NJ SUPREME COURT RULING PROVIDES HOAs RECOURSE FOR FAULTY WORKMANSHIP

South_City_Lights_condos_under_construction_2-10-08_1For many people a great starter home is a condominium unit. This takes the responsibilities of maintaining the grounds, shoveling snow, etc. and places it on the Home Owners Association (“HOA”).  In return, you are required to pay a monthly fee. For some, this provides more freedom and the ability to enjoy a variety of activities, while others would prefer to own a single family home and not pay a monthly HOA fee.

For many, an added assessment is a downside of being part of an HOA. An added assessment is an amount of money that the HOA needs in order to pay for a project or outstanding debt that was not part of the annual budget.  In some instances condominium owners face added assessments due to the faulty workmanship (i.e. improperly installed roofs which leak) of a subcontractor. A recent New Jersey Supreme Court decision addressed this issue.

In Cypress Point Condominium Association v. Adria Towers, the New Jersey Supreme Court ruled that insurance carriers may be required to provide coverage for property damage caused by faulty workmanship on the part of subcontractors.  The Court stated that standard insurance policies issued to general contractors and developers no longer contain language that allows for an exemption for coverage for damages caused by subcontractors.

In this case, the Court ruled that two commercial general liability carries must provide coverage to the developer and general contractor of Cypress Point Condominiums, a 53-unit project in Hoboken, where residents alleged in a lawsuit that their units sustained water damage caused by faulty construction work on the part of subcontractors hired by the developers and general contractors.  Damages were estimated to be $4 million.

After the lawsuit was filed the carriers denied coverage stating that the claims were excluded because subcontractors’ faulty workmanship did not constitute ‘property damage’ caused by an ‘occurrence.’

The trial judge dismissed the claim, ruling that damages caused by subcontractors during construction were not an ‘occurrence.’ An Appellate Division panel reversed.

The NJ Supreme Court stated that the consequential damage caused by the subcontractors’ faulty workmanship constitutes ‘property damage’ and the event resulting in the damage. . is an ‘occurrence’ under the plain language of the commercial general liability policies at issue.

The ruling in this case has an immense impact for New Jersey condominium owners and associations.  In many instances plaintiffs (condominium owners/associations) are left with little recourse because developers and general contractors often create shell firms for a particular project that have little or no assets to go after if there are construction defects. This means that in order to recover any sum of money the plaintiff would have to ‘pierce the corporate veil’ and sue the developers/general contractors individually. Now, based on this ruling, there will be insurance coverage for such claims and the Plaintiffs can be made whole.

Don’t sit back and think there is nothing you can do. The attorneys at Gale & Laughlin have assisted numerous clients in faulty workmanship claimsContact us today with any questions you may have.

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