The Connecticut Supreme Court is presently considering whether claims for breach of contract against a contractor for failing to properly construct a building may constitute an “occurrence” under a commercial general liability policy. At issue in
Capstone Development Corp. v. American Motorists Ins. Co., No. SC 18886 are various questions certified from a federal district court in Alabama concerning the availability of insurance coverage for defects in the construction of buildings an the University of Connecticut.
Meanwhile, the U.S. Court of Appeals for the Second Circuit has issued a new ruling calling into question an earlier precedent that insurers have relied on in disputing such claims. In
Scottsdale Ins. Co. v. R.I. Pools, Inc., No. 11-3529 (2d Cir. March 21, 2013), the Second Circuit reversed a Connecticut District Court’s declaration that a liability insurer did not owe coverage for claims brought against its insured by purchasers of swimming pools for damage the purchasers sustained when cracks developed in their pools.
The District Court had ruled in Scottsdale Ins. Co. v. R.I. Pools, Inc., No. 09-1319 (D. Conn. August 15, 2011) that the insurer had no duty either to indemnify or defend the insured, and was furthermore entitled to the return of funds it had previously expended in the defense of the insured. On appeal, however, the Court of Appeals recently ruled that the District Court had erroneously relied on a distinguishable Second Circuit precedent and therefore remanded the matter for further proceedings in the District Court.
The District Court had relied on Jakobson Shipyard, Inc. v. Aetna Cas. & Sur. Co., 961 9 F.2d 387 (2d Cir. 1992) in finding that the cracking of the concrete resulting from defects in the insured’s work could not constitute an “accident” or “occurrence.” The Second Circuit found, however, that there was a crucial difference between the CGL policy that Scottsdale had issued to R.I. Pools and the Aetna policy as issue in Jakobson. In this case, the Scottsdale “your work” exclusion contained an “exclusion [from coverage] does not apply if the damaged work . . . was performed on [the insured’s] behalf by a sub-contractor.” The court noted: