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Home under construction collapses: Using Republican Judges' interpretation, General Contractors have limited insurance protection in Michigan

Gerald and Jonna Heaton were building a home in Shiawassee County with the help of Pristine Home Builders as General Contractor.  Pristine hired Great Lakes Superior Walls to install "Precast concrete foundation walls," which, unfortunately collapsed allowing the home under construction to shift.  It had to be razed, and the Heatons obtained a negligence judgment against the two contractors for approximately $270,000.00.

Pristine's insurer, Auto-Owners, paid the 60% of liability attributed to Pristine.  The foundation sub- did not pay its 40% share of fault, however, and the Heatons attempted to collect that balance from Auto-Owners through garnishment.  The Heatons argued that under the General Contractor's insurance policy, Auto-Owners remained liable for the negligence of the general contractor's agents.

The Court dismissed the Heatons' garnisment action, however, relying upon a Supreme Court analysis of the term "occurrence" used in the general's liability policy.  According to the judges of the Court of Appeals, Auto-Owners could evade liability because this event was not an "occurrence" as that term is used in Michigan law and intended under the policy.  Under the policy language, although Auto-Owners had agreed to indemnify the General for a Sub's neglgience, the coverage was excluded if the damage resulting including the "restoration, reparatation or replacement" of the damaged property.

The policy defined "occurrence" as an "accident, including continuous or repeated exposure to substantially the same general harmful conditions."  Under Michigan law, an "accident" includes "an undesigned contingency, a casualty, a happening by chance, somethin out of the ususal course of things...not naturally to be expected."  If the collapse of a home under construction sounds like an "occurrence" or an "accident" under these definitions, perhaps you haven't been attending to the work of the insurance industry or receiving their support for election. 

Michigan's elected judges have held that under these circumstances, the insurer is allowed to define (in the "fine print") events so as to exclude the intended coverage which an insured purchased.  Indeed, the Republican majority of the Michigan Supreme Court has reversed prior precedent and held that an insurance contract should NOT be interpreted as the "reasonable insured" would have anticipated. 

Under this exisiting law, the Court of Appeals judges hearing the Heaton case felt compelled to rule that Pristine was not entitled to the insurance coverage for sub-contractors that it believed it had purchased. And forty percent of the home-owners' damages will either go uncompensated or come directly from the future income of the "insured" General Contractor.

Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
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