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in Berkley Specialty Ins Co vs. Masterforce Construction Corporation, (3rd Circ., No. 21-1287, May 11, 2023), in a non-precedential opinion, the US Court of Appeals for the 3rd Circuit affirmed a judgment in favor of an insurer seeking a declaration that it did not owe its insured defense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While the Berkley Specialty opinion is non-precedential, the opinion itself contains citations to a number of precedential opinions which exclude claims of faulty workmanship from the definition of occurrence under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 or 717-731-4800.


Faulty Workmanship Not Occurrence, Travelers No Duty to Defend / Indemnify Real Estate Investment Companies, Federal Judge Rules


PHILADELPHIA,  September 1 — A Pennsylvania federal judge granted summary judgment Travelers Insurance last week, ruling it had no duty to defend insured real estate developers who were sued for claims of defective community living infrastructure construction.

In the breach of contract suit over coverage (bad faith claims had been dismissed earlier in the case), U.S. District Judge Mitchell Goldberg said that no coverage existed under the applicable Travelers insurance policies because the defective workmanship issues were not “occurrences” under well-established Pennsylvania precedent.

The insured plaintiffs, Northridge Village LP and Hastings Investment Co. Inc., bought and subdivided lots in Chester County, Pa., subsequently selling them to a builder.   Northridge built roads, storm water and runoff  management and other infrastructure for the planned community.

The community  association alleged defects with the construction of roads, drainage ponds, utility boxes, and other items, later suing Northridge and Hastings in Pennsylvania state court in 2013.  Northridge and Hastings then sought defense and indemnity for the suits under a commercial general liability policy with a $1 million occurrence limit, $2 million aggregate limit and $2 million products-completed-operations aggregate limit, as well as excess coverage of $2 million.  When Travelers denied the claims, Northridge and Hastings brought a coverage and bad faith suit against Travelers  in 2015.

Judge Goldberg dismissed the coverage suit, relying on what he called well-settled precedent stemming from a 2006 case, Kvaerner Metals Div. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006).  Judge Goldberg held that under Kvaerner, construction workmanship issues did not constitute “occurrences”‘ within the meaning of the CGL policies, as they were not accidental, fortuitous events which the instrument of insurance is designed to cover:

 “Courts in this circuit have consistently applied Kvaerner and held that claims based upon faulty workmanship do not amount to an ‘occurrence,’ and thus do not trigger an insurer’s duty to defend … The same conclusion has been reached in this circuit in cases where the faulty workmanship results in foreseeable damage to property other than the insured’s work product…Given the weight of Pennsylvania and Third Circuit precedent, I conclude that the term ‘occurrence’ in defendants’ CGL policies and excess policies does not include faulty workmanship. Further, the definition of ‘occurrence’ excludes negligence claims premised on faulty workmanship.”

Judge Goldberg further held that even if a duty to defend were potentially triggered, that was mooted by a ‘Real Estate Development Activities’ exclusion which also appeared in the applicable policies.

Northridge Village LP and Hastings Investment Co. Inc. v. Travelers Indemnity Co. of Connecticut et al., (E.D. Pa 2:15-cv-01947)(Goldberg., J.)

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


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.)

Basement Collapse Caused By Defective Workmanship Not Covered By Property Policy


VIRGINIA, July 26 – Peerless Insurance has won a summary judgment motion in federal court in Virginia, after the Court held that a property policy insuring a building under renovation did not provide coverage for a collapsed basement wall which was the result of a subcontractor failing to properly shore a basement wall.

Construction Company Taja Investments was doing excavation work in a building crawl space. One of the basement walls collapsed because a subcontractor did not properly shore the walls as construction proceeded.  Taja filed a claim with Peerless.

Peerless denied the claim made by the insured, Taja, arising out of the collapse and Taja filed suit.  In granting summary judgment, the Court reasoned that the collapse was a result of the insured’s failing to safeguard the basement walls during excavation.  The Court found under Virginia law that there was no independent cause of the loss apart from the insured’s failure, and the failure of the subcontractor. The Court also rejected the lines of cases outside Virginia which do not require independent cause to establish coverage.

The Court also found that an earth movement exclusion applied to bar coverage whether or not the movement was underground and whether the movement was natural or man made:

“while the movement that caused the east wall’s collapse occurred below grade (in the basement, below the ground level of the structure), it still involved movement of the earth surface (the uppermost layer of the soil and clay).”

