Under a commercial general liability policy, does an insurer have a duty to defend its insured when the insured’s work damages property that was outside the scope of work to be performed by the insured? This question has been asked many times, but was, until recently, unanswered under Illinois law. In the recent case of Westfield Insurance Co. v. National Decorating Service, Inc., the 200 N. Jefferson Tower Condominium Association Board of Managers sued the property developer, general contractor, and a painting subcontractor for faulty workmanship, which allegedly caused cracking of exterior and interior walls, as well as water damage to the walls, balconies, windows, and common areas.[1] The condo association wanted the damages repaired and the water leaks stopped.
In turn, the general contractor filed a third-party complaint against the painting subcontractor, alleging that the subcontractor’s faulty workmanship damaged the other work performed on the project. Westfield Insurance Company (“Westfield”) insured the painting subcontractor under a commercial general liability policy that covered “property damage” caused by an “occurrence.” The policy named as additional insureds the property developer; 200 North Jefferson Tower Condominium Association; MCZ/Jameson Development Group; and McHugh Construction. Westfield then filed a complaint for declaratory judgment against all four defendants, seeking a ruling that it owed no defense to the painting subcontractor because the claimed damage was not property damage caused by an “occurrence” or “accident” as those terms were used in the insurance policy. Both sides filed motions for summary judgment.
U.S. District Judge John Robert Blakey found that there was an “occurrence” within the meaning of the insurance policy and that Westfield resultantly owed a defense to its insured. The judge discussed other Illinois cases which interpreted standard-form “occurrence” language, which defines “occurrence” as an “accident.” Two such cases stated that the “natural and ordinary consequences of faulty construction,” such as the cost to repair and replace the faulty workmanship itself, are not accidental and thus are not a covered “occurrence.”
Another such case stated that a construction general liability policy does not cover faulty workmanship but rather covers faulty workmanship that causes an accident. Blakey concluded that an “occurrence” must include damage to something other than the insured’s own work, stating in his ruling that “this controlling case law, along with the CGL [commercial general liability] policy language and the purpose behind CGL insurance, compels this court’s conclusion that damages beyond the scope of the named insured’s work at a building is ‘property damage’ resulting from an ‘occurrence.” The judge also noted that the purpose of a CGL policy is to provide the insured with coverage for faulty work causing an accident, but not to cover the insured’s own faulty work in and of itself. Thus, the judge found in this case that the damage tied to the subcontractor’s work was beyond its own work performed by affecting other parts of the building, and Westfield owed a duty to its insured to provide a defense as a result
This case illustrates just one of the many intricacies that are inherent not only in insurance law but also in construction litigation. Successful litigation in these fields requires familiarity with the law, knowledge, and experience to ultimately provide effective legal representation. The seasoned professionals at Rock Fusco & Connelly, LLC, can provide the experience and skills necessary to succeed in all aspects of your insurance and construction litigation.
[1] 147 F. Supp.3d 708 (N.D. Ill. 2015).