Generally the date of loss set forth in the complaint is the date that triggers coverage within a specific policy period.  Where discovery uncovers an earlier trigger date, coverage may apply during a prior policy period.

In Olde Glory Builders LLC v. Donegal Mut. Ins. Co., Olde Glory Builders, built a home and sold it to a third party in 2011.  The plaintiff was insured under a CGL policy from December 2010 to December 2011.  During the first year of owning the property, the buyer reported the property’s roof was leaking to Olde Glory Builders.  Olde Glory Builders was unable to correct the problem.  In June 2013, the property sustained significant water damage, which resulted in the buyer instituting suit against Olde Glory Builders.  In the buyer’s lawsuit, the buyer made claims against Old Glory Builders for negligent construction and its failure to detect and correct problems, which had become apparent in or before November 2012.

The insurer denied coverage contending that the alleged damages did not occur within the policy period.  Subsequently, Olde Glory Builders filed a declaratory judgment action.  In determining whether there was coverage under the policy, the court first reasoned that an insurer’s obligation to defend its insured was triggered when the allegations in a complaint could potentially fall within the scope of the policy’s coverage.  The court further reasoned, in Pennsylvania, an occurrence takes place when the injurious effects of a negligent act “first manifest” themselves to a reasonable person.

The court concluded that the effects of Olde Glory Builders’ alleged negligence “first manifested” themselves during the first year of the buyer owning the property (as he reported his complaints to Olde Glory Builders during that time).  Thus, because Olde Glory Builders’ policy was in effect at the time that the damages manifested (in 2011), the insurer was obligated to defend Olde Glory Builders.

This case illustrates how sometimes property damage that seemingly occurs outside the policy period may potentially be covered under a policy, under Pennsylvania law, if a court determines that the injury leading to the loss manifested itself while the policy was in effect.  As such, discovery should be conducted to determine, as best as possible, when complaints began to be made about alleged property damage – as this may ultimately play an important role in determining whether coverage is provided under a policy.

Thanks to Collen Hayes for her contribution to this post.