It is axiomatic that in order to obtain insurance coverage a policyholder must first establish that a claim falls within a policy’s insuring agreement before coverage under the policy is triggered. For construction claims brought under CGL policies, that frequently means showing that the damages at issue constitute “property damage” caused by an “occurrence” (where “occurrence” is generally defined as “an accident”). While this requirement may often seem like a simple factual question, in the context of a subcontractor’s faulty workmanship, the analysis has proven more difficult. Where alleged faulty work causes damage only to the insured’s own work product, is the property damage accidental?
Since 1979, commercial general liability (CGL) insurers have relied on the New Jersey Supreme Court case of Weedo v. Stone-E-Brick, Inc. and its progeny to argue that a subcontractor’s defective work can never qualify as an “occurrence” under a standard form ISO CGL policy. This argument is contrary to both the language of standard CGL policies and the trend in recent case law, but courts in New Jersey and elsewhere have continued to cite Weedo for this proposition. With its new decision in Cypress Point Condominium Association, Inc. v. Adria Towers, LLC, the New Jersey Supreme Court has now finally relegated Weedo to its proper status as an historical footnote based on outdated policy language.
Cypress Point involved claims for rain water damage to a condo building. When the condo association began noticing the damage, it brought claims against the developer/general contractor and several subcontractors. The association alleged that the subcontractors’ defective work on the exterior of the building allowed water leaks that damaged steel supports, sheathing and sheetrock, and insulation. When the developer’s CGL insurers refused to cover the claims, the association sued the insurers, seeking a declaration that the association’s claims against the developer were covered.