CGL Policy - Occurrence - Faulty Workmanship

Nationwide Mutual Fire Ins. Co. v. The David Group, Inc., [Ms. 1170588, May 24, 2019] __ So. 3d __ (Ala. 2019). The Court unanimously (Shaw, J.; Parker, C.J., and Bolin, Wise, Bryan, Sellers, Mendheim, Stewart, and Mitchell, JJ., concur) reverses the Jefferson Circuit Court’s judgment that TDG, a construction company, was entitled to coverage and indemnification under a commercial general liability insurance policy.

The opinion reiterates settled law “that faulty workmanship itself is not an occurrence under a CGL policy ....” Ms. *9. The Court pointed out that faulty work may lead to an occurrence if it subjects personal property or other parts of a structure to continuous or repeated exposure to harmful conditions. Ms. *9-10. “This concept is consistent with the idea that the purpose of the CGL policy is to protect and insure the contractor from tort liability, not to insulate it from its own faulty work. This means that, although there is no coverage for replacing poor work, there may be coverage for repairing resulting damage caused by the poor work.” Ms. *10 (emphasis in the original) (internal citations omitted).

The Court reversed the judgment that the contractor was entitled to coverage because “the record before us does not support the conclusion that the arbitrator found the Shahs [the homeowners] to have ‘suffered damages’ because of an occurrence caused by faulty workmanship.” Ms. *16.

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