The Kentucky Supreme Court determined there was no coverage for the contractor's faulty workmanship in digging the existing basement of a building to make it deeper. Martin v. Acuity, 2018 Ky. LEXIS 188 (Ky. April 26, 2018).
Martin Elias/Properties, LLC (MEP) purchased an older home to renovate and resell for profit. MEP hired Tony Gosney to renovate and expand the basement. Gosney agreed to dig the existing basement deeper, pour new footers and pour a new concrete floor. While performing his work, Gosney failed to support the existing foundation adequately before digging around it. Within days, the old foundation began to crack and eventually the entire structure began to sag. Gosney stopped work and notified his insurer, Acuity.
A structural engineer retained by MEP found the entire structure was a risk of imminent collapse. MEP demanded payment from Gosney and Acuity, but both rejected the demand. MEP sued Gosney and Acuity. Gosney sought bankruptcy protection and disappeared.
MEP and Acuity each filed motions for summary judgment. The trial court granted partial summary judgment to both parties. MEP could not recover from Acuity for the damage to the basement because that damage directly resulted from the faulty work Gosney performed. But the trial court also ruled that MEP could recover from Acuity under the policy for the damage to the structure above the basement level. Damage to the structure above the basement was an unexpected and unintended consequence of Gosney's faulty work on the basement.
The case was tried to a jury on the issue of damages. MEP was awarded $473,000 for the damage above the basement level.
Acuity appeal and the Court of Appeals reversed the trial court. None of the structural damage qualified as an accident triggering coverage as an occurrence under the policy.
The Kentucky Supreme Court affirmed the Court of Appeals. The legal analysis used to determine whether something constitutes an accident was the doctrine of fortuity, which encompassed both intent and control. Here, Gosney's actions undermined the structural integrity of MEP's property. Failure to support the existing structure before digging around the old foundation resulted in cracking of the original foundation that led to near destruction of the entire structure. Because the actions taken by Gosney, which led to the property damage, were entirely under his control, and he fully intended to execute the plan as he did, the resulting damage throughout the property was not an accident.