AUGUST 2013 BAD FAITH CASES: PROPERTY OWNER CANNOT RECOVER UNDER CGL POLICY FOR SUBCONTRACTOR’S NEGLIGENT WORKMANSHIP (Philadelphia Commerce Court)
Plaintiff brought suit against a subcontractor’s insurance company seeking coverage for damage caused by the subcontractor’s work on its apartment building. Plaintiff hired a general contractor to oversee the renovation of its apartment building. The contractor then entered into a subcontract with a plumbing company to install a complete plumbing system in the apartment building. Pursuant to the subcontract, the plumbing company purchased and maintained insurance that named the contractor and plaintiff as additional insureds.
Following the completion of the plumbing work, a leak developed in the plumbing system which caused damage to the apartment building and delayed completion of the renovation project. Specifically, plaintiff alleged the damage was caused by a leak resulting from the plumbing company’s misapplication of pipe fitting glue at the supply line junction. Plaintiff submitted a claim to the insurer for the property damage, but the insurer denied the claim. Plaintiff then brought suit against the insurer seeking declaratory judgment and alleging breach of contract and bad faith.
Under the policy, the insurer was responsible for paying “those sums that the insured becomes legally obligated to pay as damages for property damage.” The policy applied only where property damage was caused by an occurrence. The policy defined occurrence as “an accident, including continuous or repeated exposures to substantially the same general harmful condition,” but accident was not defined. Relying on case law, the court found the property damage caused by the leak did not constitute an occurrence because “the definition of “accident” required to establish an “occurrence” under the policy [could not] be satisfied by claims based on faulty workmanship.” Furthermore, the court found coverage was precluded by a policy exclusion specifying the insurance did not apply to “that particular part of any property that must be restored, repaired or re-placed because “your work” was incorrectly performed on it.” The policy used “you” to refer to the named insured, the plumbing company.
Based on the definition of ‘occurrence’ and the policy exclusion, the court granted the insurer’s Motion for Judgment on the Pleadings and denied plaintiff’s Cross Motion for Summary Judgment.