VRV Development, a general contractor hired to develop residential lots in Dallas, TX, purchased commercial general liability (CGL) coverage from Mid-Continent Casualty in May 2004, during the development process. The coverage was renewed in May 2005 but not in May 2006. In early 2007, heavy rains caused retaining walls on four lots to collapse after cracks were discovered in one of the walls the prior July; the resulting property damage led to a lawsuit. VRV tendered the suit to Mid-Continental, which refused to defend or indemnify and VRV sued.

The Fifth Circuit Court of Appeals, in VRV Development LP v. Mid-Continental Casualty Co., affirmed the lower court’s entry of summary judgment in favor of the insurer, concluding that while the damage to the walls occurred during the effective period, such damage was subject to an exclusion. The court stated that CGL policies generally “do not serve as a performance bond covering an insured’s own work.” Moreover, the court observed that the property damage was caused by the collapse of the walls, not exposure to the cracks, explaining that “property damage does not necessarily occur at the first link in the causal chain of events,” thus the focus must be on “the time of the actual physical damage…not the time of the negligent conduct.”