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High court divided on faulty workmanship coverage under CGL policy

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The high court split on whether an “occurrence” under a commercial general liability policy covers an insured contract for faulty workmanship of its subcontractor.

In Sheehan Construction Co., Inc., et al. v. Continental Casualty Co., et al., No. 49S02-1001-CV-32, Justices Robert Rucker, Brent Dickson, and Theodore Boehm reversed the trial court ruling in favor of the insurers on grounds that there was no damage to the property and thus there was no “occurrence” or “property damage.”

This class-action suit involves homeowners in a subdivision in which Sheehan Construction Co. was the general contractor. The homeowners had leaking windows, water damage, and other issues caused by the faulty workmanship of Sheehan’s subcontractors. During the period at issue, Sheehan was insured under a CGL policy by Continental Insurance Co.

The class settled with Continental. Continental filed declaratory judgment that it wasn’t obligated to indemnify Sheehan; Sheehan and the class filed a third-party complaint against Indiana Insurance and MJ Insurance, Sheehan’s insurance broker. The trial court granted summary judgment in favor of the insurers and MJ Insurance. The Court of Appeals affirmed.

The high court had to decide whether faulty workmanship fits within the insurance policy’s definition of “occurrence” under standard CGL policies. Jurisdictions have been split on this matter – some held it’s not an occurrence because it doesn’t constitute an “accident”; others have found improper construction be an “accident” and therefore an occurrence where the resulting damage occurs without the insured’s expectation or foresight, wrote Justice Rucker.

The majority aligned themselves with the jurisdictions that held improper or faulty workmanship does constitute an accident as long as the resulting damage is an event that occurs without expectation or foresight. They remanded for further proceedings because none of the parties’ Trial Rule 56 materials addressed the question of whether the faulty workmanship was the product of intentional or unintentional conduct, so the trial court reached no conclusion on that. If the subcontractor’s defective work was done intentionally instead of “without intention or design” then it is not an accident, wrote Justice Rucker.

In his dissent, Chief Justice Randall T. Shepard would align Indiana with those jurisdictions that have held faulty workmanship isn’t an occurrence. He wrote that these insurance policies are neither designed nor priced as coverage for whatever demands the insured may face in the nature of ordinary consumer claims about breach of warranty. He also joined Justice Frank Sullivan’s dissent, in which the justice views an “occurrence” under a CGL policy as accidental damage caused by an insured or insured’s subcontractor to property owned by third parties, but not the costs of repairing defective work. 

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  1. CCHP's real accomplishment is the 2015 law signed by Gov Pence that basically outlaws any annexation that is forced where a 65% majority of landowners in the affected area disagree. Regardless of whether HP wins or loses, the citizens of Indiana will not have another fiasco like this. The law Gov Pence signed is a direct result of this malgovernance.

  2. I gave tempparry guardship to a friend of my granddaughter in 2012. I went to prison. I had custody. My daughter went to prison to. We are out. My daughter gave me custody but can get her back. She was not order to give me custody . but now we want granddaughter back from friend. She's 14 now. What rights do we have

  3. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

  4. I have a case presently pending cert review before the SCOTUS that reveals just how Indiana regulates the bar. I have been denied licensure for life for holding the wrong views and questioning the grand inquisitors as to their duties as to state and federal constitutional due process. True story: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS Shorter, Amici brief serving to frame issue as misuse of govt licensure: https://www.scribd.com/doc/312841269/Thomas-More-Society-Amicus-Brown-v-Ind-Bd-of-Law-Examiners

  5. Here's an idea...how about we MORE heavily regulate the law schools to reduce the surplus of graduates, driving starting salaries up for those new grads, so that we can all pay our insane amount of student loans off in a reasonable amount of time and then be able to afford to do pro bono & low-fee work? I've got friends in other industries, radiology for example, and their schools accept a very limited number of students so there will never be a glut of new grads and everyone's pay stays high. For example, my radiologist friend's school accepted just six new students per year.

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