Faulty Workmanship and Coverage under the CGL Form
July 1, 2014
The insurer appealed from a judgment against it pertaining to coverage for a claim of property damage due to faulty workmanship. This case is Pekin Insurance Company v. Kiefer Landscaping, 2014 IL App (5th), 120588-U (2014).
Kiefer was sued by the Bruins. The complaint alleged a breach of contract, breach of implied warranty of habitability, and negligence. The allegations were that the Bruins entered into a contract with Kiefer to build a retaining wall that would add support to the fill dirt, landscaping, pool deck, pool house, pool, home, and septic tank. After Kiefer finished his work, the retaining wall began to crack and crumble and eventually collapsed. This resulted in the collapse of the backyard, and an immediate reduction in support for the home, pool, deck, pool house, fill dirt, and septic tank. The complaint also alleged damage to the trees, temporary loss of use of the pool and the loss of use of a substantial portion of the backyard.
The insured tendered the complaint to Pekin Insurance Company under a reservation of rights. Pekin then filed a motion seeking a judgment that it had no duty to defend, arguing that the underlying complaint did not allege that the Bruins sustained property damage as a result of an occurrence as required by the terms of the CGL form. The insurer also argued that the policy exclusions prevented coverage for the claim. The trial court ruled in favor of the insured and Pekin appealed.
The Appellate Court of Illinois, Fifth District, noted that the duty to defend arises if the complaint's allegations, when construed liberally in favor of the insured, fall within or potentially fall within the policy's coverage provisions. The court said that the insurer is obligated to defend as long as one of the theories might possibly fall within the scope of coverage.
Peking reiterated its assertion that it had no duty to defend because the complaint against Kiefer did not allege an occurrence resulting in property damage as required by the CGL form. The court acknowledged that CGL policies are intended to provide coverage for injury or damage to the person or property of others and are not intended to pay the costs associated with repairing or replacing the insured's defective work and products. So, when the insured's alleged negligence or defective workmanship results in damage to something other than the work it performed, there is an occurrence within the meaning of the policy.
The court found that the underlying complaint alleged that faulty workmanship by Kiefer caused damage to the retaining wall constructed by Kiefer and damage to other structures, objects, and land that were not furnished by Kiefer or part of the work itself. The alleged destruction of or damage to tangible property other than that furnished or worked on by Kiefer constitutes damage that is potentially covered under the CGL form. Therefore, the court concluded, the complaint adequately alleges that Kiefer's faulty work caused an accident and this triggers Pekin's duty to defend.
The ruling of the trial court was affirmed.
Editor's Note: This decision by the Appellate Court of Illinois reinforces the point that claims based on the faulty workmanship of the insured can be covered under the CGL form if the damage done by the insured is to property other than that on which the insured was working. In this case, the insured built a retaining wall that collapsed; that property damage claim is not covered by the CGL form. The collapsing retaining wall damaged other property owned by the claimants; that property damage is covered by the CGL form.