In State Farm Fire and Casualty Co. v. Kim’s Asia Construction, a Pennsylvania court had to determine whether a construction company was entitled to coverage in a suit alleging negligent installation of a leaky roof. Kim’s Asia was hired to remove an existing roof and install a new one. The finished roof leaked during rainstorms, and additional repairs failed to fix the issue and the building owner was forced to hire a new contractor to remove the roof and install another one. Kim’s Asia was sued and it sought coverage for the lawsuit from State Farm. State Farm agreed to defend the case under a reservation of rights and  commenced a declaratory judgment action.

The policy provided coverage for property damage caused by an “occurrence,” which was defined as an accident. In the Pennsylvania Supreme Court’s 2006 ruling in Kvaerner Metals Div. of Kvaerner U.S. Inc. v. Commercial Union Ins. Co. the justices interpreted nearly identical policy language. Applying the dictionary definition of “accident,” which means “fortuitous,” the court determined that property damage claims based on faulty workmanship do not qualify as an “accident” that establishes an “occurrence” where the underlying complaint does not allege anything “unexpected.”

Here, although the complaint included general allegations of negligence, the court determined that there was nothing “unexpected,” “unintentional” or “fortuitous” about the insured’s allegedly poor roof construction. As a result it did not meet the definition of an “occurrence” under the policy and was a faulty workmanship claim that did not trigger coverage.  As such, State Farm had no obligation to defend or indemnify Kim’s Asia in the underlying action.

Thanks to Jorgelina Foglietta for her contribution to this post and please write to Mike Bono for more information.