On August 4, 2016, the New Jersey Supreme Court issued its decision in Cypress Point Condominium Association, Inc. v. Adria Towers, LLC, et al., which held that faulty workmanship by a subcontractor that causes property damage is a covered loss under the developer’s/general contractor’s commercial general liability (CGL) insurance policy. The ruling holds that this consequential damage constitutes an “occurrence” under the CGL policy and, as such, may allow community associations to recover for water infiltration and other defective construction.

In this case, Cypress Point Condominium Association instituted transition litigation against the project’s developer/general contractor for water leaks and other construction defects, which caused damage to the units and common property. The developer’s insurance company argued that the Association’s claims were not covered under the various CGL policies obtained by the developer because the alleged faulty workmanship by the developer’s subcontractors did not amount to an “occurrence” and that the resulting damages did not constitute “property damage” under the policies.

By: Christopher R. Geary, Esq.

On February 1, 2016, the New Jersey Appellate Division issued an unpublished decision in The Palisades at Fort Lee Condominium Association, Inc. v. 100 Old Palisade, LLC, et al, (Docket No. A-4292-13T3). In Palisades, the Court reversed the Trial Court’s determination that the six (6) year statute of limitations on construction defects begins to run when the work is substantially complete. Rather, the Court held that the time period for a condominium association to bring claims against contractors who performed work on the association’s common property does not begin to accrue until control of the association is turned over to the owners by the developer.

By Jonathan H. Katz, Esq.

On October 29, 2015, the New Jersey Supreme Court granted certification (meaning that the Court will hear the appeal) of the Appellate Court’s decision in Cypress Point Condominium Association, Inc. v. Adria Towers, LLC. Specifically, the question certified for review by the Supreme Court is: “In this dispute regarding insurance coverage under a general contractor’s commercial general liability policy, do these damages constitute ‘property damage’ and an ‘occurrence’ where subcontractors’ defective work caused consequential damages to the common areas of a condominium complex and to the unit owners’ property?”

As discussed in a previous blog post, the Appellate Division held that the Insurance Service Office (ISO) 1986 standard commercial general liability insurance policy does not bar coverage to developers in association construction defects cases alleging consequential damages based upon poor workmanship by subcontractors. The Court concluded that consequential damages caused by a subcontractor’s defective work, presumably unintended and unexpected, constitute “property damage” and “occurrence” under the ISO 1986 policy. Therefore, in a condominium association’s lawsuit against a developer for defective construction resulting in consequential damages, the developer’s insurer may have a duty to defend the developer and indemnify the developer against such claims.

By Michael S. Karpoff

In a recent case, Cypress Point Condominium Association, Inc. v. Adria Towers, LLC, a New Jersey appellate court has provided potential additional sources of recovery for community associations involved in construction defect litigation against developers, as well as potential greater financial protection for such developers. In an opinion approved for publication on July 9, 2015, the Appellate Division held that the Insurance Service Office (ISO) 1986 standard commercial general liability insurance policy does not bar coverage to developers in association construction defects cases alleging consequential damages based upon poor workmanship by subcontractors.

The Court concluded that consequential damages caused by a subcontractor’s defective work, presumably unintended and unexpected, constitute “property damage” and “occurrence” under the ISO 1986 policy. Therefore, in a condominium association’s lawsuit against a developer for defective construction resulting in consequential damages, the developer’s insurer may have a duty to defend the developer and indemnify the developer against such claims.