Following the March 2014 Alabama Supreme Court’s decision in Owners v. Jim Carr Homebuilders that faulty workmanship can be a covered “occurrence” under a contractor’s Commercial General Liability policy, the carrier moved for rehearing. The Supreme Court has now ruled on that motion.
In September 2013, the Alabama Supreme Court sided with insurers in holding that construction defects can never be accidental and, therefore, can never be covered by Commercial General Liability insurance. On March 28, 2014, the Court withdrew that decision and reversed course, joining the vast majority of state Supreme Courts that have held that faulty workmanship can, in fact, constitute a covered “occurrence,” which CGL policies define as “an accident, including continuous or repeated exposure to the same generally harmful conditions.” (See the blog post about that decision here.)
So it is now official and final: Alabama is no longer one of the outlier jurisdictions on the issue of coverage for faulty workmanship.
In April, the carrier in that case, Owners Insurance Company, filed a motion for rehearing, supported by a number of insurance industry groups as amicus curiae (a/k/a “friends of the court”). I filed an amicus brief in that case, as well, on behalf of a non-profit policyholder advocacy group called United Policyholders.
On June 27, 2014, the Alabama Supreme Court denied the motion for rehearing and reiterated that it was withdrawing and replacing the September 2013 decision with the opinon issued on March 28, 2014.
So it is now official and final: Alabama is no longer one of the outlier jurisdictions on the issue of coverage for faulty workmanship. This is obviously good news for construction contractors that do work in the state of Alabama. It is also good news for policyholders in general as it continues the strong trend among state high courts that have been finding in favor of coverage in this important area of insurance law.