The Oregon Supreme Court wrestled with the meaning of "occurrence" in a liability policy, determining that recovery for an "accident" depended on whether there was a basis in fact for imposing tort liability. Twigg v. Admiral Ins. Co., 2025 Ore. LEXIS 242 (Ore. April 17, 2025).
Plaintiffs hired the insured, Rainier Pacific Development LLC, a general contractor, to build a home on a hillside lot. Once construction was substantially complete and plaintiffs had taken possession, they notified Rainier of various construction defects. This included the garage floor being sloped and cracked in the middle area and sloped inward, toward the house, raising the risk of water damage to the house. Rainier failed to timely fix the problem and plaintiffs initiated arbitration proceedings.
Plaintifs and Rainier settled their dispute through a "Repair Agreement" in which they established specific performance standards for completing specified repairs. Rainier hired a subcontractor to install a lightweight concrete overlay, known as the "Ardex", which was to be laid over the previously installed garage floor. The subcontractor completed its installation of the Ardex, but, before Rainier had completed any other work under the Repair Agreement, plaintiffs reinitiated arbitration.
Plaintiffs contended that the installation of the Ardex was flawed. Due to Rainier's failure to property install the Ardex and to complete the other agreed upon work, plaintiffs had to hire another contractor to perform work to meet the standards of the Repair Agreement.
The arbitrator found that the installation of the Ardex was "defective and contrary to one or more of the manufacturer's directives." Therefore, the arbitrator found that Rainier had breached the Repair Agreement.
A trial court entered judgment against Rainier in the amount of the arbitrator's award. Plaintiffs were unable to collect on the judgment from Rainier, so they sued Rainier's insurer, Admiral Insurance Company. Admiral answered that because the arbitrator had awarded damages based solely on Rainier's breach of the Repair Agreement, the CGL policy did not provide coverage. The trial court granted Admiral's motion for summary judgment because the damage to plaintiffs garage had not been caused by an "occurrence." The Court of Appeals affirmed.
On appeal to the Supreme Court, the dispute turned on what qualified as an "accident" under the policy. Plaintiffs could not recover for the damage to the garage floor unless Rainier's liability for the damage arose from an "accident.
Looking to dictionary definitions, there was support for plaintiff's argument that "accident" encompassed unintended property damage caused by mistakes a contractor made while fulfilling its contractual obligations. But there was also support for Admiral's view that "accident" as used in the CGL policy contemplated actionable fault, and not merely inadvertence. Thus, both interpretations were plausible and the court could not, on that basis alone, chose one interpretation over the other.
Case law supported Rainier's view that, if the underlying record could support a tort claim, then it did not matter whether the underlying claim was in fact prosecuted in tort, contract, or both. If the terms of a policy remained ambiguous after a review of the parties' proposed interpretations of the terms and conditions of the policy, the ambiguous terms were to be construed against the insurer, who drafted the policy.
Therefore, to establish the property damage alleged was caused by an "accident" within the meaning of the CGL policy, plaintiffs were not required to formally allege a tort claim or obtain an award in tort. Rather, plaintiffs were required to establish that there was a basis in fact for imposing tort liability on Rainier, even though the same facts may have established Rainier's liability in contract.
There was evidence in the record that the Ardex's manufacture provided specific instructions for its installation that Rainier's subcontractor failed to follow. Cracks and voids emerged in plaintiffs' garage floor that were consistent with those warned of in the manufacturer's instructions, and plaintiffs incurred damages as a result. Collectively, the evidence was sufficient to raise a genuine issue of fact as to whether Rainier's subcontractor, by failing to follow the manufacturer's installation instructions, unreasonably created a foreseeable risk of harm to plaintiffs and that they had incurred damages as a result.
A facfinder could find that the garage floor had been negligently installed and that plaintiffs incurred damages associated with a result. The evidence was sufficient to preclude summary judgment on the ground that plaintiffs had failed to demonstrate that their damages were the result of an accident, i.e., that there was a basis in tort to recover those damages.
The decisions of the Court of Appeals and of the trial court were reversed.