The Pennsylvania Supreme Court has ruled that damage from faulty workmanship alone is not grounds for an insurable accident claim under a commercial general liability policy.
The high court reversed a Superior Court finding for the plaintiff in the case of Kvaerner v. National Union Fire Insurance Company.
The plaintiff, Kvaerner Metals Division of Kvaerner U.S. Inc., was sued by its customer, Bethlehem Steel, in 1997 for supplying a faulty coke oven battery.
Kvaerner sought indemnification from its insurer, National Union, but the claim was denied because Bethlehem had not claimed the battery was damaged by an "occurrence," but rather due to poor workmanship.
National Union won its case at the trial level but was reversed at the Superior Court, which ruled that case should be remanded with an eye to seeing if the insurer faced a valid claim.
In reversing the Superior Court ruling, Chief Justice Ralph Cappy wrote, "As faulty workmanship does not constitute an 'accident' as required to set forth an occurrence under CGL policies, we hold that National Union had no duty to defend or indemnify Kvaerner in the action brought by Bethlehem."
National Union attorney Deborah Minkoff of the New York-based law firm of Cozen O'Connor commented that the Pennsylvania ruling could have a wide-reaching effect.
She said, "Many construction defect claims and other insurance coverage disputes will be affected by this opinion."
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