In general, a commercial general liability policy will not cover claims for faulty workmanship, which is not deemed an occurrence.  However, if the actual faulty work is attributable to a sub-contractor and not the insured, should the insured be entitled to a defense?  The Third Circuit, affirming the Eastern District of Pennsylvania, answered this question with a resounding “no.”

In Lenick Construction, Inc. v. Selective Way Insur. Co., Lenick Construction, Inc. sought a declaration that Selective Way Insur. Co. owed a duty to defend it in a property damage claim by a condominium association and various entities, referred to collectively as “Westrum.”  Westrum was the general contractor in the construction of a 92-unit development.  Westrum retained Lenick for carpentry services, including installing windows and doors that were selected and provided by the real estate developer.  Some units suffered property damage due to leaks, which were reportedly attributable to Lenick’s installation of the windows and doors.  Lenick argued they were entitled to a defense without reservation because their work product itself was not defective.  Instead, they argued, (1) they did not work on some areas that were allegedly damaged, (2) the damages arose from the work of other subcontractors, and (3) defects in the windows or doors themselves caused the damages.

However, the Third Circuit, and the Eastern District of Pennsylvania before it, disagreed.  Pennsylvania is a strict four corners state, and, as a result, the allegations in the complaint control coverage.  In analyzing the complaint, the Third Circuit recognized the complaint alleged Lenick should be liable for their own faulty work.  In other words, regardless of any liability defenses, the allegations themselves pertain solely to Lenick’s own liability for failure to perform services under the contract.  Because the complaint did not contain any allegations that would otherwise be subject to coverage, including any claim as to product defect, the Third Circuit held Lenick was not entitled to coverage.

Although the duty to defend is extremely broad, if there is no possibility of coverage for the actual claims alleged, then the duty to defend is not triggered.  We caution, however, that the results of this case may have been different in states that do not have strict four corner rules.  In New York, for instance, extrinsic evidence may be used to trigger coverage.

Thanks to Christopher Soverow for his contribution to this post.