On February 11, 2010, the Mississippi Supreme Court overturned the lower court’s grant of summary judgment in favor of the insurer and held that a general contractor’s use of a subcontractor does not necessarily preclude coverage under the general contractor’s commercial general liability (”CGL”) policy for problems that arise once the project is complete due to work performed by the subcontractor. Architex Assoc. Inc. v. Scottsdale Ins. Co., ___ So.3d ___, 2010 WL 457236 (Miss. 2010). This was a major victory for the construction industry.
The policies in question provided coverage for an “occurrence” which was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policies excluded any property damage or bodily injury that was “expected or intended from the standpoint of the insured.” The Circuit Court had determined that there was no coverage for the property damage arising out of work performed by Architex’s subcontractor because there was no “occurrence.” The lower court reasoned that the defective work was the result of an intentional act by the insured: the hiring of the subcontractor. In the lower court’s opinion, although Architex did not intend for its subcontractors to perform poorly, the hiring of the subcontractors could not be deemed an “accident” or “occurrence” under the policies.
Architex claimed that its insurer had accepted premium payments for subcontractor coverage for years, which would make the denial of coverage particularly offensive. Scottsdale asserted that Architex’s premiums were actually reduced because its subcontractors had their own insurance. The Mississippi Supreme Court ultimately found that there was no clear and unambiguous policy language limiting coverage for work performed by the subs, and in fact, the policy extended coverage to the subs by not specifically excluding them. The fact that the subcontractors had their own insurance did not determine whether Architex had coverage for damage caused by the subs’ defective work.
In conclusion, the Mississippi Supreme Court held that under Architex’s CGL policies the term “occurrence” could not be construed to preclude coverage for unexpected or unintended “property damage” resulting from the negligent conduct of a subcontractor, unless otherwise excluded or the insured breached its duties after loss. The case was remanded for further proceedings in order to determine whether there was covered property damage resulting from an occurrence.