The Georgia Court of Appeals found a subcontractor was covered under a CGL policy for loss caused by alleged faulty workmanship. Maxum Indem. Co. v. Jimenez, 2012 Ga. App. LEXIS 970 (Ga. Ct. App. Nov. 20, 2012).

   Jimenez was hired as a subcontractor to install pipes for a dormitory construction project at Georgia Southern University. Subsequent to the construction, a pipe burst occurred at the dormitory, causing damage to several units. After a jury trial, Jimenez was found liable for $191,382 in damages that arose from his negligent pipe work. 

   Jimenez was insured under a CGL policy issued by Maxum. Maxum filed a suit for a declaratory judgment, seeking a declaration that the claim against Jimenez was not covered.

   On appeal, Maxum contended the underlying claim did not constitute "property damage" caused by an "occurrence." Prior decisions from the Georgia Supreme Court had established that a subcontractor's faulty workmanship that causes unforeseen or unexpected damage to other property was an "occurrence." Here, there was no evidence that Jimenez's plumbing mistakes were expected or intentional. Therefore, the trial court correctly determined that Jimenez's acts constituted an "occurrence" involving "property damage."

   Maxum argued there was no coverage nonetheless because the judgment entered against Jimenez in the underlying suit was for only contractual indemnity and breach of contract. Although the complaint against Jimenez set forth both a breach of contract claim and a tort claim, both claims were based upon defective workmanship in the pipe installation and the resulting property damage to the dormitory. The sole basis for the award of damages was the claim for the damage to the property. 

   Maxum also argued the exclusion for contractual liability applied. Again, the appellate court disagreed. Jimenez's obligation to pay the damages award was not based upon a contractual assumption of liability, but rather was based upon his tort liability arising from his own negligent pipe workmanship. 

   On similar facts, the Hawaii Intermediate Court of Appeals arrived at the exact opposite conclusion in Group Builders v. Admiral Ins. Co., 132 Haw. 142, 231 P.3d 67 (Haw. Ct. App. 2010), where it was decided that construction defects were not covered by CGL policies because such claims were contract based.