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Birmingham Bar Association Spring 2014

Insurance other courts are mistaken when they seek to define the full extent of coverage through a contorted definition of “occurrence.” Rather, “The sounder analytical approach is to avoid conflating the several requirements of the insuring agreement and the exclusions, and instead, to let each serve its proper purpose.” According to the Court, the proper approach is reflected in the “strong recent trend in the case law that interprets the term ‘occurrence’ to encompass unanticipated damage to nondefective property resulting from poor workmanship.” “Most federal circuit and state supreme courts cases now line up in favor of finding an occurrence in the context of a claim by homeowners against an insuredhomebuilder for damage to nondefective portions of a home resulting from the defective construction of another portion of the home.” Alabama: Owners Insurance Co. v. Jim Carr Homebuilder, LLC, ___So.3d ___, 2013 WL 5298575 (Ala. September 20, 2013). Application for rehearing pending. Every rule has an exception, and for the year 2013 that exception was the State of Alabama. In an anomalous decision that bucks the modern trend, Alabama has decided that “occurrence” means something other than “accident.” This places Alabama in the minority. However, as of the time of this writing, the decision has not yet been published, and an application for rehearing is pending. In the case, a homeowner contracted with a homebuilder for the construction of a new house. Within a year after completion of the house, the homeowner of “occurrence” as “accident,” but rather seeks to define “occurrence” as something other than “accident.” Conclusion “Occurrence” means “accident.” “Accident” means “unexpected” or “unintended” or something similar. That is what the plain language of the standard CGL policy requires. Certainly the modern trend—and the national majority—follow such a plain language interpretation of “occurrence.” This is reflected in the 2013 decisions of the high courts of Connecticut, Georgia, North Dakota, and West Virginia. For every rule, however, there is an exception. The policyholder should be cautioned that the interpretation may still vary from state to state. In a minority of states—including Alabama if its recent decision stands—“occurrence” may yet mean something other than “accident.” G 1Quoting Wall v. Pennsylvania Life Ins., 274 N.W.2d 208, 216 (N.D. 1979). 2See K&L, 829 N.W.2d at 729-31, for a thorough survey of the decisions comprising the “majority.” 3Id. at 731-34 (discussing United States Fire Ins. v. J.S.U.B., Inc., 979 So.2d 871 (Fla. 2007)). 4Id. at 735 (discussing ACUITY v. Burd & Smith Constr., 721 N.W.2d 33 (N.D. 2006)). 5Quoting Lamar Homes, Inc. v. Mid- Continent Casualty Co., 242 S.W.3d 1, 8 (Tex. 2007). 6See Corder v. William W. Smith Excavating Co., 556 S.E.2d 77 (2001). 7Quoting Greystone Constr., Inc. v. Nat. Fire & Marine Ins. Co., 661 Fo.3d 1272, 1282 (10th Cir. 2011). 8Id. 9Quoting Town & Country Prop., LLC v. Amerisure Ins. Co., 111 So.3d 699, 705 (Ala. 2011). noted several problems with the house related to water leaking through the roof, walls, and floors—resulting in water damage to those and other areas of the house. The homeowner sued the homebuilder and obtained a judgment. The homebuilder was insured by a CGL policy. In a declaratory judgment action, the homebuilder’s insurer sought to obtain a judgment of “no coverage” for the homeowner’s judgment. In the trial court, the insurer lost. The trial court found that the homeowner’s judgment was in fact covered by the homebuilder’s CGL policy. On appeal, the homebuilder’s insurer argued that the homeowner’s judgment was not based on an “occurrence.” The Alabama Supreme Court stated, “We have previously considered the issue whether poor workmanship constitutes an occurrence and have held that, in each case, it depends ‘on the nature of the damage caused by the faulty workmanship.’” The Court explained the rule of “occurrence” as “faulty workmanship performed as part of a construction or repair project may lead to an occurrence if that faulty workmanship subjects personal property or other parts of the structure outside the scope of that construction or repair project to ‘continuous or repeated exposure’ to some other ‘general harmful condition’ and if, as a result of that exposure, that personal property or other unrelated parts of the structure are damaged.” Thus, for there to be an “occurrence,” the property damage must have been to something outside the scope of the contractor’s project. So, if the homebuilder’s project was a house, something other than the house (or a component of the house) must be damaged in order for there to be an “occurrence.” The decision does not explain how this rule fits the definition Contributor Gregory A. Brockwell; Birmingham Bar Bulletin/ Spring 2014 15


Birmingham Bar Association Spring 2014
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