Illinois Supreme Court Expands Insurance Coverage for Construction Defects

January 25, 2024

In a recently issued opinion of the Illinois Supreme Court concerning insurance coverage for construction defects, the Court held that insureds under standard Commercial General Liability (CGL) insurance policies may now be covered for claims involving inadvertent defective construction. In other words, contractors and construction companies can now receive coverage for claims involving damage to areas considered to be a part of the construction project. Previously, no such claims could be defended unless there was determined to be damage to property not included within the project. This was because standard CGL language regarding “property damage” caused by an “occurrence” could not include property on the building/structure constructed because a construction defect was considered to be a natural and ordinary consequence of the construction process. Meaning in legal terms, there was no accident.

With the decision in Acuity v. M/I Homes of Chicago, LLC, the Court made the determination to use the plain language of the contracts in determining what is and is not covered within a policy’s limits. In the case at hand, this meant that the damage to the townhomes could be considered an “occurrence” under the policy. The Court further wrote that to conclude otherwise “is not grounded in the language of the initial grant of coverage in the insuring agreement.” Doubling down on the belief that the proper determination of what acts are and are not eligible for coverage should be based on the language of the agreement.

This change in application comes after many years of lobbying efforts and amicus briefs aimed at Illinois courts, and additional pressure may have been felt as a result of numerous other states adopting similar policies. This shift will allow project stakeholders the ability to gain insurance coverage for defects much easier than in the past. Previously, costs of inadvertent damages were footed by either property owners or contractors, often creating increases in costs. Although the new ruling does not guarantee coverage in every situation, it will create the general rule that there should be coverage with the exception of exclusions within the policy language.

Moving forward, parties should now be able to gain coverage on previously declined claims. At the very least, these parties may be entitled to recovery of costs associated with defense of suit on those previously declined claims.

For more information regarding the new application of insurance coverage, please contact a qualified attorney at Rock Fusco & Connelly, LLC, or visit Illinois Overturns Insurance Coverage Construction Law (