ALEXANDRIA, Va., July 11 -- The American Subcontractors Association issued the following news release:
A decision by a three-judge federal appeals court panel robs construction insureds of coverage for which they have paid premiums for decades, threatening to expand contractors' risk of commercial general liability insurance denials in Texas and potentially elsewhere, the American Subcontractors Association and others told a federal appeals court.
ASA and other amici curiae filed a brief on July 6 with the U.S. Court of Appeals for the 5th Circuit supporting a Texas contractor's petitions for panel rehearing and rehearing before the full court in the case of Ewing Construction Co., Inc., v. Amerisure Insurance Company.http://asaonline.com/eweb/upload/Amici_Curiae_Brief_Ewing_Rehearing.pdf
The federal appeals court panel's 2-1 split decision on June 15 found that insurers don't have a duty to defend contractors from certain claims that many contractors normally expect to be covered by commercial general liability insurance. The ruling threatens to erode subcontractor rights beyond Texas, as insurers likely will cite the ruling to deny coverage to contractors in other states.https://www.asaonline.com/eweb/upload/Opinion%20-%20Ewing%20v.%20Amerisure.pdf
In their brief, ASA and the other amici curiae argued that the federal appeals court panel's "overly broad application of the contractual liability exclusion has left the Texas construction industry with a serious gap in insurance coverage for its work, a gap that did not exist under prior law and is contrary to the purpose of general liability insurance. If the Court's opinion stands, construction insureds and their brokers and agents must now try to manage the risk of allegedly defective construction, apparently without the commercial general liability (CGL) insurance coverage that they have counted on and have been sold for the better part of fifty years."
In the underlying case, Ewing Construction built a tennis facility in Corpus Christi, Texas, and, as part of a package of insurance products for the job, purchased CGL coverage from Amerisure. After the construction was complete and the school district claimed that the tennis courts were defective, Ewing timely tendered the lawsuit to Amerisure. Amerisure said it had no duty to defend Ewing.
The U.S. District Court, Southern District of Texas, heard the case and ruled that the contractual liability exclusion in the CGL policy that Ewing purchased applied and Amerisure had no duty to defend Ewing. The court used a 2010 ruling by the Texas Supreme Court in Gilbert Texas Constr., L.P. v. Underwriters at Lloyd's London, as the foundation of its decision. In Gilbert the Texas Supreme Court expanded the scope of the contractual liability exclusions in a CGL policy, absolving insurers from covering subcontracted work even though CGL policies promise such coverage.
ASA, ASA of Texas and other groups representing the Texas construction industry told the federal appeals court in an amici curiae brief filed on July 15, 2011, that contractors should be able to "depend on their commercial general liability policies for coverage" and that they shouldn't have to bear the "burden of defending against an adversarial insurer out to minimize its own obligation to defend and indemnify its insured." The federal appeals panel, however, disagreed and said that a "contractual liability" exclusion in the CGL policy at hand "applied in this case, and that no exception restored coverage."
For more information, visit http://www.sldf.net or contact ASA at SLDF@asa-hq.com.
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