A recent decision of the Colorado Court of Appeals in the case of “Stresscon Corporation v. Travelers Property Casualty Company of America” provides an insight into insurance coverage under a contractor’s comprehensive general liability insurance policy. While the decision may be reviewed by the Colorado Supreme Court at a later date, it does appear to express the law as it now stands in Colorado.
In the case, Stresscon fabricated concrete structural members that were being installed on the project when a panel fell, one workman was killed and another injured. Travelers, Stresscon’s comprehensive general liability insurance carrier, refused to defend it against or pay claims of the project general contractor for damages it suffered as a result of delay in construction caused by the accident.
Stresscon was successful in its claims that Travelers unreasonably denied or delayed payment under its policy to the general contractor.
As a result, Stresscon became entitled to double damages and the recovery of its attorneys’ fees under a Colorado statute that penalizes insurance companies for unreasonable denials in coverage or delays in payments.
However, Stresscon also claimed that it was entitled to recover, under its Travelers insurance policy, for the cost of the replacement of its concrete structural work that was damaged in the accident and related repairs. Travelers denied that claim.
The court agreed with Travelers ruling that its insurance policy did not cover the work of Stresscon or work performed on its behalf under policy exclusions that are common in most comprehensive liability insurance policies. Those exclusions are generally referred to as the “your work” exclusions.
Under that court’s decision, therefore, Stresscon had to bear the cost of the replacement and repairs of its work that was damaged in the accident. If, however, the concrete panel had damaged other portions of the work on the project in its fall, the Travelers insurance policy would have covered damage to other components of the project.
This is not an unusual result under insurance policies and insurance law. While the cost of replacement of faulty work itself is not covered, the cost of repair or replacement of whatever may have been damaged as a result of the incident is. For example, if a pipe breaks and causes a flood, insurance will cover the flood damages but not the repair or replacement of the pipe.
Insurance coverage is a tricky area of the law that should be considered very carefully by construction industry members when buying insurance policies and when incidents occur that may be covered by insurance. It has been my practice for many years that when a client has experienced an incident that may be covered by insurance, my philosophy is that it is covered unless the insurance company proves otherwise.
Albert B. Wolf is a principal in the Denver law firm of Wolf Slatkin & Madison PC.