October 24, 2017

 Summary: The meaning of the term “subcontractor” is both controversial and fluid, because it can be the key to which property damage coverage may apply in a construction setting after work performed on behalf of the named insured by a subcontractor has been completed. This assumes no exclusion has been issued to preclude coverage for property damage to work performed by subcontractors on behalf of a named insured, or no court has ruled that a construction defect is neither property damage nor something that could be caused by an occurrence.

To deny coverage for work performed by subcontractors, insurers are not likely to argue that coverage is only applicable when a general contractor hires a subcontractor, or that the hired contractor must be a general contractor. Instead, insurers typically maintain that property damage was not caused by a subcontractor but rather by a material supplier. This is the battleground for most of the litigation in construing the meaning of “subcontractor”. Based on court cases involving liability and first party property insurance and surety bonding, the majority consensus is that: (1) the meaning of subcontractor is ambiguous; and