The federal district court determined that under Alabama law, there was no coverage for breach of contract claims arising from alleged construction defects. Owners Ins. Co. v. Shep Jones Constr., Inc., 2012 U.S. Dist. LEXIS 62085 (N.D. Ala. May 3, 2012).
The insured entered a contract with the homeowner to remodel her home. After construction was completed, the homeowner sued the insured, alleging damages arising form breach of contract, negligence and negligent supervision.
The insured had a policy with Owners Insurance Company. Owners Insurance defended under a reservation rights. The homeowner argued she suffered both property damage and metal anguish as a result of the insured's alleged breach of contract and negligence. A jury awarded general damages of $303,500 without allocating between property damage and mental anguish.
Owners Insurance sued the insured for a declaration that it had no duty to defend or to indemnify. In its summary judgment motion, Owners Insurance argued there was no "occurrence" under the policy because breach of contract was not an "occurrence." The court agreed the breach of contract was not an "occurrence," defined in the policy as an accident. Because there was no "occurrence causing either "property damage" or "bodily injury," there were no coverage obligations and Owners Insurance was entitled to summary judgment.
Consequently, in a decision reminiscent of the Hawaii Intermediate Court of Appeal's ruling in Group Builders v. Admiral Ins., 123 Haw. 142, 213 P.3d 67 (Haw. Ct. App. 2010), the federal court's brief analysis gave little attention to the policy language. Unless the faulty workmanship was intentional, it is difficult to perceive the result as other than an "accident" that caused the property damage.
