Construction Contract Claims
No "Occurrence" Where Specific Breach of Construction Contract Claims
Tred Eyerly
April 4, 2012
Coverage for construction defects was denied because the underlying claims were strictly contract-based and did not arise from an occurrence. Secura Ins. v. Horizon Plumbing, Inc., 2012 U.S. App. LEXIS 4477 (8th Cir. March 5, 2012).
Weitz Company, LLC was the general contractor on a project for MH Metropolitan, LLC. Horizon Plumbing, Inc. was a subcontractor. Horizon was required to include Weitz an additional insured on its liability policies.
Metropolitan eventually fired Weitz, but Horizon continued with plumbing work on the project.
Weitz sued Metropolitan for breach of contract. Metropolitan counterclaimed for breach of contract, alleging Weitz failed to timely complete the project, provide progress reports, supervise, coordinate, and pay timely the subcontractors, maintain adequate accounting records, and correct deficient and defective work.
Weitz filed a third party complaint against Horizon for defective plumbing on the project, and to seek indemnity and contribution. Horizon's insurers defended and settled all claims against Horizon. The insurer also reimbursed Weitz for its defense of claims pursued by Metropolitan based upon Horizon's defective work. Weitz then contended that since it was an "additional insured" on Horizon's policies, the insurers should also pay $1.1 million for attorney fees and costs in incurred in defending against Metropolitan's entire counterclaim.
The insurer filed for a declaratory judgment. The district court ordered judgment in the insurers favor, ruling that there was no duty to defend Weitz because its claim was not based on an "occurrence" triggering coverage under the insurance policies.
Weitz contended Horizon's alleged failure to connect the drain pipes was an "occurrence" under the policy. The Eighth Circuit disagreed. Metropolitan's only counterclaim against Weitz was for breach of contract. The alleged breach of specific contractual provisions, including the failure to perform repair work required by the contract, was not an occurrence. There was no allegation of an accident or that Weitz's conduct had caused property damage.
SOURCE: www.insurancelawhawaii.com