Why it matters

A Connecticut federal court expanded the amount of insurance potentially available to an insured in a case involving coverage for 19 defective swimming pools. The insured in the underlying action was held liable for using defective concrete in 19 swimming pools. Its insurer argued that coverage was capped at the policy’s $1 million-per-occurrence limit because only one defective product was used to build the pools. The court disagreed, holding that there were 19 separate occurrences because “[a]ll of [the insured’s] prior mistakes – its bad formula, reckless management and disregard for industry standards – were just steps in a chain of events that ended in the company’s defective product destroying pools.” In so holding, this court joined a long list of courts nationwide that have construed arguably ambiguous “occurrence” language in favor of maximizing available coverage.

Detailed Discussion

R.I. Pools sued Paramount Concrete, alleging Paramount manufactured a defective concrete product (“shotcrete”) that caused damage in newly constructed pools. A jury awarded R.I. Pools $2.75 million in compensatory damages plus attorneys’ fees. Paramount then sought coverage from its insurer, Harleysville Worcester Insurance. Harleysville asserted that if the underlying litigation was covered under its policy, all of the damage stemmed from one occurrence – the production of faulty shotcrete. The policy provided limits of $1 million per occurrence and $2 million in the aggregate.

The court rejected Harleysville’s one-occurrence argument, ruling instead that there were 19 separate occurrences. According to the court, the case law is clear that “the ‘occurrence’ is the ‘unfortunate event’ that causes injury and not the cause of that event.” The court reasoned that “Paramount habitually manufactured defective shotcrete, but that shotcrete caused discrete harm each time its use in a pool caused the pool to crack and leak, thereby ruining the finished product it helped to hold together,” the court said. “All of Paramount’s prior mistakes its bad formula, reckless management, and disregard for industry standards, were just steps in a chain of events that ended in the company’s defective product destroying pools. There were 19 separate occurrences here and, to the extent that these occurrences caused ‘property damage’ and were otherwise covered under the scope and temporal limits of the CGL policy, Harleysville must cover the costs of each separate injury to each individual pool.”

To read the order in Harleysville Worcester Ins. Co. v. Paramount Concrete, click here.