American Family Mutual Insurance v. American Girl, Inc.
2004 WI 2 | Wisconsin Supreme Court | 2004
What This Case Means for Subcontractors
A soil engineering subcontractor's faulty site-preparation work caused a building to settle and become unsafe, requiring demolition. The general contractor's insurance carriers denied coverage, claiming contractual liability and business risk exclusions applied. Wisconsin's Supreme Court ruled that the CGL policies must cover the property damage because it resulted from an accidental occurrence, even though the damage was also actionable as a contract breach. This means subcontractors and contractors cannot be left without insurance protection simply because their work failures are both negligent and contractually guaranteed.
Key Takeaways
- •CGL insurance covers property damage from faulty subcontractor work even when the damage is also a breach of contract—accidental occurrence coverage applies regardless
- •Contractual liability exclusions do not eliminate coverage for property damage that stems from an unintended accident, only intentional or expected losses
- •Subcontractors should ensure their contracts flow down insurance requirements to protect the general contractor, as GCs will look to their own policies first and may pursue indemnification claims
Property damage caused by accidental occurrence is covered despite being actionable in contract.
Frequently Asked Question
If my subcontractor work causes property damage and I'm sued, will my insurance cover it even though it's also a contract breach?
Yes, according to this Wisconsin case. CGL policies cover accidental property damage regardless of whether the damage is also actionable as a contract breach. The contractual liability exclusion does not apply to unintended accidents—only to losses the contractor expected or intended. Make sure your policy clearly defines 'occurrence' and 'property damage' to avoid disputes.
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