Can faulty workmanship be considered an occurrence covered under a commercial general liability policy? According to a ruling by the Supreme Court in South Carolina in regard to the case L-J, Inc. v. Bituminous Fire and Marine Insurance, the answer is no.
Bituminous Fire and Marine Insurance sought judgment as to whether a CGL policy issued to L-J covered damage caused by faulty workmanship on a road construction project. Specifically, the case alleged that an inadequately compacted road base resulted in the deterioration of pavement in a subdivision several years after completion.
The policy language defined an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The trial court held that the damage to the roadway was covered under the policy, stating that the damage constituted an “occurrence” and, therefore, exclusions did not apply. The court of appeals affirmed this decision. However, the Supreme Court of South Carolina granted review and overturned the appellate court decision.
“The policy language clearly provided coverage for occurrences,” said Robert Hurns, counsel for the Property Casualty Insurers Association of America. “However, ongoing faulty workmanship cannot be considered to be an occurrence. The appellate court decision opened insurers up to increased litigation and expenses not contemplated in the premiums charged. The lower court's ruling was a huge concern for PCI's membership. However, that concern has now been addressed.”
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