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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. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  4. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

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