Part One of this post set the background behind CGL Insurance Coverage Issues for Chinese Drywall Claims. The installation of Chinese Drywall in homes built in the United States has resulted in many Bodily Injury and Property Damage Claims arising out of its reportedly nasty smell of sulfur and corrosion of tangible property such as copper tubing in air conditioning systems. It is an easy task to locate commentaries on whether the Courts will declare Insurance Coverage for Chinese Drywall Claims, or not. There are no reported Cases on the Insurance Coverage Issues however.
General principles of Insurance Law will guide predictions in specific Claims situations until there is a body of decided Case Law on the subject. Commercial General Liability Policies extend several types of Liability Insurance Coverage. "Bodily Injury" Liability Coverage exists, in basic terms, for a fairly uniform class of Claims which qualify as Claims for bodily injury, sickness or disease, including death resulting therefrom. This uniform CGL Policy Definition of covered "Bodily Injury" has found its way, for example, into Statutes. See, e.g., Fla. Stat. ยง 627.727(1).
It does not appear that many Chinese Drywall Claims involving sickness from inhaling whatever odors are perpetrated by Chinese Drywall will have a hard time qualifying as "Bodily Injury" under this definition.
CGL Policies require more than that, however, in order for Bodily Injury Claims to be covered "Bodily injury". CGL Policies also require an "Occurrence". This is generally interpreted to mean an "accident".
Exclusion a is a uniform Exclusion in CGL Policies. It requires that the "occurrence" was neither expected nor intended from the standpoint of the insured. Exclusion a almost always appears in the reported Case Law in conjunction with the Courts' finding that in a given Case there was, or was not, an "Occurrence" under a CGL Policy. This happens so frequently that the Florida Supreme Court has held that an "Occurrence" under a standard CGL Policy means 'an accident neither expected nor intended from the standpoint of the insured.' See State Farm Fire & Casualty Co. v. CTC Development Corp., 720 So. 2d 1072 (Fla. 1998), subscription required to Southern Second, or link to an unofficial copy of this Opinion made available through the efforts of Florida State University, here.
The Florida Supreme Court has recently repeated its long-standing holding that the interpretation of an "Occurrence" under a CGL Policy is governed by the actual terms of the Policy and Florida Insurance Law. Furthermore, an "Occurrence" under a particular CGL Policy can include a subcontractor's faulty workmanship that damages the Insured-General Contractor's own work. United States Fire Insurance Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007), subscription required to Southern Second, or: Download U.S. Fire Ins. Co. v. J.S.U.B., Inc. (Fla. Dec. 20, 2007).
In the JSUB case, the Florida Supreme Court noted that the CGL Insurer in that case argued that there was no CGL Insurance Coverage for the cost of repairing structural damage to homes, "such as the damage to the foundations and drywall."
It seems likely that, depending on the actual terms of the CGL Policy and local Insurance Law, an "Occurrence" under a particular CGL Policy can also be held by the Courts to include situations where a drywall subcontractor provides faulty materials (i.e., Chinese Drywall) that injure persons in the structure or building being built by the Insured-General Contractor in a given case.
Next: "Property Damage" Liability Coverage, or Not, Under a CGL for Damage to Property Claims in Chinese Drywall Cases.
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