Question

Mark Bortz Electrical (“MBE”) gets a job to install the systems that will control the bank of eight elevators in a new 20-story hotel built in Richardson, TX. MBE obtains the components from the distributor, installs them without any problems, and moves onto the next job. However, prior to opening, the hotel’s owners find that none of the elevators are working.

An expert hired by the hotel determines the problem is that the wiring was improperly installed by MBE. Another contractor rewires the elevator bank and everything works fine.

Diagnosing and repairing the problem delayed the hotel’s opening by two weeks .The owners make a liability claim against MBE for the lost income incurred as a result of the delay in opening the hotel. Will MBE’s CGL insurer cover this claim?

(Answer based on the CGL policy)

Answer 1

Yes, MBE's Commercial General Liability insurer should cover this claim if all the other requirements of the policy has been satisfied and under which state law the issue happened. CGL is a type of insurance that business takes inorder to protect them from, liability claims, property damage, operations coverage, idependent contractor coverage etc.

CGL policy is applicable to property damage which is a physical injury that happens as a result of occurence. The occurence is defined as any accident or mistakes. The issue mentioned in the question comes under faulty work and if you go by verbatim definition of CGL policy, the insurance comapany is not entitled to provide the settlement as fault work does not comes under occurence or nowhere in the policy the term faulty work has been used. But majority of the courts has been positive about including faulty work claims under this policy.

There has many cases where the court has ordered the insurance company to pay for faulty work by considering it comes under CGL policy. Whereas some minority of states still follow the old method or verbatim of the policy.