Breathing a ‘sigh of relief’ after Lamar Homes decision

While I suspect that many folks in the insurance industry had a “dog in the fight” so to speak in regard to the outcome of Lamar Homes vs. Mid-Continent Casualty Co., I can tell you that I sure breathed a sigh of relief when the Supreme Court of Texas had the extraordinary good judgment to side with Lamar Homes. I say this for a couple of personal reasons.

As a bit of background, I have had the pleasure of serving on the faculty of the Society of Certified Insurance Counselors for the past 15 years. The only policy that I teach is the Commercial General Liability Policy (i.e. the CGL policy). And for all these years, I’ve stood in front of one CIC class after another and bragged about the comprehensive protection provided to general contractors for construction defect-type claims arising from the work of subcontractors.

Then, in March 1994, my wife and I moved into a brand new home that we had built by a general contractor. After 16 years of marriage, this was to be our “dream house.” Within just a few months it became quite apparent that the house would be forever known as anything but our “dream house.”

Gaping cracks appeared in the walls, hardwood floors began pulling apart, and as one engineer told me quite candidly, “Your house will be unsafe to live in within six months.”

To make a long story short, we literally bulldozed our home as a result of a faulty foundation constructed by a subcontractor on behalf of our general contractor. It was an awkward moment in my life when I realized I had a big mortgage but no house to show for it.

Then the thought passed through my mind: “For many years I’ve been teaching about how the CGL policy would respond on behalf of a general contractor for the general contractor’s legal liability for damage to the completed work arising from the work of subcontractors.” Then the thought hit me — “I sure hope what I’ve been teaching is right!” Lucky for me, I guess it was.

My general contractor’s CGL carrier (under a policy that I happened to write myself) stepped up to the plate and fully paid for my damages because of the exception to the exclusion in the policy that eliminates coverage for damage to completed work. Thank goodness for the exception to the exclusion!

And thank goodness that the Supreme Court of Texas had the wisdom to carefully consider the insuring agreement of the CGL policy and conclude that defective workmanship that results in unexpected and unintended property damage is an occurrence of property damage as defined by the CGL policy.

Now, it would be a perfect world if I could just convince the Supreme Court to rule that an insurance agent’s contingency agreement with a carrier cannot be affected by a CGL claim when the homeowner who takes action against a general contractor also happens to be the general contractor’s agent.

Oh well, I guess that’s a topic for a whole different conversation.