The first step is to try to determine when the project was completed. Issuance of a certificate of occupancy or other indication may affect completed operations coverage and certain exclusions. In our experience, and unless you too can do so without help, we recommend that you assign coverage counsel to assist you with their advice and recommendations.

Arguably, in any jurisdiction, the earliest date on which covered property damage could occur is the completion date or date of occupancy for a custom home and the escrow closing date or date of purchase for a specification home.

In the hypothetical case, the date on which a certificate of occupancy was issued is the appropriate trigger for this completed operations claim. Another document that is helpful in establishing completion date in most cases is a loan closing document that reflects when the property was sold to the homeowner.

These documents help define when completed operations coverage is triggered and when certain exclusions apply. Due to the complexity of construction-defect coverage issues and the involvement of multiple parties and their insurance carriers, who may have different types of policies, it may be wise to involve coverage counsel early in the claim. Such counsel, in addition to giving coverage advice, may recommend certain areas for further investigation before definitive coverage analysis can be completed. The counsel may recommend filing a declaratory judgment action as a mechanism for resolving complex coverage issues.

Florida insurance law provides a lesson concerning the developing treatment of these and similar insurance coverage issues by the courts of the country. At first, and in cases involving pre-1986 standard-form commercial general liability (CGL) insurance policies, the Florida courts refused to find CGL coverage for a variety of claims for a contractor's faulty workmanship, at least where the damages sought against the policyholder/general contractor were for the replacement of the policyholder's own defective materials and work. These cases were representative of the typical construction project, then and now, as seen in LaMarche v. Shelby Mut. Ins. Co. (Fla. 1980).

Completed operations coverage was specifically excluded for property damage to work performed by the named insured arising out of such work or any portion thereof. If the named insured was a general contractor, then the work on the construction project was deemed the general contractor's work and there was no coverage under the general contractor's CGL policy. See Tucker Construction Co. v. Michigan Mutual Insurance Co. (Fla. 5th DCA 1982).

Things changed in Florida Insurance Law in Dec. 2007, mirroring a change in insurance law across the nation. That is at least partly because the relevant CGL exclusion for damage to property had changed. The post-1986 standard CGL coverage form presently in use provides in relevant part that, although there is still an exclusion for property damage to the insured's work arising out of it or any part of it, this exclusion does not apply if the work in question was performed on the insured's behalf by a subcontractor.

With this change in language, insurance coverage was extended in Florida to general contractors under their CGL policies in cases presenting facts that had earlier resulted in judgments of no coverage. For instance, Auto-Owners Insurance Co. v. Pozzi Window Co. (Fla. Dec. 20, 2007, as modified on denial of rehearing on August 26, 2008); United States Fire Insurance Co. v. J.S.U.B., Inc. (Fla. Dec. 20, 2007). Other Courts in other jurisdictions have disagreed with parts of the Florida experience.

Thus, try to determine when the project was completed. The answer to that question in a given jurisdiction can determine the outcome of coverage questions. Further, in our experience, we strongly recommend that you assign coverage counsel to assist you with their advice and recommendations accordingly.

Determining Entitlement to Coverage

The insured's job and correspondence files contain a wealth of information, including such things as the identities of design professionals, subcontractors, material suppliers, and so forth. It also included pertinent contracts, certificates of insurance, and other documents of note.

From the contracts, indemnification clauses and requirements for your insured to be named as an additional insured on other policies should be sought. Tender letters to all subcontractors, suppliers, and other entities (once called “materialmen”) should be immediately mailed to all of these entities and their carriers, seeking an immediate response to your demands that they participate with you in defending and indemnifying your named insured.

Once the tenders have been mailed, a matrix should be created to identify each entity to which a tender letter was sent, the tender date(s), their coverage, and their respective responses. Generally, providing non-privileged material documentation (contracts, subcontracts, indemnity clauses, additional insured clauses, additional insured endorsements, certificates of insurance, invoices, trigger dates, complaints and cross complaints) with each of your tender letters should assist in allowing targeted insurers an opportunity to evaluate and set forth their coverage position in a reasonably short time frame. Thus, we recommend in any such construction defect claim that you:

Obtain a complete copy of the general contractor's job file. It will facilitate identification of all of the subcontractors on the project, and it should also contain their certificates of insurance, which will provide valuable information such as the names of the insurers, policy numbers, dates of coverage, and limits.

Obtain copies of all contracts and subcontracts to determine each party's scope of work on the project. In addition, contracts spell out obligations for defense, indemnity, and “additional insured” insurance requirements.

Obtain copies of all policies held by the parties. Indemnity and additional insured provisions of the insurance policies, in combination with the subcontracts, will assist in determining entitlement to indemnification or insurance coverage.

Obtain a copy of any existing Owner-Controlled Insurance Program (OCIP) policy or other type of project policy that pertains to the construction project, as each and all of these insurance policies may provide additional coverage for the benefit of the general contractor.

Architects and professional engineering firms may be entitled to claim indemnity. They may also be obligated to pay indemnity themselves, or provide insurance coverage to the general contractor or the owner/developer, or both, depending upon the contract terms. Every party involved in the construction project is a potential source of recovery and should not be overlooked. In addition to the traditional construction defendants, the design team and other professional engineering firms, surveyors, grading contractors, material suppliers, and other vendors may have liability.

Sometimes you can make something out of nothing, but to do so you first have to look under all the rocks, beneath the bed, and into the closet.