October 2008

Are you covered?

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Your CGL policy may or may not cover breach of contract claims

by Jared W. Heald and Stephen M. Phillips
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This article is the first of two articles discussing what is covered by standard commercial general liability insurance policies. The second article will appear in the January 2009 issue.

Commercial general liability (CGL) insurance policies provide insurance coverage for bodily injury and property damage claims. However, CGL policies do not provide coverage for replacement or repair of defective work. You need to understand the nature of CGL policies and the details of contractual liability exclusions.

If a claim or suit against your company seeks only to recover the cost of reroofing or repairing an allegedly defectively installed roof system or the economic loss sustained by the building owner because of defective work (meaning the building's value declined because the work did not meet contract requirements), standard CGL insurance policies will not provide coverage (though there are some special endorsements available through the NRCA/CNA insurance program that provide coverage applicable to roofing work in certain circumstances.)

A CGL insurance policy is not a performance bond. It does not guarantee contractual performance. Per the terms of CGL policies, there is only coverage for bodily injury and property damage claims caused...

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