As we noted in a prior post, the Hawaii Intermediate Court of Appeals recently decided that construction defects do not constitute an occurrence under a CGL policy.  Citing the same Colorado Court of Appeals case that the Hawaii ICA found persuasive, the 10th Circuit certified a similar issue to the Colorado Supreme Court in Greystone Construction, Inc. v. National Fire and Marine Ins. Co., No. 09-1412 (10th Cir. June 2, 2010).

   The Hulls purchased a house built by Greystone Construction in June 2001.  Subcontractors were employed to build the house.  In November 2005, the Hulls sued Greystone, alleging damage to the house due to the subcontractor’s negligent design of the soil-drainage and structural elements.

   Greystone sought coverage from National under its CGL policies.  National denied coverage, deciding that the construction defects were not an occurrence under the policies.  Greystone sued, but the district court granted summary judgment to National.  Relying on the Colorado Court of Appeals’ decision in General Security Indemn. Co. of Arizona v. Mountain States Mutual Cas. Co., the district court determined the underlying complaint did not allege an “occurrence” under National’s policy.

   On appeal, the Tenth Circuit noted that under Colorado law, the term “accident” as used in CGL policies meant a “fortuitous event.”  Therefore, General Security determined that a claim for damages arising from poor workmanship, standing alone, did not allege an accident that constituted a covered occurrence.

   Nevertheless, the Tenth Circuit was uncertain of the status of Colorado case law because the Colorado Supreme Court had not defined the terms “accident” and “occurrence” as those terms were used in post-1986 policies.  Moreover, the policy at issue here had an exception to the exclusion for “your work” where the damage arose out of work performed by a subcontractor.  The Colorado courts had not considered how the coverage grant and subcontractor exception to the “your work” exclusion operated in conjunction with one another.

   Therefore, the Tenth Circuit asked the Colorado Supreme Court:

Is damage to non-defective portions of a structure caused by conditions resulting from a subcontractor’s defective work product a covered “occurrence” under Colorado law?