In National Union Fire Ins. Co of Pittsburgh, PA v. Turner Constr. Co., et al., National Union insured a construction project through an Owner Controlled Insurance Program (OCIP), pursuant to which the construction project owner procured insurance on behalf of all parties performing work on the project. National Union issued the OCIP policy.

After a construction accident where a segment of the decorative pipe rail system on the exterior of the project fell to the street from the eighth floor of the building, an investigation determined that more than 20% of the pipe rail connections surveyed did not conform to the building plans. Other construction problems with the installation of the pipe rail network were also discovered.

National Union agreed to provide a defense under a reservation of rights, but then filed a declaratory judgment action declaring that the policy did not cover the underlying claims. National Union also sought reimbursement of its incurred defense costs.

National Union’s summary judgment motion was granted by the trial court, which held that the CGL policy did not cover GSJC’s claims. The motion court also directed that National Union be reimbursed the costs and fees it had paid for the defense. An appeal resulted.

The Appellate Division noted that under New Jersey law, which was controlling, there is no “occurrence” under a commercial general liability policy where the only alleged damage is to the insured’s own work. The court held that faulty workmanship is not an occurrence because of a lack of fortuity.

However, the Appellate Division reversed the portion of the motion court’s decision that required defendants to reimburse National Union for defense costs, as the policy did not differentiate between covered and uncovered claims. Based on the failure of the policy to differentiate between covered and uncovered claims, the Court held that the reimbursement of defense costs was precluded by the policy.

Special thanks to Mike Nunley for his contributions to this post. For more information, please contact Bob Cosgrove at .