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Water Continues to Ebb “Occurrences” in Construction Defect Cases (PA)

August 15, 2019

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<p style="text-align: justify;">Pennsylvania has been one of the few remaining jurisdictions that does not consider faulty workmanship an “occurrence” under a Commercial General Liability (“CGL”) Insurance Policy. However, it appears that the tide is now flowing in the other direction for water damage. <em>Kvaerner</em> established the general proposition that property damage due to an insured's faulty workmanship is not typically covered under a CGL. However, the Pennsylvania Superior Court appears to be chipping away at this determination.</p>
<p style="text-align: justify;">In<em> <a href="">Pennsylvania Manufacturers Indemnity Company v Pottstown Industrial Complex LP</a></em><a href=""></a>, a landlord leased space to a commercial tenant for purposes of storage. The tenant filed suit in the underlying action, alleging that the landlord was required to maintain the roof in serviceable condition and further alleged that the landlord’s failure to do the same resulted in leaks that damaged the stored product. The trial court, in the companion declaratory judgment action, sided with the insurer, proclaiming that claims of inadequate roof repairs or maintenance could not be considered an occurrence pursuant to <em>Kvaerner</em>.</p>
<p style="text-align: justify;">The Superior Court reversed, holding that the tenant had plausibly alleged an “occurrence” pursuant to the CGL policy. Additionally, the Court distinguished <em>Kvaerner</em>, arguing that <em>Kvaerner</em> only stood for the proposition that damage to the insureds workmanship or materials could not be an occurrence. Here, the Court argued that the landlord’s faulty workmanship (or lack of repair) led to damages to another’s property. Specifically, the Court held that Kvaerner only stands for the proposition that faulty workmanship can not be considered an “occurrence” if it relates to the insured’s product, work, or property. This is a step in broadening an insurer's obligations.</p>
<p style="text-align: justify;">Thanks to Matthew Care for his contribution to this post.  Please contact <a href="">Georgia Coats</a> with any questions.</p>


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