MAY 2013 BAD FAITH CASES: COURT GRANTS INSURED’S PRELIMINARY OBJECTIONS, DENIES BAD FAITH CLAIM AND RULES THAT NEGLIGENT SUPERVISION DOES NOT TRIGGER COVERAGE (Philadelphia Commerce Court)
In Calfayan Constr. Assocs. v. Erie Ins. Exch., the insured, a general contractor, filed suit for bad faith and breach of contract, seeking a declaration that the carrier owed a duty to defend the insured in an underlying negligent construction lawsuit.
The carrier filed preliminary objections, arguing that the cause of action in the underlying lawsuit was not a covered “occurrence” under the policy, which covered property damage and harmful conditions. The insured argued that the underlying lawsuit did not just allege poor workmanship, but negligent construction, which should be covered.
The court rejected this argument, finding that negligent construction is not covered as property damage. As such, no suit for bad faith could exist and dismissal was proper.