9th Aug 2017

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“Construction defects” as an “occurrence” under a (CGL) third party liability policy

The building industry members will argue that a “construction defect” always should be deemed an “occurrence” within the meaning of CGL policies, even when the contractor intentionally performs the work with “knowledge that the work may create a risk of further events that could lead to harm”. The industry representative will argue that unless the insurance company can prove that the policy holder/contractor expected or intended its work to be defective and cause property damage, the faulty workmanship is accidental and thus an “occurrence”. [Navigators Specialty Ins. Co. v. Moorefield Construction (2016) 6 Cal. App. 5th 1258, 1278]

OBSERVATION: Navigators Specialty Ins. Co. v. Moorefield Construction
Navigators Specialty Insurance stated that: “We need not and do not decide whether all construction defects are “occurrences” under a standard CGL policy.” [Navigators Specialty Ins. Co. v. Moorefield Construction (2016) 6 Cal. App. 5th 1258, 1278] The Navigators Specialty Ins. opinion did conclude there was an absence of coverage stating: “Moorefield’s conduct was not an accident because it was a deliberate decision made with knowledge that the moisture vapor emission rate from the concrete slab exceeded specifications. [6 Cal. App. 5th 1258, 1278] See § D24 DELIBERATE ACT [§ D24:3 “Knowledge” as an element of deliberate act].

References in bold are to Mr. Cornblum’s text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, 2017 Edition, published by ThomsonReuters (1-800-344-5008 to order 3-Volume text).

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