In a decision out of the Superior Court in Delaware, Judge Rocanelli bought a favorite insurance industry argument so extreme, several state legislatures (including Colorado and South Carolina) have passed laws overruling court decisions in their states adopting it.
The argument is that the definition of “occurrence” in a Commercial General Liability (“CGL”) policy “an accident, including continuous or repeated exposure to substantially the same general harmful conditions” really means “an event happening without human agency, or, if happening through such agency, an event which under circumstances, is unusual and not expected by the person to whom it happens.”
This unusual judicially extended definition then supported Judge Rocanelli’s further conclusion that defective workmanship does not constitute an occurrence, where a builder was sued by a homeowner who discovered damages in the home years after the home was built. Judge Rocanelli skipped over the second part of this judicially created definition—not even giving voice to the obvious point that the homeowners did not expect negligent work by the builder and the ensuing losses may well have been unusual (however “unusual” is further defined by the Court). Rather this Court stopped at the first part: concluding human agency was involved! So this builder would presumably have been entitled to a defense if the homeowner sued him because meteor struck his home, but not otherwise! Odd that a liability policy issued to a builder would escape the obligation to defend claims for any property damage caused by the builder’s negligence! Why should builders bother paying premiums in Delaware for such policies?
Fortunately in California and many other states, the law is not so distorted, and where there is resulting property damage to work other than the insured’s own work, or property damage caused by negligent work by subcontractors, the courts have had no problem finding an occurrence and there is a duty to defend under the plain terms of these standard policies.