New Jersey’s greatest contribution to American rock ’n’ roll, Bruce Springsteen, was nearly relegated to obscurity by a marijuana bust involving his bandmates. Rock legend has it that one of The Boss’ early bands, the Castilles, was forced to break up when some of its members were caught with cannabis in Freehold in 1967. While it would have been unthinkable back then, New Jersey is now on the precipice of marijuana legalization. Gov. Phil Murphy’s campaign platform included a commitment to legalizing recreational use, and three cannabis-related bills have passed through New Jersey Senate and Assembly committees and await the legislature’s final vote, which could happen this month. Legalization would transform New Jersey’s economy, and may also be a litmus test for nearby New York. Looking ahead, business owners, entrepreneurs and investors who are contemplating entry into the cannabis space, when and if legalization occurs, would do well to educate themselves about the potential insurability of various exposures facing the industry.
Insurance coverage litigation can be lengthy and is usually complex, and these characteristics are only exacerbated by the need to comply with often arcane state law rules of procedure. New Jersey, long a hotbed of insurance litigation, has too often exemplified this reality. Until now.
Since 1979, commercial general liability (CGL) insurers have relied on the New Jersey Supreme Court case of Weedo v. Stone-E-Brick, Inc. and its progeny to argue that a subcontractor’s defective work can never qualify as an “occurrence” under a standard form ISO CGL policy. This argument is contrary to both the language of standard CGL policies and the trend in recent case law, but courts in New Jersey and elsewhere have continued to cite Weedo for this proposition. With its new decision in Cypress Point Condominium Association, Inc. v. Adria Towers, LLC, the New Jersey Supreme Court has now finally relegated Weedo to its proper status as an historical footnote based on outdated policy language.
Cypress Point involved claims for rain water damage to a condo building. When the condo association began noticing the damage, it brought claims against the developer/general contractor and several subcontractors. The association alleged that the subcontractors’ defective work on the exterior of the building allowed water leaks that damaged steel supports, sheathing and sheetrock, and insulation. When the developer’s CGL insurers refused to cover the claims, the association sued the insurers, seeking a declaration that the association’s claims against the developer were covered.