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Birmingham Bar Association Bulletin - Fall 2014

“However, in making that argument Owners asks the term ‘occurrence’ to do too much. The term ‘occurrence’ is defined in the Owners policy simply as ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions.’ If some portion of the Owners policy seeks to affect coverage by references to the nature or location of the property damaged, it is not the provision in the policy for coverage of occurrences. The policy simply does not define ‘occurrence’ by reference to such criteria….Indeed, to read into the term ‘occurrence’ the limitations urged by Owners would mean that, in a case like this one, where the insured contractor is engaged in constructing an entirely new building, or in a case where the insured contractor is completely renovating a building, coverage for accidents resulting from some generally harmful condition would be illusory. There would be no portion of the project that, if damaged as a result of exposure to such a condition arising out of faulty workmanship of the insured, would be covered under the policy.” A critical point of Owners II is the Court’s conclusion that “occurrence” is “simply an accident.” After reaching that conclusion, however, the Court went on to reiterate its longstanding rule that “faulty workmanship itself is not ‘property damage’ ‘caused by’ or ‘arising out of ’ an ‘occurrence.” Thus, the cost of repairing or replacing faulty workmanship “is not the intended object of a CGL policy issued to a builder or contractor.” As the Owners II opinion makes clear, the definition of “occurrence” as “accident” certainly does not negate coverage for property damage (including damage to the project itself) that is accidentally caused by faulty workmanship. In other words, the CGL policy may not provide coverage for the “faulty workmanship” itself, but it may and often does provide coverage for property damage resulting from the faulty workmanship. This is true even if the property damage Alabama Law Update is limited solely to the construction project. This conclusion in Owners II is a complete reversal from Owners I. It is also entirely consistent with the policy’s plain language definition of “occurrence” as “accident” and with the clear majority of states that have definitively decided the issue. Based on the foregoing, followed by an insightful analysis of the “your work” exclusion, the Supreme Court affirmed the trial court’s judgment in favor of the insured homebuilder. Thus, the homeowner’s entire $600,000 judgment against the homebuilder was found to be covered by the homebuilder’s CGL policy. The judgment became final on June 27, 2014, when the Supreme Court overruled the insurer’s final application for rehearing.5 The insurer fully satisfied the judgment, plus interest, shortly thereafter. Conclusion “Occurrence” means “accident.” “Accident” means “unexpected” or “unintended” or something similar. That is what the plain language of the standard CGL policy requires. With Owners II, the Alabama Supreme Court has brought Alabama law in line not only with the plain language of the CGL policy, but also with the overwhelming national majority. While the coverage analysis does not end with “occurrence,” we can at least be assured that Alabama now correctly defines “occurrence” as “accident.” G ...the Alabama Supreme Court has brought Alabama law in line ...with the overwhelming national majority ENDNOTES 1 We will call this “Owners I.” Owners Ins. Co. v. Jim Carr Homebuilder, LLC, 2013 WL 5298575 (Ala. September 20, 2013). 2 Quoting Town & Country Prop., LLC v. Amerisure Ins. Co., 111 So.3d 699, 705 (Ala. 2011). 3 Those filing amicus curiae briefs in support of the homeowner and homebuilder were: Alabama Associated General Contractors, Inc.; Greater Birmingham Association of Homebuilders; Associated Builders & Contractors of Alabama; Homebuilders Association of Alabama; and United Policyholders. 4 Owners Ins. Co. v. Jim Carr Homebuilder, LLC, 2014 WL 1270629 (Ala. March 28, 2014), final app. for rehearing denied June 27, 2014. 5 The insurer’s final application for rehearing was supported by amici curiae National Association of Mutual Insurance Companies and Property Casualty Insurers Association of America. the ...policy may not provide coverage for the “faulty workmanship” itself, but it may and often does provide coverage for property damage resulting from the faulty workmanship. Birmingham Bar Bulletin/ Fall 2014 19


Birmingham Bar Association Bulletin - Fall 2014
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