The Michigan Supreme Court issued a unanimous opinion on June 29, 2020 in a case with wide ranging implications for all members who routinely purchase CGL insurance. In a break from over thirty years of established law, the Court held unintended or unanticipated faulty workmanship by a subcontractor which damages the General Contractor’s work may constitute an “accident” and therefore be an “occurrence” triggering coverage.
In Skanska USA Building v MAP Mechanical Contractors, Inc., Skanska served as the construction manager and contracted with MAP to install a steam boiler for the Mid-Michigan Medical Center. MAP accidentally installed some of the expansion joints backwards which lead to over $1 million in damages to concrete, steel, and the heating system itself. Skanska paid for these repairs and sued Amerisure under a CGL policy seeking recovery. Consistent with prior law, Skanska’s claims against the insurance company were rejected, and the Court of Appeals affirmed the trial court’s ruling. The Court of Appeals reasoned that although Skanska could seek coverage for any damage its work did to a third party’s property, it could not recover for damage to its own work. That Court concluded that there was no “coverage” under the CGL policy because the only damage was to Skanska’s own work product, which did not constitute an “accident.” Skanska, who was represented by MITA member Kotz Sangster, sought leave to appeal that ruling to the Michigan Supreme Court.
MITA lead the charge for the construction industry and was the first of many contractor associations to file an amicus curie brief, which is a brief filed by an interested group of persons or companies when a matter of importance for a large group comes before the court. Butzel Long’s appellate practice group, lead by Eric Flessland, wrote the amicus curie brief demonstrating the correct interpretation and application of the insurance policy and urging the Court to take up this insurance coverage question of such importance to the construction industry. The Michigan Supreme Court granted leave to appeal and heard oral arguments in April. We are pleased to report the court agreed with MITA’s positions concerning insurance coverage in this important ruling.
Writing in a unanimous opinion for the Court, Chief Justice McCormack said, “Under the current standard language of CGL policies, an “accident” may include unintentionally faulty subcontractor work that damages an insured’s work product. Accordingly, Skanska may be able to recover under the Amerisure policy the cost of repairs Skanska incurred when it corrected faulty work performed by MAP in the renovation of the medical center … [G]iven the planin meaning of the work ‘accident’, we conclude that faulty subcontractor work that was unintended by the insured may constitute an ‘accident’ (and thus an ‘occurrence’) under a CGL policy.”
The impact of this ruling upon MITA members and the industry cannot be understated. If your subcontractor performs poorly and causes property damage, there is a greater possibility your CGL insurance carrier could pay for the loss – even if the loss is only to your own work. MITA recommends you seek legal counsel to evaluate each situation to determine your legal rights and to ensure proper notice is given to your carrier.
If you have any questions, please contact Mike Nystrom, Executive Vice President, at email@example.com. He can also be reached at 517-896-1493.