What can contractors and property owners learn from the Twigg construction dispute?
Key Takeaways
- Owners can trigger an insurance policy without formally alleging a tort claim if the contractor's defective work could support a tort claim.
- The Oregon decision may allow property owners to assert only a breach of contract claim to trigger insurance coverage, depending on the policy language.
- Owners should assert both contractual and negligence claims.
On February 15, 2023, the Oregon Court of Appeals issued a decision holding that a claim for breach of a settlement agreement did not trigger an insurance policy because a breach of contract was not an "accident" under the policy, even though the alleged breach was negligently performing construction work required by the settlement agreement.
On April 17, 2025, the Oregon Supreme Court reversed the Oregon Court of Appeals' decision.[1]
What the Oregon Supreme Court Decided
Our prior advisory has a more detailed recitation of the case's factual background, but in brief, homeowners and contractor entered into a settlement agreement that required the contractor to repair certain construction defects. The homeowners then filed a claim for breach of the settlement agreement after the work was not done correctly. After obtaining a judgment, the homeowners sought to recover from the contractor's insurer on the ground that the post-settlement defective work was an "accident" under the contractor's policy. The term "accident" was not defined in the policy. The Court of Appeals held that the homeowners did not sufficiently allege there was an "accident" because they brought only a breach of contract claim, not a tort claim.
The Oregon Supreme Court ultimately concluded that the homeowners "were not required to formally allege a tort claim or obtain an award in tort" to trigger the policy.[2] Rather, they just needed "to establish that there was a basis in fact for imposing tort liability on" the contractor.[3] In other words, if the contractor's defective work could have been the basis for a tort claim (e.g., negligent construction), the work constituted an "accident" and triggered the insurance policy even though the homeowners asserted only a breach of contract claim.
Conclusion
Depending on the language of the applicable insurance policy, this case could relax the prior understanding that a property owner must assert both breach of contract and negligence claims to maximize the possibility of triggering insurance coverage. At least in some circumstances, asserting only a breach of contract claim could be enough. That being said, generally a building owner will want to assert both contractual and negligence claims.
[1] Twigg v. Admiral Insurance Co., 373 Or 445, --- P3d ---- (2025).
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