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Page 466 DEFENSE COUNSEL JOURNAL–October 2012cost of repairing the defectiveconstruction.Ever eager to share the misery, thesued entities then turned to their generalliability insurers, claiming the defectiveconstruction was an “accident” andtherefore covered under their generalliability policies. Not since asbestoslitigation has any one coverage issuespawned so much litigation. As of thedate of this article, only seven states haveescaped addressing whether defectiveconstruction meets the definition of an“accident” and therefore constitutes acovered “occurrence” within the meaningof the I.S.O. general liability policy in usesince 1986. 2 This article explores thevarious approaches courts have taken onthe issue. It then presents other issuesthat are beginning to be addressed bycourts who have found defectiveconstruction to be an “occurrence.” Inaddition, state legislatures in at least fourstates have addressed the issue, spurredby decisions purportedly unfavorable toinsureds in those jurisdictions.I. Is Defective Construction an“Occurrence?”The broad form general liabilitypolicy widely in use since the 1960'sgrants the following coverage:We will pay those sums that theinsured becomes legally obligated topay as damages because of “bodilyinjury” or “property damage” towhich this insurance applies. ...2 See Appendix I.b. This insurance applies to “bodilyinjury” and “property damage”only if:(1) The “bodily injury” or“property damage” is causedby an “occurrence” thattakes place in the “coverageterritory”; and(2) The “bodily injury” or“property damage” occursduring the policy period. 3From this language, it is clear that inorder to trigger the coverage agreement inthe first instance, there must be “propertydamage ... caused by an ‘occurrence.’”What then is an “occurrence?” The I.S.O.policy defines an “occurrence” as “anaccident, including continuous orrepeated exposure to substantially thesame general harmful conditions.” 4 Enterthe fortuity principle—that which isaccidental is necessarily fortuitous. Thepolicy is obviously intended only to coverfortuitous events—those which areforeseeable, but not within the insured’scontrol. Arguably, if the resultant defectwas “accidental” then the loss was an“occurrence.”Other courts have reached the sameresult looking instead to policy exclusionsto justify their decisions. ComprehensiveGeneral Liability (“CGL”) policiescontain a number of exclusions, whichmight apply to bar coverage even wherethe court finds the defective construction3 Insurance Services Office, Form CG 00 0112 04, available at http://www.ramsgate.com/forms/CG0001.pdf.4 See United States Fire Ins. Co. v J.S.U.B.,Inc., 979 So.2d 871 (Fla. 2007).
Raising the Roof Page 467to be an occurrence. The I.S.O. broadform general liability policy currently inuse contains three exclusions, generallyreferred to collectively as the “businessrisk exclusions,” as follows:This insurance does not apply to:j. Damage to Property“Property damage” to:(5) That particular part of realproperty on which you or anycontractors or subcontractorsworking directly or indirectly onyour behalf are performingoperations, if the “propertydamage” arises out of thoseoperations; or(6) That particular part of anyproperty that must be restored,repaired or replaced because“your work” was incorrectlyperformed on it.Paragraph (6) of this exclusion doesnot apply to “property damage”included in the “products-completedoperations hazard”.k. Damage to Your Product“Property damage” to “your product”arising out of it or any part of it.l. Damage to Your Work“Property damage” to “your work”arising out of it or any part of it andincluded in the “products-completedoperations hazard”.This exclusion does not apply if thedamaged work or the work out ofwhich the damage arises wasperformed on your behalf by asubcontractor.The policy then defines the“products-completed operations hazard”as:all “bodily injury” and “propertydamage” occurring away frompremises you own or rent and arisingout of “your product” or “your work”except:(1) Products that are still in yourphysical possession; or(2) Work that has not yet beencompleted or abandoned. However,“your work” will be deemedcompleted at the earliest of thefollowing times:(a) When all of the work called forin your contract has been completed.(b) When all of the work to be doneat the job site has been completed ifyour contract calls for work at morethan one job site.(c) When that part of the work doneat a job site has been put to itsintended use by any person ororganization other than anothercontractor or subcontractor workingon the same project.Work that may need service,maintenance, correction, repair or
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