There is no shortage of pitfalls that developers and general contractors can face in New Jersey, but it looks as though one longtime source of angst may be gone for good.
Late this summer, the state Supreme Court ruled that damage from faulty work by subcontractors can be covered under a general contractor’s insurance policy. The case — which involved damage to a Hoboken luxury condo property — effectively settled a question that had weighed on the construction industry in New Jersey and other states for decades, fueling countless disputes between builders and their insurance carriers.
Experts say that, as much as anything else, the lack of certainty was to blame.
Carriers often previously contested whether such negligent work resulted in covered ‘property damage’ caused by a covered ‘occurrence’ — and suggested they should not have to cover any damages from the subcontractor’s faulty work,” said Greg Horowitz, an attorney with McCarter & English. “In essence, the carriers argued this was a non-fortuitous business risk that developers and general contractors could not or did not transfer to the insurance industry.”
Horowitz, a partner with the Newark-based firm’s insurance coverage and complex commercial litigation group, said that such litigation often forced developers and contractors with “to settle for smaller net recoveries from their insurers than perhaps they should have received.”
But he said that resolving the issue in favor of policyholders “should have a positive benefit on the entire construction industry” on many levels.
In a Q&A prepared for Real Estate NJ, Horowitz broke down the ruling and its impact on how developers and general contractors do business in New Jersey.