Tred R. Eyerly | Insurance Law Hawaii | December 5, 2016
Bound by Pennsylvania law, the federal district court found there was no coverage for defects in the installation of a roof. State Farm Fire & Cas. Co. v. Kim’s Asia Constr., 2016 U.S. Dist. LEXIS 138915 (E.D. Pa. Oct. 5, 2016).
Kim’s Asia Construction contracted to remove and dispose of Powerline Imports, Inc.’s roof, and then install a new roof. After completion of the project, Powerline sued, alleging that Kim’s Asia’s negligent construction of the roof caused the roof to leak, even in minor rain storms. Kim’s Asia made additional repairs, but the leaks continued. Powerline had to hire a new contractor to remove and dispose of the roof and install another roof. Powerline then sued Kim’s Asia.
Kim’s Asia sought defense and indemnification from State Farm under its comprehensive business liability policy. State Farm began defending Kim’s Asia under a reservation of rights, but filed a complaint for a declaratory judgment that it had no duty to defend or indemnify. State Farm filed a Motion for Judgment on the Pleadings and/or Motion for Summary Judgment.
In Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A. 2d 999 (Pa. 2006), the Pennsylvania Supreme Court found that the key term in the dictionary definition of “accident” was “unexpected.” This implied a degree of fortuity that was not present in a claim for faulty workmanship.
Here, the underlying complaint alleged that Kim’s Asia “negligently installed a roof which leaks so badly that it cannot be repaired and needs to be completely replaced.” The allegations related directly to Kim’s Asia’s allegedly poor construction of the roof it agreed to build, and therefore amounted to a claim for faulty workmanship.
The presence of the word “negligence” in the underlying complaint did not change the analysis. The key question was whether there was a causal nexus between the property damage and an occurrence, i.e., a fortuitous event. The underlying complaint did not allege anything “unexpected,” “unintentional,” or “fortuitous” about the damage to the roof. Nothing in the complaint suggested that Powerline’s claim was anything other than a claim of faulty workmanship. Therefore, the events alleged in the underlying complaint did not qualify as an “occurrence” under the policy.
Therefore, State Farm’s Motion for Judgment on the Pleadings and/or Motion for Summary Judgment was granted.