Can faulty workmanship be considered an occurrence covered undera commercial general liability policy? According to a ruling by theSupreme 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 towhether a CGL policy issued to L-J covered damage caused by faultyworkmanship on a road construction project. Specifically, the casealleged that an inadequately compacted road base resulted in thedeterioration of pavement in a subdivision several years aftercompletion.


The policy language defined an “occurrence” as “an accident,including continuous or repeated exposure to substantially the samegeneral harmful conditions.” The trial court held that the damageto the roadway was covered under the policy, stating that thedamage constituted an “occurrence” and, therefore, exclusions didnot apply. The court of appeals affirmed this decision. However,the Supreme Court of South Carolina granted review and overturnedthe appellate court decision.


“The policy language clearly provided coverage for occurrences,”said Robert Hurns, counsel for the Property Casualty InsurersAssociation of America. “However, ongoing faulty workmanship cannotbe considered to be an occurrence. The appellate court decisionopened insurers up to increased litigation and expenses notcontemplated in the premiums charged. The lower court's ruling wasa huge concern for PCI's membership. However, that concern has nowbeen addressed.”

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