Claimant’s failure in underlying suit to plead that defective workmanship caused damage to external property is basis for court determination of no “occurrence” in subsequent declaratory judgment action.

Marvin Lumber filed suit against Sapa, a manufacturer and seller of aluminum window extrusions, after extrusions that it had incorporated into 25,000 window and door units began oxidizing and required extensive repairs. Marvin’s claims against Sapa included breach of contract, breach of express warranty, breach of implied warranty, fraud, fraudulent concealment, negligent misrepresentation and unlawful trade practices. The case settled, but Sapa instituted a declaratory judgment action against its insurers. Sapa alleged these insurers had breached their respective insurance contracts by refusing to defend and indemnify Sapa in connection with the Marvin Lumber lawsuit.

The defendant insurers, including our client, argued that the events at issue in the Marvin Lumber case did not constitute an “occurrence,” a requirement for commercial general liability coverage, which has consistently been interpreted by Pennsylvania courts to mean an accident and to exclude claims for defective work. In arguing that coverage existed for Marvin’s claim, Sapa relied heavily on Indalex v Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 83 A.3d 418 (Pa. Super. 2013), which involved allegations that the insured manufactured defective windows that resulted in water leakage and associated damage including cracked walls, mold and personal injury stemming from mold. The Indalex court found that these claims constituted an accidental “occurrence” because they involved damage to persons or to property other than the insured’s product.

In finding that the allegations in Marvin Lumber failed to constitute an “occurrence,” the court distinguished Indalex. The court noted that Marvin Lumber only sought compensation related to the damage to the extrusions themselves, as opposed to damage to other property. Although Sapa’s expert testified that some surrounding property inside customers’ homes was indirectly damaged through the subsequent process of installing new extrusions, it conceded that Marvin Lumber’s complaint never set forth a specific request for these damages. Furthermore, the court found that the record did not support the conclusion that the failure of Sapa’s extrusions directly caused damage to any external property.

_{Case Law Alerts, 3^rd Quarter, July 2018}

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