In a significant case with far-reaching implications in Massachusetts, Lessard v. R.C. Havens & Sons, Inc., 104 Mass. App. Ct. 572 (2024), the Appellate Court made a crucial determination. It firmly established that construction defects, in and of themselves, do not qualify as property damage within the purview of a commercial general liability policy (CGL). This ruling has set a new benchmark and will likely impact numerous similar legal disputes in the future.

Unraveling the Legal Nuances of Construction Defects and CGL Policies

Understanding the Case Context

In the Lessard case, homeowners took legal action against an insured homebuilder due to construction defects in their residence. After achieving a jury verdict in their favor, the homebuilder's insurer stepped in and sought a declaratory judgment stating that it had no obligation to indemnify the homebuilder under the CGL policy. The superior court granted the insurer's request, and the homeowners appealed, setting the stage for a detailed legal battle.This case highlights the importance of clearly defining and interpreting the terms within a CGL policy. The policy requires the insurer to cover damages for which the insured becomes legally obligated. However, the key question at hand was whether the homeowners' losses constituted "property damage" as defined by the policy.

The Policy's Definition of Property Damage

The CGL policy specifically defines "property damage" as either "physical injury to tangible property, including all resulting loss of use of that property" or "loss of use of tangible property that is not physically injured." This definition sets a clear framework for determining what constitutes property damage under the policy.The court carefully examined the reasoning from other jurisdictions, which often emphasize that CGL policies define "property damage" as "physical injury." This implies that the property was not defective initially but became damaged later. Additionally, the common distinction between claims for the costs of repairing or removing construction defects (which are not claims for property damage) and claims for the costs of repairing damage caused by construction defects (which are claims for property damage) was also taken into account.In the Lessard case, although the homeowners won a jury verdict, they failed to provide any evidence of their repair costs at trial. The underlying jury verdict only awarded damages for the costs of repairing or removing construction defects. As a result, the declaratory judgment in favor of the insurer was affirmed.This case serves as a valuable lesson for both homeowners and insurers. It emphasizes the need for clear documentation and evidence when claiming property damage under a CGL policy. Homeowners must be able to demonstrate that the damage was caused by factors other than the initial construction defects. Insurers, on the other hand, must carefully interpret and apply the policy terms to ensure proper coverage.Overall, the Lessard v. R.C. Havens & Sons, Inc. case has shed light on the complex relationship between construction defects and CGL policies. It has provided valuable guidance for legal practitioners and stakeholders in the construction industry, helping them navigate the intricacies of such disputes.