There are a variety of situations where construction litigation may be necessary to address issues such as shoddy workmanship, defective materials, or other problems that lead to property damage. One factor that played a role in Wisconsin construction litigation cases was known as the "integrated systems rule." This rule stated that insurance coverage for property damage would only apply if damage occurred to "other property." However, a recent ruling by the Wisconsin Supreme Court has rejected this rule. This ruling may affect other types of construction litigation cases and ensure that contractors, suppliers, or those responsible for property damage are held liable.
5 Walworth, LLC v. Engerman Contracting, Inc.
In the case of 5 Walworth, LLC v. Engerman Contracting, Inc., a property owner in Lake Geneva hired a contractor to construct an in-ground swimming pool complex. This contractor, Engerman Contracting, Inc., hired a subcontractor, Downes Swimming Pool Co., Inc., to perform the construction. Downes hired a supplier, Otto Jacobs Company, to supply shotcrete, a ready-mixed concrete used in the construction of the pool. However, after the pool construction was finished, leaks were found. Over the course of several years, attempts were made to repair the leaks. Eventually, it was determined that the leaks would continue to develop and get worse over time. As a result, the property owner was forced to demolish and rebuild the pool.
The property owner sought damages against Engerman and Downes for deficient construction, requesting compensation for the demolition of the old pool and construction of the new pool. Downes also brought a third-party claim against Otto Jacobs, claiming that the shotcrete provided for the project was inferior. The insurers for Engerman, Downes, and Jacobs sought a summary judgment to declare that their commercial general liability (CGL) policies did not provide coverage for these damages. The insurers' claims were based on the integrated systems rule. Since the pool itself was damaged by improper construction methods and defective materials, as opposed to other property, the insurers argued that they were not required to pay for the demolition and new construction.
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