Alabama’s Highest Court Settles Ambiguity and Declares Faulty Work is not an Occurrence
The highest court in Alabama confirmed and clarified current law addressing whether there could be an occurrence due to faulty work in and of itself, where there was no damage to any surrounding property. In this case, the insured was hired to perform cabinetry and woodworking work for a homebuilder. The insured sued the homebuilder and was later countersued for breach of contract, negligence, and mental-anguish, among other things. This matter also involved issues as to ownership interest of the subject properties.
The Mobile Circuit Court found that no occurrence, stating that what the insured “describe[s] is not an accident, but rather a business dispute between [the insured] and [the homebuilder] and nothing that [insured] contend[s] can transform that business dispute into an occurrence here.” The Alabama Supreme Court confirmed, making it clear that “‘faulty workmanship itself’ simply does not constitute an accident or ‘occurrence’ within the meaning of a [CGL] policy, such as the policy here.” Instead, coverage will hinge on the “nature of the damage caused by the faulty workmanship.” Citing Town & Country Property, LLC v. Amerisure Ins. Co., [Ms. 1100009, October 21, 2011].
The court then referenced U.S. Fid. & Guarantee Co. v. Warwick Dev. Co., 446 So. 2d 1021 (Ala. 1984) and Moss v. Champion Ins. Co., 442 So. 2d 26 (Ala. 1983), stating that the former found no coverage for the portions of a home that were defectively constructed whereas the latter found coverage since the “poor workmanship resulted in not merely a poorly constructed roof but damage to the plaintiff’s attic, interior ceilings, and at least some furnishings.
Because the counterclaims did not allege damage to the any property other than what was constructed by the insured, did not allege additional repairs, and did not allege that the claimant was forced to remodel as a result of the insured’s work, the court found no occurrence and would not apply “reasonable inference” as urged by the insured. Although mental-anguish might qualify as an occurrence for “bodily injury,” the court dismissed it as inapplicable in this matter since it did not arise from the faulty workmanship but rather, from the dispute surrounding ownership interest of the subject properties.