General Contractor Not Covered For Defective Work Of Subcontractor, Iowa Court Says

The scope of insurance coverage for construction defect liability is still in flux in many areas, but most courts would agree with the Iowa Court of Appeals that a general contractor is not insured for the defective work of his subcontractors. In Continental Western Ins. Co. v. Jerry’s Homes, Inc., 2006 WL 228917 (February 1, 2006) the key to the ruling was that damage in a new housing subdivision (buckled roads, sidewalks and driveways) was merely defective workmanship and did not cause other property damage. Almost any court, under similar circumstances, will hold there is no “property damage” as defined by a Commercial General Liability policy, and therefore no “occurrence,” the precursor to coverage under a CGL. It is a long-standing observation that a CGL is not a performance bond for defective work, and covers only property damage and bodily injury arising out of work by the insured or someone operating on his behalf.

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