The homeowners hired the insured to raise the structure of their home twenty-four inches above the flood zone. Lafayette Ins. Co. v. Peerboom, 2011 U.S. Dist. LEXIS 58985 (S.D. Miss. June 2, 2011). When the insured's crew returned from lunch one day, they found the house had fallen from hydraulic jacks being used to raise the structure a few inches at a time. There was substantial damage to the entire structure.

   The homeowners sued, asserting several claims, including negligence and breach of contract. The complaint alleged the homeowners entered a contract with the insured to raise their structure while maintaining its integrity. However, the insured failed to use proper equipment, which caused the house to fall and be completely destroyed.

   The insured tendered the claim to its insurer, Lafayette Insurance Company. Lafayette defended under a reservation of rights and filed suit for a declaratory judgment. Lafayette's subsequent motion for summary judgment contended there was no "occurrence" alleged in the underlying complaint and, even if there was, the business risk exclusions barred coverage.

   The court first determined there was an "occurrence." Even though the homeowners did not know precisely how their home was damaged, it was possible it was caused by an accident. Therefore, the claimed "property damage" was the result of an "occurrence."

   The court next turned to the business risk exclusions to see if they negated coverage. Exclusion j (5) excluded coverage for property damage when the insured was "performing operations" and the "property damage" arose out of those operations. Exclusion j (6) barred coverage for "that particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it." Some cases found the business risk exclusions inapplicable if the insured was working only on the foundation and the entire structure was damaged. 

   Here, however, it was clear from the underlying complaint that the insured was hired to raise the entire house and then construct a new concrete foundation on which the house would ultimately rest. Therefore, the risk that the house would fall and sustain damage was not merely a fortuitous event, but a business risk which fell squarely within the exclusions j (5) and j (6). Accordingly, Lafayette's motion for summary judgment was granted.

   In Group Builders v. Admiral Ins., 123 Hawaii 142, 231 P.3d 67 (Haw. Ct. App. 2010), the Intermediate Court of Appeals' analysis differed from that utilized in Lafayette Ins. Co.  Group Builders never made an initial determination on whether there was an occurrence, nor did it consider the business risk exclusions. Instead, the court simply found the construction defects were not covered because they were based on contract and did not constitute an occurrence. Id. at 148, 231 P.3d at 73.

   Thanks to Honolulu attorney Bruce Wakuzawa for the heads up on the Lafayette Ins. Co. case.