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Birmingham Bar Association Spring 2014

Gregory A. Insurance Brockwell; Leitman, Siegal, Payne & Campbell, P.C. “Occurrence” Means “Accident” A (Mostly) Banner Year For Contractors Advocating A Plain Language Interpretation Of The CGL Policy Those representing contractors, property owners, and insurers in the area of “construction defects” are all too familiar with the diversity of law across the 50 states as to whether or not a construction defect (or damage resulting from a construction defect) can be an “occurrence” under the ordinary commercial general liability (“CGL”) insurance policy. For many years, the law has been inconsistent from state to state and subject to relatively frequent change. The CGL policy basically defines “occurrence” as “accident,” which should be an easy enough issue to interpret. Unfortunately, however, many courts in the past have failed to follow the policy’s plain language definition of “occurrence” and have instead interpreted “occurrence” to mean something other than “accident.” For contractors and other policyholders who have long advocated for a plain language interpretation (i.e., “occurrence” means “accident,” as the policy plainly states,) 2013 was a banner year, with the one notable exception being Alabama. The following is a brief summary of the year’s important state high court decisions, in chronological order. In each of the cases below, the contractor’s CGL policy included the standard insuring provision, covering damages because of “bodily injury” or “property damage” if such bodily injury or property damage were caused by an “occurrence.” Each policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The word “accident” was not defined in the policy. North Dakota: K&L Homes, Inc. v. American Family Mutual Insurance Co., 829 N.W.2d 724 (N.D. April 5, 2013). The homeowner purchased a newlyconstructed house from a homebuilder. Not long after purchasing the house, the homeowner noticed cracks, unevenness, and shifting. The homeowner alleged that the house suffered damage because of “substantial shifting caused by improper footings and inadequately compacted soil under the footings and foundation.” Such foundation work had been performed by a subcontractor. The homeowner obtained a judgment against the homebuilder. The homebuilder’s insurer denied coverage for the judgment. In the ensuing coverage dispute, the trial court concluded that “the deficient work of the excavation subcontractor was not an accident and did not constitute an ‘occurrence’” under the homebuilder’s CGL policy. On appeal, the North Dakota Supreme Court noted that it had previously defined “accident” as “happening by chance, unexpectedly taking place, not according to the usual course of things.” The Court also noted that “the majority of state supreme courts who have decided the issue of whether inadvertent faulty 12 Birmingham Bar Association


Birmingham Bar Association Spring 2014
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