The recent case of Ewing Constr. Co. v. Amerisure Ins. Co., 2012 U.S. App. Lexis 12154 (5th Cir. June 15, 2012) reminds us that, without an endorsement adding back to the policy specific coverage for contractual liabilities, defect claims arising from work under a construction contract may not be covered. In Ewing, the contractor signed a contract to build tennis courts for a school in Corpus Christi, Texas for $2 million. Soon after completion, the courts cracked and flaked and could not be used.
Even though the contractor was sued for breach of contract and negligence, the court found that the source of the negligence was the contract, and that the contractual liability exclusion in the policy precluded coverage. Obtaining contractual liability coverage is a must for any contractor hoping for protection from claims that its work under contract was defective and caused property damage. Brokers should always recommend this coverage.