It was a long time in the making (or preventing), but New Jersey is now officially a continuous trigger jurisdiction when it comes to construction defect litigation and CGL policies.
In the case of Air Master v. Selective Insurance, the appellate court was faced with a “typical” NJ construction defect case, i.e. a large condominium complex which years after completion experienced water infiltration and resulting damages.
The case’s key facts are:
• Air Master’s work was conducted between November 2005 and April 2008;
• Water damage (allegedly resulting from the work) was noticed as soon as February 2008;
• But, it was not until April 2010 that an “expert” documented the water issues;
• Penn National insured Air Master from November 2005 to April 2008;
• Selective insured Air Master from June 2009 until June 2012; and
• Harleysville insured Air Master from June 2012 to June 2015.
The Superior Court, in an approved for publication decision, was effectively asked to determine whether Selective’s policy obligations were limited to “property damage” that occurred during its policy periods. In a 29 page opinion, the Superior Court held that:
(1) a “continuous trigger” theory of insurance coverage may be applied in this State to third-party liability claims involving progressive damage to property caused by an insured’s allegedly defective construction work.
(2) the “last pull” of that trigger — for purposes of ascertaining the temporal end point of a covered occurrence — happens when the essential nature and scope of the property damage first becomes known, or when one would have sufficient reason to know if it.
(3) the “last pull” of the trigger does not occur until there is expert or other proof that “attributes” the property damage to faulty conduct by the insured.
So, what does all of this mean? The bad news (especially for Selective in the case at bar) is that insurers will no longer able to argue that, in the absence of evidence of “property damage” during the policy period, there is no coverage — so, earlier in time insurers are likely to bear more risk. But, the good news is that the “trigger” ends (it seems) when there is actual or constructive notice of the “property damage” — which means that later in time insurers should be able to limit coverage…if they can establish notice of the problems.
The last domino has finally fallen, but a new game is about to begin.
For more information about this post please e-mail Bob Cosgrove.