The federal district court was bound by a prior decision from the Kentucky Supreme Court in deciding construction defects did not qualify as an "occurrence" under a CGL policy. See State Auto Ins. Co. v. Thomas Landscaping & Construction, Inc., 2011 U.S. Dist. LEXIS 88176 (E.D. Ohio Aug. 9, 2011).
After Thomas Construction built a custom home for Michael Roland, Roland filed suit alleging the home was not built according to his specifications. Specifically, Roland alleged that Thomas Construction failed to build the home within the acceptable standards of the home building industry, failed to meet the standard of care implied in its contract, failed to provide workmanship and materials within acceptable standards, and breached its warranty to repair or replace. Thomas Construction tendered the suit to State Auto, who denied coverage.
State Auto then filed for a declaratory judgment and moved for summary judgment. No opposition was filed by Thomas Construction. Applying Kentucky law, the federal district court followed the Kentucky Supreme Court's decision in Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W. 3d 69 (Ky. 2010). Only fortuitous harm was covered under Kentucky law. Simply focusing on the builder's lack of intent to build a faulty house was not enough. If a builder had control over the building of a home, one could not logically argue that substandard construction by the builder was a fortuitous, accidental event. Therefore, under Cincinnati Ins. Co., a claim for faulty workmanship, in and of itself, was not an "occurrence" because the workmanship did not involve the fortuity required to constitute an accident.
The facts here were similar to those in Cincinnati Ins. Co. Consequently, State Auto did not owe a duty to indemnify and its motion for summary judgment was granted.
