In a landmark ruling, the Massachusetts Appellate Court has clarified that construction defects alone are not covered under Commercial General Liability (CGL) policies. In the case Lessard v. R.C. Havens & Sons, Inc., 104 Mass. App. Ct. 572 (2024), the court upheld the decision that construction defects, without further damage, do not constitute “property damage” under the terms of a CGL policy.

The case stemmed from a lawsuit filed by homeowners against a homebuilder over construction defects in their property. After a jury found in favor of the homeowners, the builder’s insurer intervened, seeking a declaratory judgment to confirm that it was not required to indemnify the builder under the CGL policy. The superior court ruled in favor of the insurer, and the homeowners appealed.

The Appeals Court focused on whether the homeowners’ losses qualified as “property damage” within the CGL policy. The policy stated that the insurer would cover damages for "property damage" caused by an event covered under the policy. The policy defined “property damage” as either "physical injury to tangible property, including all resulting loss of use of that property," or "loss of use of tangible property that is not physically injured." The court noted that other jurisdictions had determined that CGL policies apply only to claims involving actual physical injury to property, rather than defects. It further differentiated between costs related to the repair or removal of construction defects, which do not qualify as property damage, and claims for damages resulting from construction defects, which do qualify.

Since the homeowners did not present any evidence of repair costs at trial and the jury's verdict only accounted for the cost of repairing the defects, the court affirmed the insurer’s declaratory judgment, ruling that the defects alone did not meet the definition of property damage under the policy.