Reading Insurance Law – Of Emperors and Clothes

We lawyers can sometimes adopt a herd mentality.  A senior lawyer or judge says something.  You go back and read the case.  You may be reluctant to voice your difference.  That’s how we, as a profession, can just get things wrong.  The example here comes from insurance law, but you can apply it to your area of expertise.

When it comes to commercial general liability insurance, the law does not change very much.  It is the wording that can sometimes change, if the insurer sells something different than the standard policy.  Many make the mistake of treating judicial consideration of different wording as new law.  It doesn’t work like that.

Some readers from the insurance field have asked me to explain my analysis of the Supreme Court’s decision in Progressive Homes v. Lombard as set out in my paper, “Is it Not Covered? (A Guerilla Guide to Commercial Liability Insurance Exclusions)”.  That paper, which I delivered at various CBA lectures on insurance law, has been posted to leeakazaki.com in “CGL Policies – the Russian Doll of Business Insurance.”   Progressive Homes, in my view, did not change the law of liability insurance but clarified it.  Damages to buildings constructed by a contractor and caused by the contractor’s faulty workmanship have always been covered in the coverage grant of standard general liability policies, and also taken away by exclusions for that type of damage.

This analysis contrasts with the ‘hype’ about the Progressive Homes decision in its aftermath.  Both lawyers and judges in their decisions have considered the decision as a broadening of coverage for construction losses resulting from faulty workmanship.  (Eg., see the discussion of post-Progressive Homes decisions in “A Contractor’s Construction Errors May Be Covered By A General Liability Policy.”  To see how we must read such commentary with caution, just read the Progressive Homes decision with highlights which I have posted to this blog.  The highlighting at paragraphs 52, 55, 57 62 and 64 of the PDF show that the Supreme Court would have found against coverage, based on the standard CGL wording of the exclusion.  It was only because the insurer sold the contractor an endorsement providing additional coverage, that the court found in favour of the insured.  If you don’t have time to go through the PDF of the decision, paragraph 52 spells it right out, here:

[52] The central exclusion in this appeal is the “work performed” exclusion. This common exclusion clause and its relationship to work completed by subcontractors have received a great deal of attention, both in Canada and the United States . … The standard form version of the “work performed” exclusion precludes coverage for damage to the insured’s own work once it is completed. However, the text of this exclusion has been modified several times during Progressive’s coverage by Lombard. There are three versions of the “work performed” exclusion in Progressive’s successive CGL policies.

More generally, in law, it goes to show there’s no substitute for reading the case.  Take the time to read it, over and over again if need be.  If someone, such as a senior lawyer or judge differs from your view, you can take them to the text and show them what it says.

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