Georgia has joined the growing legion of high state courts to find that faulty workmanship can arise from an occurrence, invoking coverage for a contractor. See Am. Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., Inc., 2011 Ga. LEXIS 177 (Ga. March 7, 2011).
Hathaway Development Co., a general contractor, sued its plumbing subcontractor, Whisnant Contract Company, Inc., for negligent plumbing work at three job sites. Hathaway sought to recover the costs of repairs required to fix Whisnant's plumbing mistakes and costs to repair water and weather damage to surrounding properties.
After a default judgment was entered against Whisnant, Hathaway sought payment from Whisnant's insurer, American Empire Surplus Lines Insurance. The insurer denied liability because the claim did not arise from an occurrence. American argued Whisnant's negligent workmanship could not be deemed an "accident." The trial court agreed and granted summary judgment to American. The Court of Appeals reversed, holding that because Whisnant's faulty workmanship caused damage to the surrounding properties, the acts of Whisnant constituted an "occurrence."
The Georgia Supreme Court affirmed. The plumber's acts constituted an "occurrence." On one project, Whisnant installed four-inch pipe on an underslab, although the contract specified six-inch pipe. On another project, Whisnant improperly installed a pipe which separated under hydrostatic pressure. Each of these missteps damaged neighboring property being built by Hathaway. These acts could not be considered to be intentionally performed. Instead, an occurrence could arise where faulty workmanship causes unforeseen or unexpected damage to other property.
Hawaii has not joined this growing trend. While the Hawaii Supreme Court has never addressed whether construction defects arise from an occurrence, the Intermediate Court of Appeals decided in Group Builders that construction defects arise from contract, and consequently there is no coverage when contractors are sued for such defects. [See prior Group Builders' post here].
