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Where a plumbing subcontractor installed water lines that did not meet the project specifications, and this caused damage to a neighboring property, the prime contractor sued the sub for negligent work and was entitled to recover its damages from the sub’s commercial general liability (CGL) policy because the court found the defective work constituted an occurrence and accident within the meaning of the policy.  The prime contractor obtained a default judgment against the subcontractor who failed to answer the complaint, and then sought payment from the sub’s insurer.  The insurer denied coverage, asserting that the defective work was not an “occurrence” defined under the policy as an “accident.”  The trial court agreed with the insurer’s argument and granted it summary judgment.  That decision was reversed on appeal.  In concluding that the policy provided coverage the state supreme court, citing Black’s Law Dictionary, stated:

“It is commonly accepted that, when used in an insurance policy, an ‘accident’ is deemed to be ‘an event happening without any human agency, or, if happening through such agency, an event which, under circumstances, is unusual and not expected by the person to whom it happens….[I]n its common signification the word means an unexpected happening without intention or design.”

The court held:

“[A]n occurrence can arise where faulty workmanship causes unforeseen or unexpected damage to other property.  In reaching this holding, we reject out of hand the assertion that the acts of [Subcontractor] could not be deemed an occurrence or accident under the CGL policy because they were performed intentionally.  ‘[A] deliberate act, performed negligently, is an accident if the effect is not the intended or expected result; that is, the result would have been different had the deliberate act been performed correctly.’”

The court stated that its decision is in accord with the trend in a growing number of jurisdictions which have considered construction defect claims under CGL policies and interpreted the word “accident” in this manner. American Empire Surplus Lines Insurance Company v. Hathaway Development Company, 707 S.E. 2d 369, 288 Ga. 749 (2011).

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 13, No.7  (July 2011).

Copyright 2011, ConstructionRisk.com, LLC