QUESTION:
We have a situation where an insured (the builder) was building a house in 2019-2020 and a sub-contractor (now out of business) accidentally oiled a bamboo panelled ceiling incorrectly. This has led to damage to the bamboo panels. They attempted to remediate the issue at the time and it appeared to be successful. However, over time, some areas have become more noticeable to the homeowners and they want it replaced now.
A contract works claim was not lodged and would likely fail for "faulty workmanship".
The GL insurer is saying that at the time of the damage, it was still a first-party loss, which is not covered by a GL policy. However, the third party has most definitely suffered a loss now (since the contract was completed and paid for after the remediation efforts were performed).
Is it a correct interpretation to say that because at the time the damage occurred there was no third party loss, even though there is now, the claim should be declined? A claim was not notified in 2020 as the remediation was deemed successful at that time.
CROSSLEY GATES REPLIES:
Legal liability at law can only arise in two ways:
1. When a competent court enters judgment against a party, and
2. When a party formally agrees it is legally liable, usually by way of a settlement agreement.
Before this, legal liability is only alleged.
You are correct that a GL policy is triggered by accidental damage occurring during the period of insurance. Legal liability at law does not usually arise at that point, but later (if at all) by one of the two ways referred to above.
