Where plaintiff, homeowner, filed a complaint against the general contractor , the failure of the contractor to provide its Commercial General Liability (CGL) Insurance Company with notice of the claim for almost two years entitled the insurance company to summary judgment on its denial of coverage due to prejudice suffered. The defects alleged involved work of subcontractors. Accordingly, the court explained that such faulty workmanship of a subcontractor may constitute an accident and thus an occurrence under the policy, depending upon the facts of the case. In this case, however, the untimely notice of the claim to the carrier was fatal to coverage. The contractor argued that it was owed coverage despite the late notice, and asserted that the insurance company failed to present any evidence that it was harmed or prejudiced in any way by reason of the contractor’s failure to notify it. In ruling against the contractor, the court held that prejudice to the carrier from late notice of a claim must be presumed, and that the carrier is not required to prove it was harmed. Instead, the court held “once prejudice is presumed, the burden is on the insured to ‘establish some evidence that prejudice did not occur in the particular situation.’” Summary judgment in favor of the insurance company was, therefore, found to be appropriate. Sheehan Construction Company v. Continental Casualty Company, 938 N.E. 2d 685 (Dec. 2010).

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. 13, No.9 (Dec 2011).

Copyright 2011, ConstructionRIsk.com, LLC