Faulty Construction Not Covered Loss Under Nationwide Builders’ Policy, Pa. Federal Judge Rules

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PHILADELPHIA, Nov. 16  — Two homebuilders insured by Nationwide Mutual Insurance Company accused in an underlying lawsuit of poor workmanship are entitled to no coverage, U.S. District Judge Michael M. Baylson ruled earlier  this week, because such workmanship did not constitute a fortuitous  “occurrence” which would trigger coverage under the policy.

William Tierney III sued  Robert and Hannelore Bealer, owners of Affordable Homes for foundation cracks and water leakage problems they built for Tierney in Pennsylvania State Court.   The complaint alleged that a May 2014 flooding of the home’s basement was due to faulty construction.   In response to Bealers’ requests for defense and indemnity in that case, Nationwide declined, citing no triggering  occurrence under policy, despite the Bealers’ claims that the problems were actually caused by superseding events including heavy storms and shifting ground.

The Bealers sued Nationwide for coverage in 2015, and the suit was removed to Federal Court.

Judge  Baylson, citing Pennsylvania law requiring analysis of the underlying complaint only, found that Nationwide was within its rights to deny coverage under the language of the policy:

“The Bealers’ alternative explanation for the cause of Tierney’s property damage is outside the scope of this analysis because it is not pled in the underlying complaint. . . Tierney’s factual allegations are that a failure to properly design and construct the property caused the damage at issue. These are faulty workmanship claims, and the Bealers’ attempts to reframe them as based on an ‘occurrence’ due to the ‘degree of fortuity’ involved in the intervening factors that allegedly led to the damage, are unavailing.”

Bealer v. Nationwide (E.D. Pa., No. 16-3181, Nov. 16, 2016)(Baylson, J.)

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Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800.

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