The Illinois Appellate Court affirmed the trial court's ruling that the insurer had a duty to defend a construction defect case. West Bend Mut. Ins. Co. v. Pulte Home Corp., 2015 Ill App. Unpub. LEXIS 1039 (Ill. Ct. App. May 15, 2015).
Pulte Home Corporation was a developer who developed and constructed a residential condominium development know as The Reserve of Elgin (The Reserve). G.H. Siding was subcontracted by Pulte to work on the development, including the installation of exterior siding.
The Reserve Homeowners Association (HOA) filed suit against Pulte and James Hardie Building Products Inc., the company that manufactured the exterior siding. The complaint alleged that Pulte developed, designed, constructed and sold the units and common areas. Pulte installed siding manufactured by Hardie on the exterior of the units. The siding was allegedly defective. The HOA alleged breach of implied warranty of habitability and breach of contract by Pulte. Hardie was sued for breach of express warranty and breach of implied warrant of habitability.
Pulte filed a third-party complaint against G. H. Siding and other subcontractors. Pulte alleged it had entered into contracts with G.H. Siding and to the extent that the exterior face components were improperly installed and resulted in defects, G. H. Siding breached its contractual obligations.
Both Pulte and G.H. Siding tendered the defense of the underlying complaints to West Bend, the insurer for G.H. Siding, whose policy named Pulte as an additional insured. West Bend filed suit for a declaratory judgment that it had no duty to defend or indemnify Pulte or G. H. Siding. West Bend argued the underlying complaints did not allege "property damage" caused by an "occurrence" because the only alleged damage was to repairing or replacing the alleged defective materials, workmanship and design.
After the complaints were answered, West Bend filed a motion for judgment on the pleadings. The motion was denied because the broad-based allegations of the underlying complaints regarding damages at least potentially could come within coverage. The court could not determine that the allegations of resultant damage would not include damage to something other that the project itself. Therefore, West Bend had a duty to defend Pulte and G.H. Siding.
The appellate court affirmed. Under Illinois law, property damage to a building caused by a contractor's defective construction was not an accident and did not constitute an "occurrence." But damage to something other than the project itself did constitute an "occurrence."
The HOA's complaint asserted that as a proximate result of Pulte's actions, substantial repairs and/or replacement of exterior portions of the building and resultant damage was required. The HOA also sought to recover "such other damage resulting from the defective materials and defective conditions determined at trial." In its third-party complaint, Pulte asserted that if it was "liable to the HOA in any respect, then such liability arose from and as a consequence of G. H. Siding's" actions.
Therefore, the HOA's complaint alleged that Pulte caused damage to the buildings themselves and other unspecified damage resulting therefrom. Pulte's third party complaint sought to hold G.H. Siding accountable should it be found liable to the HOA "in any respect." The court rejected West Bend's contention that the underlying complaints did not allege even the potential of "property damage" caused by an "occurrence." Consequently, West Bend had a duty to defend both Pulte and G. H. Siding.
