Interpreting Missouri law, a federal district court determined that property damage arising from faulty workmanship did not arise from an occurrence. Employers Mut. Casualty Co. v. Luke Draily Constr. Co., 2011 U.S. Dst. LEXIS 69929 (W.D. Mo. June 29, 2011).

   Draily Construction Company was hired as general contractor on a hotel construction project. Draily subcontracted some aspects of the project to Mimbela Construction Company, which in turn subcontracted the roof work to Roof Toppers. The roof was installed improperly by Roof Toppers. 

   The hotel was completed and opened for business in 2004. The owner discovered leaks in the roof and tiles that had fallen off. The owner filed suit against Draily for breach of construction contract.

   Under Missouri law, contract claims did not constitute occurrences under a CGL policy.  One claim against Draily was denominated "negligence." The court determined, however, this was also a contract claim by another name. For example, the underlying complaint alleged Draily was negligent in "failing to construct the roofing required . . . in accordance with the plans and specifications . . . ."

   Further, the court reasoned the damages were foreseeable because during the construction, Draily had expressed concerns about the quality of work performed by Roof Toppers. Therefore, there was no occurrence.

  Despite finding no occurrence, the Missouri federal district court still considered the business risk exclusions. The court found the insurer did not carry its burden to show an exclusion from coverage.    Summary judgment was granted to the insurer.

   Some courts have rejected the argument in construction defect cases that there is no occurrence merely because an accident is deemed "foreseeable." For example, the Florida Supreme Court stated, "We expressly rejected the use of the concept of 'natural and probable consequences' or 'foreseeability' in insurance contract interpretation. . . . " United States Fire Ins. Co. v. J.S.U.B., Inc, 979 So.2d 871, 883 (Fla. 2007).  The appropriate consideration is whether the damage was expected or intended from the standpoint of the insured.  Id. at 885