HLS 16RS-1310 ORIGINAL
2016 Regular Session
HOUSE CONCURRENT RESOL UTION NO. 111
BY REPRESENTATIVE FOIL
CONTRACTORS/CONSTRUCTION: Authorizes and directs the Louisiana State Licensing
Board for Contractors to provide recommendations with respect to whether
contractors' insurance policies should insure claims against contractors' workmanship
1 A CONCURRENT RESOL UTION
2To authorize and direct the Louisiana State Licensing Board for Contractors to conduct a
3 study and to provide recommendations concerning contractors' general liability
4 policies and whether such policies should insure claims against contractors'
5 workmanship.
6 WHEREAS, a Commercial General Liability Policy (CGL) generally does not insure
7a contractor for property damage due to the contractor’s own faulty workmanship; however,
8the Louisiana Second Circuit Court of Appeals affirmed the holding of a lower court that a
9certain general contractor was entitled to insurance coverage for the costs of repairing
10defective work performed by a subcontractor (Broadmoor Anderson v. National Union Fire
11Insurance of Louisiana, 40,096 (La. App. 2d Cir. 9/28/05), 912 So. 2d 400); and
12 WHEREAS, the insurance policy at issue was a CGL policy, and such policy was
13purchased by the project owner and named as additional insureds "all contractors" and "all
14tiers of subcontractors"; and
15 WHEREAS, after the project's completion, the owner noticed problems with leaks
16concerning ceramic tile shower stalls in certain rooms, and such leaks were determined to
17have been caused by defective workmanship in the installation of certain shower pans; and
18 WHEREAS, the general contractor and subcontractor collaborated in efforts of
19remediation; and
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1 WHEREAS, shortly after the commencement of repairs, the general contractor made
2a formal demand on the CGL insurer for the general contractor's costs for remediation; and
3 WHEREAS, ultimately, the general contractor filed suit against the insurer and
4obtained a summary judgment finding coverage in favor of the general contractor; and
5 WHEREAS, cases of precedence hold that a contractor is not entitled to insurance
6coverage through a CGL policy for property damage caused by the contractor’s own
7defective performance, and a common refrain among those cases is that "a CGL policy is not
8intended to serve as a performance bond"; and
9 WHEREAS, the ruling in Broadmoor Anderson does not directly affect that common
10refrain, because the subcontractor responsible for the defective work was not entitled to any
11insurance coverage for costs of remediation; and
12 WHEREAS, as summarized by a California court, "Generally liability policies…are
13not designed to provide contractors…with coverage against claims their work is inferior or
14defective…Rather liability coverage comes into play when the contractor’s (insured)
15defective materials or work cause injury to property other than the insured’s own work or
16products." (Clarendon America Ins. Co. v. General Sec. Indem. Co. of Arizona (2011) 193
17Cal. App. 4th 1311, 1325) (emphasis added); and
18 WHEREAS, the Louisiana State Licensing Board for Contractors (board) is the state
19agency authorized to license and regulate building contractors in this state, and such board
20serves the mission and purpose of "the protection of the general public from incompetent and
21fraudulent acts of a contractor while promoting the integrity of the construction industry";
22and
23 WHEREAS, many Louisiana citizens hire board-licensed contractors to perform and
24complete both residential and commercial constructions in this state; and
25 WHEREAS, some such citizens allege adverse outcomes with respect to defective
26constructions resulting from the substandard workmanship of respective licensed
27contractors; and
28 WHEREAS, such allegations of adverse outcomes prompt a particular concern of
29such citizens relative to CGL policies of contractors licensed in this state; and
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1 WHEREAS, such particular concern relates to the aforementioned common refrain
2that "a CGL policy is not intended to serve as a performance bond" and thus, a CGL policy
3generally does not contain coverage to insure citizens' claims against contractors with
4respect to contractors' substandard or faulty workmanship; and
5 WHEREAS, while the state shares interest in the board's mission and purpose to
6protect the general public from certain incompetent and fraudulent acts while promoting
7integrity of the state's construction industry, it is also a state interest to determine whether
8the general public may be better protected by CGL policies that insure citizens' claims
9against contractors, when such claims result from assertions of substandard or faulty
10workmanship of contractors licensed in this state through the Louisiana State Licensing
11Board for Contractors.
12 THEREFORE, BE IT RESOLVED that the Legislature of Louisiana does hereby
13authorize and direct the Louisiana State Licensing Board for Contractors to conduct a study
14and to provide recommendations concerning contractors' general liability policies and
15whether such policies should insure claims against contractors' workmanship.
16 BE IT FURTHER RESOLVED that the Louisiana State Licensing Board for
17Contractors is hereby authorized to exercise its discretion as to the use of or engagement in
18certain research, consultations, studies, or any other pertinent information deemed essential
19by the board in its determination as to whether such CGL policies should necessarily insure
20claims against contractors' workmanship.
21 BE IT FURTHER RESOLVED that the Louisiana State Licensing Board for
22Contractors shall submit a written report of its findings and recommendations to the House
23Committee on Commerce and Senate Committee on Commerce, Consumer Protection, and
24International Affairs on or before February 1, 2017.
25 BE IT FURTHER RESOLVED that a copy of this Resolution be transmitted to the
26executive director of the Louisiana State Licensing Board for Contractors.
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HCR NO. 111
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HCR 111 Original 2016 Regular Session Foil
Authorizes and directs the La. State Licensing Bd. for Contractors to report its findings and
recommendations concerning contractors' general liability policies and whether such policies
should insure claims against contractors' workmanship.
Requests a written report of its findings and recommendations by Feb. 1, 2017.
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