I. Course of Construction Exclusions
Course of Construction (“COC”) exclusions are found on General Liability and excess liability policies, typically a wrap-up or project specific policy, and generally exclude “all property damage occurring during the course of construction.” Insurers claim COC exclusions are not problematic because they are intended to prevent an overlap in coverage between the general liability policy and first-party property Builder’s Risk policy. However, because General Liability policies and Builder’s Risk policies provide coverage for different risks, COC exclusions can create a gap in coverage for owners and contractors. Therefore, any exclusion on a wrap-up or project specific policy that limits coverage for property damage liability should be scrutinized, and amendments sought when warranted and commercially achievable, for owners, developers and contractors because General Liability policies do not cover the same risk as that of a Builder’s Risk policy.

General liability policies provide defense and indemnity to the insured(s) for claims made by a third-party against the insured. Broad COC exclusions serve to preclude coverage for all property damage, not just property damage to the insured project. This includes property damage to property other than the insured project, e.g. an adjacent property. On the other hand, Builder’s Risk policies provide first-party property coverage for direct physical loss to the project during the course of construction. The Builder’s Risk policy will not provide coverage for property other than the project itself (e.g., adjacent property) and it will not provide a defense or indemnity in the event the owner of the damaged property brings a claim against a potentially at-fault party.

Reprinted courtesy of Anna M. Perry, Saxe Doernberger & Vita, P.C., Rachel S. Kindseth, Saxe Doernberger & Vita, P.C. and Nina Catanzaro, Saxe Doernberger & Vita, P.C.

Ms. Perry may be contacted at APerry@sdvlaw.com
Ms. Kindseth may be contacted at rkindseth@sdvlaw.com
Ms. Catanzaro may be contacted at NCatanzaro@sdvlaw.com