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Pennsylvania Federal Court Holds the Line on Kvaerner

February 18, 2022

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<p style="text-align: justify;">The District Court for the Eastern District of Pennsylvania recently opined on a liability insurer’s duty to defend and/or indemnify its named insured and additional insured in a lawsuit arising out of alleged construction defects in a new housing development. This decision reinforces that <em>Kvaerner</em> – while nibbled at the edges – still arguably remains good law in Pennsylvania.</p>
<p style="text-align: justify;">The case, captioned<em> <a href="">Main Street America Assurance Co. v. Howard Lynch Plastering, Inc</a>.</em>, follows a familiar factual pattern: a builder contracted with a subcontractor, who was required to acquire liability insurance for itself and the builder. The insurance policy issued to the subcontractor contained common policy language and defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”</p>
<p style="text-align: justify;">In the course of the project, the builder and/or the subcontractor allegedly constructed the homes in a defective manner, requiring the homeowners to obtain extensive repairs to their homes. Thus, the question before the court was whether defective construction constituted an “occurrence” under the usual policy definition. The insurer therefore argued that “the effects of faulty construction” are not “occurrences.”</p>
<p style="text-align: justify;">The Eastern District agreed with the insurer, tracing the history of Pennsylvania courts’ case law on the subject. The court concluded that commercial general liability policies do not cover defective construction or damages to the property caused by defective construction. Based on this, the court entered summary judgment declaring the insurer has no obligation to defend or indemnity any party for the alleged construction defects.</p>
<p style="text-align: justify;">Thanks to Jason Laicha for his contribution to this article.  If you have any questions, contact <a href="">Matthew Care</a>.</p>


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