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Vol. 3, Iss. 12
August 20, 2014

Ewing’s Undoing’s Ungluing: Appeals Court Follows Ewing And Holds That Contractual Liability Exclusion Precludes Coverage For Construction Defect Claim

In January, the Supreme Court of Texas, in easily one of the most important coverage cases of 2014, held in Ewing Construction Co. v. Amerisure Insurance Co. that the “contractual liability” exclusion, contained in a CGL policy, did not preclude coverage for a construction defect claim involving not out of the ordinary facts. The Texas Supreme Court’s decision came following the case’s earlier time spent in the 5th Circuit.

The day Ewing was decided it seemed like case closed on the issue. Not so fast. As I mentioned in the last issue of Coverage Opinions, Mid-Continent Casualty Company convinced the 5th Circuit in Crownover v. Mid-Continent, No. 11-10166 (5th Cir. June 27, 2014) that, despite Ewing, the contractual liability exclusion still precluded coverage for a garden variety construction defect claim. Lee Shidlofsky and Doug Skelley, who represented Ewing Construction, had much to say about Crownover in a blog post. [The Crownovers filed a Petition for Rehearing with the Fifth Circuit. Not surprisingly, trade associations for Texas builders have chimed-in with amicus briefs in support of rehearing – including one filed by Shidlofsky and Skelley.]

Now, in Travelers Prop. Cas. Co. of Am. v. Peaker Services, Inc., No. 315070 (Mich. Ct. App. July 22, 2014), a Michigan appeals court, following Ewing, held that a contractual liability exclusion did not apply: “In the context of a CGL policy, ‘assumption of liability’ means assuming the legal obligations or responsibilities of another. In this case, defendant did not assume the legal obligations or responsibilities of another when it contracted with the university to provide goods and services of a particular quality and to return the university’s property to ‘as was’ condition in the event the university’s property was damaged during completion of the contract. Therefore, the contractually-assumed liability exclusion in the CGL policy did not preclude coverage in this case and the trial court reached the correct result, albeit for different reasons.”

I’m not saying much about Peaker Services here because you can get that from another Shidlofsky and Skelley blog post.


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