In Group Builders, Inc. v. Admiral Ins. Co., 123 Haw. 142, 231 P.3d 67 (Haw. Ct. App. 2010) [decision here], the Hawaii Intermediate Court of Appeals determined that construction defects did not arise from an occurrence and therefore were not covered under a CGL policy. [See our Group Builders' post here]. Bills were recently submitted to the Hawaii State Legislature in an effort to rectify the Group Builders' decision.
The bills are identified as SB1192, HB939 and HB929. They are patterned after a Colorado statute, Colo. Rev. Stat. sec. 13-20-808, seeking to overturn an appellate court decision, General Security Indemnity Co. of Arizona v. Mountain States Mutual Cas. Co., 205 P.3d 529 (Colo. Ct..App. 2009). Similar to Group Builders, General Security held that damages from faulty workmanship did not arise from an occurrence. Ironically, Group Builders relied heavily upon the General Security's outline of the majority/minority positions regarding construction defects.
The Senate Committee on Commerce and Consumer Protection will conduct a hearing on SB1192 in Conference Room 229 on Wednesday, February 9, 2011 at 8:30 a.m. The bill states that Group Builders "does not properly consider a construction professional's reasonable expectation that an insurer would defend the construction professional against an action or notice of claim." Courts are instructed to "presume that the work of a construction professional that results in property damage, including damage to the work itself or other work, is an accident unless the property damage is intended and expected by the insured."
The bill further states that the Act "shall apply to all insurance policies currently in existence or issued on or after the effective date of this Act." Whether inclusion of existing policies in the bill could withstand a constitutional attack on impairment of contracts remains to be seen.
We will track the progress of these bills. Also on the construction defect front, several cases are brewing in the Hawaii state circuit courts and in the federal district court which seek to challenge the holding in Group Builders.