Taja Investments v. Peerless Ins. Co. a/k/a Liberty Mutual Insurance Co., Civ. No. 1:15-cv-01647, 2016 U.S. Dist. LEXIS 95760 (E. D. VA, July 21, 2016).

Cincinnati Insurance Owes Indemnity For Contractor’s Negligence


PITTSBURGH, June 13  — An insurer must indemnify  its contractor and pay for a  homeowner’s recovery of $174,553.04 for defectively installed structural panels, a federal judge in the Western District of Pa. has ruled.

Gary Gadley hired Jerry Ellis Construction  to build a timber home made from Thermocore Structural Insulated Panel Systems SIPs. In 2011, Gadley bought the panels directly from Thermocore for use in his roof.

Gadley  claimed that Ellis was negligent in installing the SIP’s out of sequence and in violation of manufacture guidelines and specifications, sued Ellis for the error, and sought damages relating to repair and reconstruction.  In the underlying case, Ellis’ insurer, Cincinnati Insurance Co.,  defended Ellis subject under a reservation of rights.

Gadley won a verdict in the underlying case.  Specifically, the jury found that Ellis did not breach its contract with Gadley to install the SIPs. The jury found that while  Ellis did not breach his construction contract, he instead  breached expressed and implied warranties made to Gadley about the proper installation of the SIP’s.   Gadley was awarded $108,000 in damages for Ellis’ breach of the express and implied warranties reduced by nearly a third based on the jury’s finding that Gadley did not fully mitigate his damages.

Cincinnati sued Ellis and Gadley seeding a declaration of no coverage, and in that case moved for summary judgment.  They argued that the policy provided indemnity only for property damage caused by an occurrence, and that coverage was also excluded by a “damage to your own work exclusion.”  Gadley argued that this exclusion only applied to $25,000.00 of the verdict specifically allocated to damage to the SIP’s themselves.

U.S. District Judge Kim R. Gibson denied the motion for summary judgment,  pplying Indiana law to find that Ellis’ errors were not intentional and therefore, they were a covered “occurrence” under the policy:

“Because the jury determined that Jerry Ellis Construction did not engage in intentional or reckless conduct, the Court declined to grant Gadley’s request for treble damages. Instead, the Court doubled the damages that the jury awarded to Gadley. In applying the jury’s verdict in the underlying action to the instant matter, the Court cannot conclude that the Ellis Defendants’ faulty workmanship was intentional. Rather, the faulty workmanship was ‘unexpected’ and ‘without intention or design.’ The Ellis Defendants’ faulty workmanship therefore constitutes an ‘accident’ that is covered by the Policy.”

Judge Gibson also ruled that damages under Pennsylvania’s Unfair Trade Practices and Consumer Protection law were also covered:

“Plaintiff does not cite any provisions of the Policy to support its argument that Gadley’s UTPCPL damages are excluded. Rather, Plaintiff only argues that the Policy does not provide coverage for Gadley’s UTPCPL damages because the ‘property damage’ that Gadley sustained is not covered by the Policy. As discussed above, the Ellis Defendants’ faulty workmanship constitutes an ‘accident’ that is covered by the Policy. Accordingly, because the damages awarded to Gadley are not excluded by the Policy and are below the Policy’s limits, Plaintiff must indemnify the Ellis Defendants.”

Cincinnati Ins. Co. v. Jerry Ellis Construction  (W.D. Pa.., June 9 2016)


NJ: Crum & Forster No Duty To Defend Contractor in Faulty Installation Case


NEW JERSEY, April 13 –  A New Jersey appeals court ruled insurer Crum & Forster  had no duty to defend an insured contractor against claims of  faulty installation of insulation and cladding at a condominium complex.

The appeals court affirmed a lower court grant of summary judgment in favor of Crum & Forster Insurance Co. relieving it of the obligation to defend contractor  Breese Corp.  Breese was a defendant in an underlying suit brought by a condominium association alleging defective work in the installation of an external insulation and finishing system, EIFS.   Breese installed insulation boards at Lakeside  at North Haledon condos.

The policy contained an  exclusion for EIFS-related claims, and the appeals court ruled it applied to bar coverage.  At the trial court level, the court there determined that the system installed by Breese met the specifications of an EIFS  — a rigid insulation board, an adhesive layer attached to the substrate, a reinforced base coat and a finish coat.

