The Georgia Supreme Court has ruled that a general contractor can recover from its subcontractor’s insurers for the cost of repairs for damage to surrounding property resulting from the subcontractor’s faulty workmanship. The state’s highest court found that negligent construction is an “occurrence” under a commercial general liability (CGL) policy and that damage to surrounding property caused by the faulty workmanship that is neither intended nor expected is covered. The Court said in its opinion:
In reaching this holding, we reject out of hand the assertion that the acts of [the subcontractor] could not be deemed an occurrence or accident under the CGL policy because they were performed intentionally. [A] deliberate act, performed negligently, is an accident if the effect is not the intended or expected result; that is, the result would have been different had the deliberate act been performed correctly.
This ruling appears to be very significant because it eliminates one of the defenses most often relied-upon and cited defenses by insurers in construction cases. The Court’s opinion makes it clear that an intentionally-performed act – such as the act of construction work – resulting in unintended damage because it was improperly performed can be an “occurrence.”
Hathaway Development Company, a general contractor, had hired a plumbing subcontractor, Whisnant Contracting, Inc., to work on three projects. On one project, the subcontractor installed a four-inch pipe under a slab as opposed to the six-inch pipe called for in the building plans. The subcontractor also improperly installed a dishwasher supply line and installed a pipe that separated under hydrostatic pressure. Because of the damage sustained, Hathaway sued Whisnant not only for damage to the property in total, but also for the cost of fixing water and weather damage to surrounding properties.
After summary judgment was entered by the trial court against the subcontractor, Hathaway sued Whisnant’s insurer, American Empire, for the damage. At issue in the case was whether Whisnant’s actions constituted an “occurrence.” That was because American Empire denied coverage, arguing that it did not constitute an occurrence. The policy defined an occurrence as “an accident, including continuous or repeated exposure to substantially the same general conditions.” American Empire argued that Whisnant’s shoddy workmanship could not be construed as an accident.
The lower court agreed and awarded summary judgment in favor of American Empire. But the Georgia Court of Appeals reversed that ruling, concluding that American Empire’s policy covered damages arising out of an “occurrence,” since the term “accident” is never defined. Absent such a definition, the Court said the law must accept the commonly-held definition found in Black’s Law Dictionary that an accident is “an event happening without any human agency, or it happening through such agency, an event which, under circumstances, is unusual and not expected by the person to whom it happens.”
Source: Insurance Journal
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