The United States District Court for the District of Oregon held that property damage incurred to a condominium project resulting from a myriad of construction defects constituted just one occurrence under the relevant excess general liability policy.
In Chartis Specialty Ins. Co. v. American Contractors Ins. Co. Risk Retention Group et al., Case No. 3:13-CV-1669 (D. Ore. Aug. 12, 2014), the owners association of a condominium complex sued its developers for property damage incurred to the condominium as a result of numerous and distinct construction defects. The owners association alleged that the developers failed in their duties as developers to build the condominium complex free from defects. The alleged defects included errors in the construction of the roof, fire sprinklers, insulation, and windows and doors, resulting in total damages of $3.6 million.
Chartis, which provided liability insurance for the developers in excess of $2 million per occurrence/$4 million aggregate, argued that the damages at issue were the result of multiple occurrences, subject to at least two retentions; i.e., $4 million. The Chartis Policy defined "occurrence" as:
an accident, including continuous or repeated exposure to conditions, which results in ... Property Damage neither expected nor intended from the standpoint of the Insured. All such exposure to substantially the same general conditions shall be considered as arising out of Occurrence.
Because there were multiple defects/conditions resulting in property damage, Chartis argued for multiple occurrences.
The court disagreed, finding that despite various defects, the property damages at issue arose from just one occurrence: the developers' failure to perform its duties. In reaching this holding, the court looked to the allegations and facts forming the basis of the settlement between the owners association and developers, rather than the actual cause of the property damage at issue. The court explained that "in insurance coverage cases, it is the insured's actual conduct, not the imputed conduct of another, that determines coverage." Id. at 10 (quoting McLeod v. Tecorp Int'l, Ltd., 844 P.2d 925 (Or. App. 1992). The court found that because the allegations asserted that the property damage was the developers' failure to ensure that the condominium was properly developed, and not that the developers negligently performed any of the work themselves, the property damage was caused by a single occurrence.