{"id":1597,"date":"2013-05-14T06:25:51","date_gmt":"2013-05-14T12:25:51","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=1597"},"modified":"2013-05-07T15:27:05","modified_gmt":"2013-05-07T21:27:05","slug":"the-occurrence-debate-continues-pennsylvania-and-north-dakota-edition","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/the-occurrence-debate-continues-pennsylvania-and-north-dakota-edition\/","title":{"rendered":"The \u201cOccurrence\u201d Debate Continues: Pennsylvania and North Dakota Edition"},"content":{"rendered":"

Aaron Mandel and Stevi Raab – April 30, 2013<\/p>\n

As noted in our previous installment of CDCQ, the \u201coccurrence\u201d issue is one of the most hotly litigated topics in construction defect coverage cases. This last quarter was no exception. Two recent cases addressing this issue \u2013 and reaching opposite results when it comes to whether faulty workmanship qualifies as an \u201coccurrence\u201d under liability policies \u2013 are Zurich American Insurance Co. v. R.M. Shoemaker Co., No. 12-2268, 2013 WL 1224104 (3d Cir. Mar. 27, 2013), and K&L Homes, Inc. v. American Family Mutual Insurance Co., — N.W.2d —, 2013 WL 1364704 (N.D. Apr. 5, 2013).<\/p>\n

In Zurich, Shoemaker was hired to oversee construction of an addition to a Monmouth County, New Jersey prison. Shoemaker\u2019s oversight allegedly was deficient and enabled subcontractors to perform faulty construction work on the project. That faulty construction work led, in turn, to water intrusion that reduced the prison\u2019s structural integrity and damaged its electrical system and acoustic ceiling tiles, among other things. Shoemaker was insured under occurrence-based CGL policies that defined \u201coccurrence\u201d to mean an \u201caccident,\u201d and its insurers sued in federal court, seeking a declaration that the damage to the prison was not the result of an \u201coccurrence\u201d within the meaning of their policies.<\/p>\n

Resolving the matter under Pennsylvania law, the district court determined that Shoemaker\u2019s failure to perform its oversight duties was not an \u201coccurrence.\u201d Shoemaker appealed, and the Third Circuit Court of Appeals affirmed. The court noted that, when it comes to \u201coccurrence\u201d policies, \u201cthe critical inquiry dictating whether a general liability insurer must defend its insured … is whether an event was sufficiently fortuitous from the perspective of the insured to qualify as an \u2018occurrence.\u2019\u201d Citing to Kvaerner Metals Division of Kvaerner U.S., Inc. v. Commercial Union Insurance Co., 589 Pa. 317 (2006), and Millers Capital Insurance Co. v. Gambone Brothers Development Co., 941 A.2d 706 (Pa. Super. 2007), the court held that \u201c[f]aulty workmanship \u2013 whether caused by the contractor\u2019s negligence alone or by the contractor\u2019s negligent supervision, which then permitted the willful misconduct of its subcontractors \u2013 does not amount to an \u2018accident\u2019 or \u2018occurrence.\u2019\u201d<\/p>\n

In contrast to Zurich, the North Dakota Supreme Court in K&L altered the landscape of construction defect-related \u201coccurrence\u201d litigation in that state by concluding that faulty workmanship by itself can qualify as an \u201coccurrence\u201d within the meaning of a CGL policy.<\/p>\n

There, K&L was hired to construct a home. The homeowners sued K&L after they noticed cracks, unevenness, and shifting in the home caused by allegedly defective work on its footings and foundation, and ultimately recovered damages from K&L for breach of contract and breach of warranty. American Family had issued a CGL policy to K&L providing coverage for \u201cproperty damage\u201d arising out of an \u201coccurrence,\u201d which the policy defined to mean an \u201caccident,\u201d and K&L sued American Family for coverage. The parties cross-moved for summary judgment, and the court granted American Family\u2019s motion on the ground that the defective work on the house was not an accident (and, therefore, not an \u201coccurrence\u201d within the meaning of the policy). It appears that the lower court\u2019s decision was guided by the North Dakota Supreme Court\u2019s decision in ACUITY v. Burd & Smith Construction, 721 N.W.2d 33 (N.D. 2006), in which the North Dakota Supreme Court held that faulty construction work did not implicate an \u201coccurrence\u201d unless it was accompanied by bodily injury or property damage to something other than the work itself.<\/p>\n

On appeal, the North Dakota Supreme Court reversed. The court expressly rejected American Family\u2019s argument that ACUITY applied because the entire house was K&L\u2019s work within the meaning of policy. The court instead ruled that ACUITY was incorrectly decided, and held that \u201cthere is nothing in the definition of \u2018occurrence\u2019 that supports that faulty workmanship that damages the property of a third party is a covered \u2018occurrence,\u2019 but faulty workmanship that damages the work or property of the insured contractor is not an \u2018occurrence.\u2019\u201d Based on this reasoning, the court concluded that faulty workmanship itself \u201cmay constitute an \u2018occurrence\u2019 if the faulty work was \u2018unexpected\u2019 and not intended by the insured, and the property damage was not anticipated or intentional, so that neither the cause nor the harm was anticipated, intended, or expected.\u201d<\/p>\n

via The \u201cOccurrence\u201d Debate Continues: Pennsylvania and North Dakota Edition | Sedgwick LLP – JDSupra<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Aaron Mandel and Stevi Raab – April 30, 2013 As noted in our previous installment of CDCQ, the \u201coccurrence\u201d issue is one of the most hotly litigated topics in construction defect coverage cases. This last quarter was no exception. Two recent cases addressing this issue \u2013 and reaching opposite results when it comes to whether… Continue reading The \u201cOccurrence\u201d Debate Continues: Pennsylvania and North Dakota Edition<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[4,172,3],"tags":[19,204,3,346],"class_list":["post-1597","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-construction-law-2","category-insurance-claims","tag-construction-defects-2","tag-construction-disputes","tag-insurance-claims","tag-occurrences","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nThe \u201cOccurrence\u201d Debate Continues: Pennsylvania and North Dakota Edition - 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