What Contractors Need to Know About Liability Contracts

HOUSTON, March 14, 2014 /PRNewswire/ -- The Texas Supreme Court has issued a January, 2014 decision that changes Texas contractors' commercial general liability policies. Heather Asselin, a director in Construction/Surety Law with Coats Rose Law Firm, explains how the decision affects contractors.

In Ewing Construction, Inc. v. Amerisure Insurance, a Texas school district asked Ewing to pay for damages after a tennis court project was completed by a subcontractor, hired by Ewing, stating the courts were crumbling and unusable.

Ewing's insurance carrier, Amerisure, denied the claim, saying it was barred by the contractual liability exclusion.

"Most general liability policies have a clause allowing the insurance company to exclude claims when a contractor assumes liability in an agreement," says Asselin. "But that clause also comes with an exception that the insurance company pays for property damage claims resulting from a general liability that would apply in the absence of a contract."

Ewing argued its agreement did not enlarge its obligation under the general law or to exercise ordinary care in doing so.

The Texas Supreme Court distinguished its decision in Gilbert Texas Constr., L.P. v. Underwriters at Lloyd's, agreed with Ewing, and found the general contractor who agrees to perform its work in a good and workmanlike manner without more, does not enlarge its duty to exercise ordinary care in fulfilling the contract and does not assume liability for damages arising out of its defective work to trigger the contractual liability exclusion.                 

Asselin advises contractors to:

• Evaluate their assumption of liability provisions in light of the Ewing decision
• Evaluate their contract language either on a project by project basis, or globally
• Evaluate insurance coverage in light of the decision regarding their duties under common law compared with contractual obligations

Heather Asselin is a Director in the Construction/Surety and Litigation sections of Coats Rose, as well as complex disputes on behalf of clients in areas including: securities fraud, personal injury, wrongful death, contract claims, employment discrimination claims, breach of fiduciary duty, and defamation.

Coats Rose is a full service business transaction and litigation law firm based in Houston. For more than 25 years, Coats Rose attorneys have worked with clients in construction/surety law, real estate law, commercial litigation, municipal law, public finance, affordable housing, insurance law, labor and employment law, and governmental relations with more than 90 attorneys, with offices in Houston, Clear Lake, Dallas, Austin, San Antonio, and New Orleans.

SOURCE Coats Rose