Insurers Must Pay For Hoboken Luxury Condo’s Water Damage: Supreme Court

HOBOKEN, NJ — The insurers of a Hoboken luxury condo building plagued by water damage will be liable for the allegedly faulty work, according to a recent New Jersey Supreme Court decision.

Last week, the New Jersey Supreme Court ruled that rain water damage caused by a subcontractor’s faulty workmanship constitutes “property damage” and an “occurrence” under a property developer’s commercial general liability (CGL) insurance policy.

According to court documents, the dispute arose from the construction of Cypress Point, a 53-unit, luxury condominium building on Clinton Street in Hoboken. Co-defendants Adria Towers, Metro Homes and Commerce Construction Management served as the project’s developers and general contractors, with subcontractors carrying out most of the work.

During construction, the developers obtained four CGL policies from Evanston Insurance Company and three from Crum & Forster Specialty Insurance Company, court records state.

The policies, which are modeled after the 1986 version of the standard form CGL policy promulgated by the Insurance Services Office, provide coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ . . . caused by an ‘occurrence’ that takes place in the ‘coverage territory’ . . . [and] . . . occurs during the policy period.”

According to court records, after completion of the complex, several residents began experiencing problems such as roof leaks and water infiltration around windows in units and common areas. The Cypress Point Condominium Association brought an action against the developer and several subcontractors, alleging faulty workmanship during construction and claiming various consequential damages.

• See related article: Hoboken Condo Developers May Be Liable For Faulty Construction

Ultimately, a question arose as to whether the association’s claims were covered by the insurers’ CGL policies. Subsequently, the insurers moved for summary judgment, arguing that they were not liable because the subcontractors’ faulty workmanship did not constitute an “occurrence” that caused “property damage” as defined by the policies.

A trial court agreed and granted the motion, which was later reversed by an appellate court. The New Jersey Supreme Court weighed in with their final decision on Aug. 4, remanding the matter back to the trial court.

“We affirm the judgment of the Appellate Division and hold that the consequential damages caused by the subcontractors’ faulty workmanship constitute ‘property damage,’ and the event resulting in that damage –- water from rain flowing into the interior of the property due to the subcontractors’ faulty workmanship –- is an ‘occurrence’ under the plain language of the CGL policies at issue here,” the Supreme Court wrote in its decision.

Photo courtesy of Ansell Grimm & Aaron, PC

Photo caption: Two employees remove the bricks from around a window at Cypress Point Condominiums on Clinton Street to determine what is causing water infiltration at the building.

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