We disagree, and would like your thoughts.

Pennsylvania Subscriber

A

We hold for coverage. The first of the reasons given for denial is that the loss is not an “occurrence.” Since the definition of an “occurrence” is an accident, perhaps the adjuster is of the opinion that the roof was intentionally installed poorly. That position is hard to accept since the roof has performed as a “roof” for ten years. At law, liability attaches because of negligence, through statute, or through the assumption of another's liability. In this case, negligence has led to property damage.

The adjuster cites two cases as proof that this is not an “occurrence.” The first of these is Davis v. Maryland Ins. Co., 38 F. Supp. 2d 387, in which the court held that it “must examine the claim to determine if it is more appropriately designated as a contractual claim.” In Davis it was held to be a breach of contract, and, as such not covered by the CGL. But in Davis , financial loss, rather than bodily injury or property damage, was alleged. Therefore, the use of this case to bolster the denial is inappropriate.

The other case used to deny the claim is Solcar Equipment v. PMA et al., 414 Pa. Super. 110, where the court simply stated that the loss was not an accident or occurrence but did not explain why it thought so. Perhaps, on reviewing the case, the court thought that Solcar's work was intentionally slipshod, but that is not the case here. Further, Solcar was criticized in Marine Office of America for Continental Insurance Co. v. Quarry, 142 F. 3d 428, where the court held that allegations of negligence are included within the definition of “occurrence.”

The adjuster uses exclusion l. damage to your work to deny the loss; however, this exclusion contains the exception that the exclusion does not apply if the work was performed “on your behalf by a subcontractor.” Since the roof was put on by a subcontractor, the exception to the exclusion applies. The next exclusion the adjuster refers to is n. recall of products, work or impaired property. But there has been no recall or withdrawal from the market or from use; there is no evidence that any product (such as the staples) or work (that of the subcontractor) has been recalled or withdrawn from use.

So we are left with exclusion m. for damage to impaired property as justification for denial. A review of the legal thinking on this exclusion is not informative, since the majority of cases reviewed involved a tangible product, and not the work of a subcontractor. The one case reviewed that did involve a subcontractor's work involved monetary loss, and not property damage as in this instance.

In looking at the definition of “impaired property”, the language is informative. First, “`impaired property' means tangible property, other than [emphasis added] 'your product' or 'your work'.” What is the tangible property? The roof? The entire house? If so, since both the contractor's “work” and “product” are the completed dwelling, the definition does not fit and the exclusion does not apply. Second, the definition states that the other property must incorporate “your work” or “your product that is known or thought to be defective, deficient, inadequate, or dangerous.” At what point is something known? Note the use of the present tense of the verb “to be.” This suggests that the knowledge is immediate — in other words, it is readily and immediately apparent to all that the product or work is deficient or inadequate; certainly at least soon after the operations are completed and the product or work is put to its intended use. Therefore, we think this definition and its exclusion are ambiguous.

For these reasons, we consider the claim covered.

Editor's note: Although we believe this claim was covered, we invite comment from anyone who has had a similar situation, and how the definition and exclusion were interpreted.