A debate has simmered for decades as to whether a standard commercial general liability (CGL) insurance policy covers a contractor for the defective workmanship of its subcontractors. The policies, standardized by an insurance industry group, protect a contractor against property damage caused by an “accident.” But, is the shoddy workmanship of a subcontractor an accident? The state courts are almost evenly divided on this issue.

The Indiana Supreme Court, in a contentious 3 – 2 decision, recently ruled that subcontractor workmanship can constitute an accident. The court majority reasoned that if the deficient workmanship had not been foreseeable by the insured prime contractor, then it was accidental. The dissent argued that CGL policies are neither designed nor priced to cover that business risk.

Other cases this week involved extensive change orders issued by a project owner in response to an unknown subsurface utility line and a mechanic’s lien amount based on an inaccurate contract price and percentage of completion. The change orders did not fundamentally redefine the project, so there was no “cardinal change” that put the owner in breach of contract. And, the mechanic’s lien was “excessive.” It was properly removed.