Property damage caused by a subcontractor's faulty workmanship may be an "occurrence" (Colorado Law)
In Greystone Construction v. National Fire & Marine Insurance Company, Richard and Lisa Hull bought a house built by Greystone, a general contractor. Greystone hired subcontractors to perform all work on the house. The house was built on soils containing expansive clays. Over time the soil expansion caused extensive damage to the home. The Hulls sued Greystone in 2005 asserting defective construction by the subcontractors. Greystone was insured under a commercial general liability (CGL) policy by National. National denied it owed Greystone a defense.
There is another home at issue. Douglas and Sandra Giorgetta bought a home in 1999, from Branan, a general contractor, who also hired subcontractors to build the house. Their home’s foundation also shifted due to being constructed on expansive soils. In 2006, the Giorgettas sued Branan asserting claims that mirrored the claims that Hull brought against Greystone. Branan also had a CGL policy with National, and National denied it was obligated to defend. The district court awarded summary judgment to National holding that Hull and Giorgetta complaints do not allege accidents that would trigger covered occurrences under their policies.
The main issue was whether property damage resulting from faulty construction by a sub-contractor was an “occurrence” under the terms of the policies. National argued that construction defects are not “occurrences” but rather the foreseeable result of poor workmanship, which is not covered by a CGL policy. The Court held that injuries flowing from improper or faulty workmanship constitute an “occurrence” so long as the resulting damage is to non-defective property and is caused without expectation or foresight. The Court considered the facts to determine if faulty workmanship was anticipated or accidental. The Court found that the damages suffered by the homeowners may have resulted from an unforeseen “occurrence” and the damage suffered was an unanticipated or unusual result flowing from a common place cause thus qualifying as a covered “occurrence” under the policy.
