A roofing contractor that contracted with a homeowner’s association to recommend and specify re-roofing materials, was sued by the association for negligent advice because the recommended material allegedly did not adequately insulate the building. The contractor tendered the claim to its CGL carrier but the carrier denied coverage on the basis that the advice rendered constituted professional services that were not covered by the policy. Coverage under the CGL policy was for an “occurrence,” which was defined as “an accident, including continuous or repeated exposure to substantially the same general conditions.”

The court held that the insurance company was entitled to summary judgment against the contractor because there had been no “accident” as defined by the “occurrence” definition of the policy. Specifically, the court stated that a contractor’s deliberate act of rendering professional advice could not constitute an accident. Further, the contractor’s intent to induce the homeowner’s association to rely upon using the recommended materials could not, in the opinion of the court, constitute an “occurrence” that was insured under the policy. Ray v. Valley Forge Insurance Company, No. B129058, (1999 Cal. App. LEXIS 1142).

Risk Management Note: The standard CGL policy contains exclusions for damages arising out of professional services. It is not uncommon to endorse the policy to provide some limited professional liability coverage. When such coverage is added, however, it typically only covers professional liability damages if there are also bodily injury or property damages. Purely economic losses are typically not covered. A contractor that intends to provide professional opinions or recommendations should consider purchasing a contractor’s professional liability policy to cover errors and omissions. These policies are offered by most major professional liability carriers at premiums that have become increasingly competitive.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 1, No. 5 (May 2000).

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