Connecticut Supreme Court Determines Damage Caused by Unintended Faulty Work Constitutes Property Damage Resulting from an "Occurrence" Under Standard Commercial General Liability Policy


Jurisdictions are split over whether defective construction can give rise to an occurrence under commercial general liability insurance policies. Some jurisdictions have held that faulty workmanship cannot constitute the basis for an occurrence because it is not the type of risk intended to be insured by commercial general liability policies or lacks the fortuity necessary to be considered an accident. In contrast, other jurisdictions have held that faulty workmanship may constitute the basis for an occurrence because it is unintended. The Connecticut Supreme Court joined those courts holding that faulty workmanship may give rise to an occurrence in the recent decision Capstone Building Corp. v. American Motorists Ins. Co., SC 18886, 2013 WL 2396276 (Conn. June 11, 2013) (“Capstone”).

Capstone Development Corporation and Capstone Building Corporation (collectively, “Plaintiffs”) served as developer and general contractor, respectively, for a construction project (the “Project”) for the University of Connecticut (“UConn”). UConn supplied insurance for the Project under an owner controlled insurance program (“OCIP”) from American Motorists Insurance Company’s (“AMICO”) predecessor in interest. The OCIP included a commercial general liability policy (the “Policy”) on a standardized form that tracked the language of the 1986 revisions by the Insurance Services Office, Inc. The Policy’s general insuring agreement provided coverage for “damages resulting from ‘bodily injury’ or ‘property damage’ if the bodily injury or property damage is caused by an ‘occurrence’ that takes place in the ‘coverage territory’ and occurs during the ‘coverage period.’” The Policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Policy further defined “property damage” as “[p]hysical injury to tangible property, including loss of use of that property” and “[l]oss of use of property that is not physically injured.” The Policy did not define “accident.”

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