Pa. Courts Continue To Limit What Constitutes An “Occurrence” Under CGL Policies: Defective Workmanship Claims

Pennsylvania Courts continue to interpret the scope of the term “occurrence” in the CGL policy narrowly.  Recently, in Berkley Specialty Ins Co vs. Masterforce Construction Corporation, (3rd Circ., No. 21-1287, May 11, 2023), in a non-precedential opinion, the US Court of Appeals for the 3rd Circuit affirmed a judgment in favor of an insurer seeking a declaration that it did not owe its insured defense or indemnity for property damage claims arising out of a defective work product.

 In Berkley, the insurer issued CGL policies to Masterforce in 2012 and 2013.  The CGL policies limited coverage to property damage caused by an “occurrence”. The policies in question defined occurrence in part as “an accident including continuous or repeated exposure to substantially the same general, harmful conditions.” 

Customers of Masterforce, the Brandts, brought claims against Berkley’s insured for faulty roof panel installation which caused property damage.  The U.S. District Court  for the Middle District of PA granted Berkley’s motion for summary judgment,  finding that it did not owe a duty of defense or indemnity to Masterforce under a long line of Pennsylvania  case law which holds that  claims relating to faulty or defective workmanship do not constitute a fortuitous occurrence under the CGL policy.

In affirming the District Court’s ruling, the Third Circuit Court of Appeals provided a succinct yet comprehensive review of Pennsylvania case law beginning with Kvaerner Metals vs. Commercial Union Insurance Company and a line of case which followed and expanded upon  Kvaerner

The Appeals Court noted that claims for property damage arising out of defective or faulty workmanship were not fortuitous  under the definition of “occurrence” because damage arising from faulty workmanship was foreseeable. The Court specifically rejected the Brandts’ argument that it should distinguish between damage to the work product performed by the contractor and damage to other property.  The Court noted that this was a distinction without a difference, pointing to prior precedent, that property damage arising from faulty workmanship including damage to property other than the work itself was too foreseeable to be considered an accident.

While the Berkley Specialty opinion is non-precedential, the opinion itself contains citations to a number of precedential opinions which exclude claims of faulty workmanship from the definition of occurrence under the CGL policy, whether that workmanship caused damage to the work itself or to other property.            

Insurers can and should continue to take advantage of the narrow definition of “occurrence” in CGL policies given it by Pennsylvania courts.  For a copy of the Berkley Specialty opinion, or for additional information about how insurers can effectively handle defective workmanship claims and coverage disputes, contact me at chaddick@dmclaw.com or 717-731-4800.

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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 three decades, 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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