It has been several months since the New Jersey Supreme Court decided Cypress Point Condo Ass’n v. Adria Towers, LLC.

The issue in Cypress Point was whether rain water damage caused by a subcontractor’s faulty workmanship constituted “property damage” caused by an “occurrence” to trigger coverage under a condominium developer’s commercial general liability (CGL) insurance policy. Cypress Point, a condominium association, filed claims against Adria Towers, the developer, and its insurers, as well as various subcontractors. Adria Towers was also the general contractor on the condominium project and hired the subcontractors who performed the construction work. The Association alleged faulty workmanship during construction and claimed consequential damages.


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Generally speaking, a contractor’s commercial general liability (“CGL”) policy is designed to cover personal injury or property damage caused by an accident resulting from the contractor’s work. The policy is not meant to be a guarantee of the contractor’s work and therefore does not cover damages to the work itself – instead, these are known as “business risk” damages. The concept that is inherent in every agreement for the performance of construction work is the risk that the work will be done improperly.

By selecting a particular contractor, the owner has to make a business judgment as to the qualifications and reliability of the selected contractor, and therefore assumes the risk that the work will be done incorrectly. If the work is done improperly and needs to be corrected, the contractor, and ultimately the owner, bears the burden of repairing or fixing that faulty work. The contractor’s insurance is not a performance bond guaranteeing the work; instead, the commercial general liability insurance is designed to cover any unexpected damages that arise from the contractor’s work, such as damage to other property caused by the faulty work.

Consider a roofer hired to install a new roof on a building. Once completed, the roof is the roofing contractor’s “work.” If the roofer installs the wrong type of shingles, but does everything else correctly, the only “damage” to speak of would be to the roof shingles themselves, i.e. the roofer’s work. The cost of replacing the shingles is therefore that “business risk” not covered by insurance.


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A New Jersey trial court granted summary judgment in favor of Selective Insurance Company holding that the “continuous trigger” theory does not provide insurance coverage subsequent to the manifestation of damages that arose from a subcontractor’s negligence in the construction of a condominium development. The issue arose in the matter of Cypress Point Condominium Association v. Selective Way Insurance Company, et al., Docket No. HUD-L-936-14, 2015 N.J. Super. Unpub. LEXIS 721 (N.J. Super., Hudson Cnty. Mar. 30, 2015) (“Cypress Point”).

“The ‘continuous trigger’ theory holds that an occurrence occurs under an insurance policy each time damage accrues over a continuous period of time, from ‘exposure to manifestation’.” Cypress Point, at *12. Courts developed the “continuous trigger” theory to counter scientific uncertainties surrounding initial manifestations of damages typically at issue in environmental, toxic tort, and delay manifestation property damage claims. Id.

In Cypress Point, the Cypress Point Condominium Association (the “Association”) filed a Declaratory Judgment Action against Selective Way Insurance Company (“Selective”) seeking a declaratory judgment that Selective owed a duty to indemnify its insured, MDNA Framing, in connection with an underlying construction defect action filed by the Association. The Association filed an amended complaint in the underlying action on June 12, 2012, bringing claims against MDNA Framing, which was contracted to perform framing and window installation work in connection with the construction of the Cypress Point condominium development. Construction of the development commenced in 2002 and was substantially completed in 2004. Subsequent to the completion of construction, unit owners began to experience water infiltration around the interior windows. The Association’s liability expert found numerous defects related to MDNA Framing’s work, including missing flashings, a lack of a continuous water management system, and improper sealant application around the windows. The Association’s liability expert issued his initial report opining on these deficiencies on June 30, 2012.


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