers on how to manage risks and liabilities more effectively. Insurance companies may now seek to adjust their policy writings to avoid ambiguity about coverage in light of this ruling.
Contractors, on the other hand, might need to consider additional or alternative coverage options or enhance quality control measures to mitigate risk factors that insurance may not cover following this precedent.
The homeowner involved in the dispute was left to bear the cost of the repairs, as the court did not find the insurance policy applicable in this instance. The ruling serves as a cautionary note to homeowners to scrutinize the qualifications and the insurance details of their chosen contractors.
Moving forward, this case may also trigger legislative considerations to better define insurance terms and contractor obligations, aimed at protecting homeowners and ensuring fair practices in the construction industry.
While the ruling provides clarity, it also opens a conversational gateway for policyholders, insurers, and legal professionals to reevaluate and negotiate terms more clearly in the future, potentially influencing the broader landscape of commercial legal liability insurance.