A general contractor may not be covered under a general liability insurance policy for property damage caused by defective materials supplied by a subcontractor.

The case
In Stanley Martin Cos. v. Ohio Cas. Group, 2007 U.S. Dist. LEXIS 73587 (E.D. Va. 2007) a general contractor constructed 24 duplex townhouses in Maryland. The general contractor contracted with a subcontractor to supply wood trusses for use in construction of the townhouses. The subcontractor warranted that the trusses were free of mold and other defects and agreed to indemnify the general contractor accordingly.

Prior to commencing construction, the general contractor obtained insurance for the project, which included an umbrella general liability policy providing coverage for property damage or injuries caused by an occurrence, exceeding the general contractor's primary commercial general liability policy.

As the townhouses were built and sold, homeowners began reporting problems with mold growing on the wood trusses and fire walls of their new homes and demanded that the general contractor fix the problem. The general contractor provided notice of the homeowners' claims to its insurance carriers and hired a contractor to undertake the extensive mold remediation effort. The cost of the mold remediation ultimately exceeded the general contractor's commercial general liability policy limits.

The general contractor looked to its umbrella policy carrier to provide coverage for the overage. When the carrier denied coverage, the general contractor filed suit seeking indemnification for the costs incurred in remediating the mold damage to the construction project.