By Randy Maniloff, Partner, White and Williams LLP
Karen Carpenter, on life as an insurer in Pennsylvania handling construction defect claims:
Everything I want the world to be
Is now comin' true especially for me
And the reason is clear, it's because Gambone is here
It's the nearest thing to heaven that I've seen.
Karen Carpenter, on life as a policyholder in Pennsylvania seeking coverage for a construction defect claim:
Talkin' to myself and feelin' old
Sometimes I'd like to quit
Nothing ever seems to fit
Nothing to do but frown
Rainy Days and Gambone always get me down.
[OK, so I own a couple of Carpenters CDs. And what's so terrible about that. Besides, I'll just deny I said it.]
For policyholders seeking coverage in Pennsylvania for construction defects, the past few years have been a continuous and repeated exposure to the same general harmful conditions - losing. This trend continued when the Eastern District of Pennsylvania decided Bomgardner Concrete v. State Farm.
If Bomgardner Concrete simply involved an insured-contractor, precluded from coverage for its construction work that went south, with no other unusual factors, I probably would have deemed the decision not Binding Authority material. After all, such cases have become relatively routine and each new one generates less interest. But Bomgardner Concrete has a twist to the usual fact pattern of a Kvaerner/Gambone decision.
Bomgardner Concrete was an insured-concrete installer that installed a concrete floor at a residence. A claim was made against the company for spalling and delamination of the concrete. The court discussed Kvaerner, Gambone and CPB International and concluded that no coverage was owed because the claim "[did] not arise out of an 'occurrence.'" Id. at 11.
So far it sounds like a run of the mill Pennsylvania construction defect decision of late. And, besides, even if any "property damage" had been caused by an "occurrence," surely coverage would have nonetheless been precluded by the "your work" exclusion. Even the staunchest policyholder counsel, arguing in favor of faulty workmanship constituting an "occurrence," would be hard pressed to deny the applicability of the "your work" exclusion to those facts.
But Bomgardner Concrete has a twist. The defective concrete was caused by the concrete itself -- excess water and inadequate curing. The defect was not caused by the concrete installation. And, most significantly, Bomgardner Concrete, the insured-concrete installer, obtained the concrete from another party [Pennsy]. Thus, the insured argued that the claim was not for "faulty workmanship."
The court rejected this argument:
Although Bomgardner asserts that his claim is not one for faulty workmanship because the blame lay with Pennsy, this argument is unavailing. Assuming, as we must, that the fault was entirely Pennsy's, the underlying claim is nonetheless one based on improper workmanship. That Pennsy was responsible for the defective concrete does not convert the claim into one based on an "accident." Indeed, the court in Kvaerner rejected the insured's argument that its faulty workmanship claim was covered under the insurance policy, even though the insured alleged that its subcontractor was actually to blame for the defective work product. Kvaerner, 908 A.2d at 893. Likewise, in Millers Capital Insurance Co. v. Gambone Brothers Development Co., 941 A.2d 706, 715 (Pa. Super. Ct. 2007), in which the Superior Court applied Kvaerner, the court stated that claims based on faulty workmanship, whether the fault of the insured or a subcontractor, "cannot be considered 'occurrences'... as a matter of plain language and judicial construction."
Id. at 10.
The significance of Bomgardner Concrete is this. The Pennsylvania Supreme Court held in Kvaerner that, even if the insured did not intend for the damage to occur (which the Kvaerner court noted is almost always the case), faulty workmanship does not constitute an occurrence. In Bomgardner Concrete, the insured, having bought the at-fault product from another party, no doubt felt that it had a stronger argument that it did not intend for the damage to occur. But despite this, the court still concluded that the property damage was not caused by an "occurrence."
If the Bomgardner Concrete court had concluded that any "property damage" was caused by an "occurrence," then the discussion would have no doubt turned to the "your work" exclusion and its "subcontractor exception." But the court noted that, by finding no "occurrence," it was not necessary to reach the exclusions.
Download a free copy of the unenhanced lexis version of the decision in Bomgardner v. State Farm Fire & Cas.. Lexis.com subscribers can access the enhanced version of Bomgardner v. State Farm Fire & Cas., 2010 U.S. Dist. LEXIS 96379 (E.D. Pa. Sept. 14, 2010).
Please let me know if you have any questions.
Randy J. ManiloffWhite and Williams LLP1800 One Liberty Place | Philadelphia, PA 19103-7395Direct Dial: 215.864.6311 | Direct Fax: firstname.lastname@example.org
The views expressed herein are solely those of the author and not necessarily those of the firm or its clients. The information contained herein shall not be considered legal advice. You are advised to consult with an attorney concerning how any of the issues addressed herein may apply to your own situation. The term "Binding Authority" is used herein for literary purposes only and is not an admission that any case discussed herein is in fact binding authority on any court.