Gordon A. Einhorn, EsquireThomas, Thomas & Hafer,

LLP305 N Front Street, 6th FL

Harrisburg, PA 17101www.tthlaw.com

COVERAGE ISSUES IN CLAIMS FOR FAULTY WORKMANSHIP

COVERAGE E – LIABILTY TO OTHERS

A. We pay for the benefit of insureds, up to the applicable limit(s) of liability (See Part II D) shown in the Declarations, those sums that insureds become legally liable to pay as damages because of bodily injury or property damage insured in this policy.

 

Such bodily injury or property damage must:  

1. Be caused by an occurrence that takes place within the applicable coverage territory: See Common Conditions.

 Occurrence Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions. 

Kvaerner v. Commercial Union Ins. Co., 589 Pa. 317 (2006)

“The definition of “accident" required to establish an “occurrence” cannot be satisfied by claims based upon faulty workmanship. Such claims simply do not present the degree of fortuity contemplated by the ordinary definition of “accident”… to hold otherwise would be to convert a policy of insurance into a performance bond.”

Millers Capitol Ins. Co. v. Gambone, 2007 Pa. Super 403

(2007)

No coverage for damage caused by faulty workmanship to non-

defective work performed by the same contractor.

Erie Insurance Exchange v. Abbott Furnace Co., 2009 Pa. Super 88

(2009)

National Mutual Ins. Co. v. CPB International, Inc., 562 F. 3d 591

(3d Cir. 2009)No coverage for damage to other property that was caused by the insured’s faulty workmanship.

Indalex, Inc. v. National Union Fire Ins. Co., 2013 Pa. Super 311

(2013)

Insureds had duty to defend window and door manufacturer whose faulty products resulted in water damage to other parts of building in which they were installed.

PRIOR TO INDALEX

o No coverage for insured’s faulty product or workmanship

o No coverage for damage to other property caused by faulty product on workmanship

o Outright denials of coverage

o Defense under reservation of rights

POST INDALEX

o No coverage for insured’s to faulty product or workmanship

o Unclear if there is coverage for

damage to other property caused by faulty workmanship

o Denial of claims more risky

o Defense under reservation of rights

o Pa. Supreme Court will need to clarify this issue but could take years

Questions/Comments ?