Lakeside argued that stucco did not meet the definition of substrate, and therefore that the exclusion did  not apply.  The appeals court disagreed:

“It was undisputed that the installation was not made in accordance with the plans, and so Lakeside’s reliance on using the plans to define ‘the’ only permissible ‘substrate’ is misplaced…The experts’ disagreement does not make the language of the exclusion ambiguous,…[trial ] Judge [Ralph] DeLuccia listened to the testimony, had the opportunity to observe the witnesses and his factual findings were based upon substantial, credible evidence in the record. We find no reason to disturb them.”

The underlying litigation commenced, as it so often does, after the condominium experienced water infiltration problems, including mold and bacteria issues.  Crum & Forster also argued the a bacterial and mold related exclusion also barred coverage.


Third Circuit Rules Subcontractor’s Insurer Must Defend, Indemnify Construction Project Owner


PHILADLEPHIA, Feb. 17 – The U.S. Third Circuit Court of Appeals has ruled that the insurer of a subcontractor who employed an injured worker must defend the project owner  in the personal injury litigation brought by worker, regardless of the subcontractor’s immunity under Pennsylvania workmens’ compensation law.

In Ramara v. Westfield, the Court provided a succinct statement of the facts:

Appellee, Ramara, Inc. (“Ramara”), the garage owner, engaged Sentry Builders Corporation (“Sentry”) as a general contractor to perform work at its parking garage, and, in turn, Sentry engaged a subcontractor, Fortress Steel Services, Inc. (“Fortress”), to  install concrete and steel components as part of the work. As  required by its subcontracting agreement with Sentry, Fortress obtained a general liability insurance policy (“the Policy”) from Westfield Insurance Group (“Westfield”) naming Ramara as an additional insured under the Policy. While Fortress was working on the project in April 2012, one of its employees on the job, Anthony Axe, was injured in an accident. As a result of his injury, Axe filed a tort action against Ramara and Sentry but he did not include Fortress as a defendant as it was immune from actions at law by its employees for injuries suffered on the job if they were entitled to compensation for their injuries under the Pennsylvania Workers’ Compensation Act (“Act”).   Ramara tendered its defense in Axe’s action to Westfield. But Westfield declined to defend Ramara as it claimed that Axe’s complaint against Ramara did not include allegations imposing that obligation on it under its Policy with its applicable endorsements.

The policy secured by Fortress naming Ramara as an additional defendant contained an Additional Insured Endorsement, under which Ramara was entitled to defense and indemnity if the underlying personal injury action alleged that the plaintiff’s injuries were in whole or in part caused by Fortress, the named insured.    Westfield claimed that since the complaint, which did not name Fortress as a defendant, contained no express averments of wrongdoing against Fortress, Ramara was not entitled to defense and indemnification.

Judge Morton Ira Greenberg undertook an examination of the underlying personal injury complaint, and concluded there were sufficient allegations implicating Fortress’ role in causing the accident, its legal immunity notwithstanding:

Taken together and construed liberally in favor of Ramara for purposes of this insurance coverage case, these allegations partially base Ramara’s liability on its failure to supervise the work of its contractors or subcontractors who used equipment improperly and disregarded a site specific fall protection plan, all while performing their work in violation of the industry’s standard of care. Fortress, though engaged by Sentry, was one of Ramara’s subcontractors, and Axe’s employment by Fortress was the sole reason that Axe was at the job site and was injured. Clearly, Axe made factual allegations that potentially would support a conclusion that Axe’s injuries were “caused, in whole or in part” by Fortress’s acts or omissions.

Of course, we need not and, indeed, cannot decide whether Axe will succeed on these claims at trial. Ramara only must show that the Axe complaint, when liberally construed in favor of Ramara, includes allegations to support a conclusion that Fortress was potentially negligent and that its negligence was a proximate cause of Axe’s injuries. We conclude that it does. Accordingly, Ramara comes within the Additional Insured Endorsement of the Policy with respect to the Axe case. Therefore, Ramara is entitled to a defense in the Axe case even under Westfield’s narrow interpretation of the Additional Insured Endorsement limiting coverage to situations in which an insured’s contractor’s actions proximately caused a plaintiff’s injuries.

(emphasis added).

The Court ruled that the workmen’s compensation immunity which Fortress enjoyed was not dispositive of whether the factual allegations of the complaint made out a case that but for Fortress’ acts or omissions, the injury would not have occurred, thereby entitling Ramara to defense and indemnity under the Westfield policy insuring Fortress.  The Court affirmed the District Court judgment holding Westfield liable for the defense and indemnity of Ramara in the underlying personal injury litigation.

Ramara v Westfield Ins. Co., (Third Cir., Feb. 17, 2016)

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