ALABAMA – Construction Defects – CGL Occurrences

The Supreme Court of Alabama addressed “occurrences” that trigger coverage in a construction defect case.  A project owner sued the contractor for faulty workmanship. The contractor’s commercial general liability policy covered “bodily injury” and “property damage” only if “[t]he ‘bodily injury’ or ‘property damage’ is caused by an ‘occurrence.’” The CGL insurer, originally having defended the contractor, withdrew its defense after its own investigation determined that the project owner’s allegations did not constitute an “occurrence”.

The Court found that the allegations of faulty workmanship did not constitute an “occurrence” as described in the CGL policy. The policy defined an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” While the policy did not define “accident,” prior case law described it as an “unintended and unforeseen injurious occurrence; something that does not usually occur in the usual course of events or that could not be reasonably anticipated.”

Based on the definitions of “occurrence” and “accident,” the Court concluded that allegations of faulty workmanship alone do not amount to an “occurrence” triggering the policy.  Instead, in order to trigger coverage, the faulty workmanship must result in other, further damage to the structure. This other damage caused by the faulty workmanship is an occurrence because it is a result of “‘continuous or repeated exposure’ to some other ‘general harmful condition.’”

By way of illustration, the Court pointed out that a leaky roof from faulty workmanship on its own is not an “occurrence”.  However, a leaky roof that leads to damage to the walls, attic, floors, or some other part of the structure, due to continuous and repeated exposure to the leak, would be an occurrence. The Court noted that CGL policies are meant to protect contractors from tort liability, not to insulate them from their own faulty work.

This case clarifies that mere construction defects, without more, generally will not constitute an “occurrence.” Where the plaintiff alleges only faulty workmanship, this case indicates non-coverage for want of an occurrence.  Thoughtful and creative counsel for the plaintiffs will draft complaints to find coverage for their construction defect cases.  Framing allegations as a chain of events beginning with faulty workmanship and ending with other property damage resulting from continuous exposure to the faulty workmanship focuses on the process of damage rather than the conduct itself.

Read the full opinion here:  Nationwide Mutual Fire Insurance Company v. The David Group, So.2d (Ala. May 24, 2019)

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