Pennsylvania Appeals Court Confirms Insurance Coverage for Product Liabilities and Distinguishes “Faulty Workmanship”

By: Joseph C. Safar & Kimberly L. Karr, K&L Gates, Pittsburgh

Whether a construction defect constitutes a covered “occurrence” under a commercial general liability (“CGL”) policy has been the subject of a national debate among state courts in recent years.  Armed with a small minority of seemingly pro-insurer decisions finding no coverage for a contractor’s “faulty workmanship,” some insurers have sought to broaden the coverage-divesting implications of such cases by arguing that the defective design or manufacturing of products should also be deemed “faulty workmanship,” and thus, not covered.  This expansive view of what constitutes “faulty workmanship” disregards important distinctions made in earlier cases and significantly degrades, if not completely undermines, the broad products liability coverage commonly recognized to exist under CGL policies.  For example, if taken to its logical conclusion, this would mean that product manufacturers whose off-the-shelf products unexpectedly cause property damage or bodily injury to others would not be able to obtain coverage—thereby defeating the very purpose of securing CGL coverage.

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