ILNews

High court divided on faulty workmanship coverage under CGL policy

Back to TopE-mailPrintBookmark and Share

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. 

ADVERTISEMENT

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Today, I want to use this opportunity to tell everyone about Dr agbuza of agbuzaodera(at)gmail. com, on how he help me reunited with my husband after 2 months of divorce.My husband divorce me because he saw another woman in his office and he said to me that he is no longer in love with me anymore and decide to divorce me.I seek help from the Net and i saw good talk about Dr agbuza and i contact him and explain my problem to him and he cast a spell for me which i use to get my husband back within 2 days.am totally happy because there is no reparations and side-effect. If you need his help Email him at agbuzaodera(at)gmail. com

  2. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

  3. Any attorneys who practice in federal court should be able to say the same as I can ... efiling is great. I have been doing it in fed court since it started way back. Pacer has its drawbacks, but the ability to hit an e-docket and pull up anything and everything onscreen is a huge plus for a litigator, eps the sole practitioner, who lacks a filing clerk and the paralegal support of large firms. Were I an Indiana attorney I would welcome this great step forward.

  4. Can we get full disclosure on lobbyist's payments to legislatures such as Mr Buck? AS long as there are idiots that are disrespectful of neighbors and intent on shooting fireworks every night, some kind of regulations are needed.

  5. I am the mother of the child in this case. My silence on the matter was due to the fact that I filed, both in Illinois and Indiana, child support cases. I even filed supporting documentation with the Indiana family law court. Not sure whether this information was provided to the court of appeals or not. Wish the case was done before moving to Indiana, because no matter what, there is NO WAY the state of Illinois would have allowed an appeal on a child support case!

ADVERTISEMENT