Summary
The Supreme Court of Appeals of West Virginia affirmed a circuit court ruling that a commercial general liability policy did not provide coverage for claims arising from allegedly defective landfill design, construction, inspection, and supervision. The court held that faulty workmanship did not constitute an occurrence under the policy and that the professional liability exclusion was valid and applicable to the engineering services at issue.
Topics
Practice areas
Questions Presented
- Whether the circuit court erred in finding that allegations of faulty workmanship do not constitute an 'occurrence' under the CGL policy.
- Whether the CGL policy is ambiguous regarding 'products-completed operations hazard' coverage, requiring coverage.
- Whether the professional liability exclusion applies to the claims against Brackenrich.
Holdings
- Faulty workmanship, standing alone, does not constitute an 'occurrence' under a standard CGL policy; claims based on poor workmanship or negligent performance of contractual duties are not covered.
- No ambiguity exists; the policy's exclusionary language is clear, and the insured did not expect such coverage nor was a premium charged for it.
- The professional liability exclusion is valid and applies because the inspection and supervision services were part of the engineering services Brackenrich agreed to provide under the contract.
Key quotations
“Before any coverage can be found to exist under the `products-completed operations hazard,' or any other portion of the commercial general liability policy, an `occurrence' within the policy definition of that term must be determined to have occurred.” (856)
“The products hazard and completed operations provisions are not intended to cover damage to the insured's products or work project out of which an accident arises. The risk intended to be insured is the possibility that the goods, products or work of the insured, once relinquished or completed, will cause bodily injury or damage to property other than to the product or completed work itself, and for which the insured may be found liable. The insured, as a source of goods or services, may be liable as a matter of contract law to make good on products or work which is defective or otherwise unsuitable because it is lacking in some capacity. This may even extend to an obligation to completely replace or rebuild the deficient product or work. This liability, however, is not what the coverages in question are designed to protect against. The coverage is for tort liability for physical damages to others and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained.” (856)
Factual background
The Authority contracted with Brackenrich to design and supervise construction of an upgrade to the Webster County landfill, including a constructed wetland system to treat leachate. Kanawha Stone was hired as the contractor. The wetland allegedly failed to function properly, causing the Authority over $200,000 in disposal costs. The Authority sued Brackenrich and Kanawha Stone for breach of contract, warranties, negligence, and nuisance. Nationwide insured Brackenrich under a CGL policy and sought a declaratory judgment that it had no duty to defend or indemnify because the claims did not constitute an 'occurrence.'
Procedural history
The Authority sued Brackenrich and Kanawha Stone for defective landfill design and construction. Nationwide, Brackenrich's CGL insurer, sought declaratory relief on coverage. The circuit court found no 'occurrence' and denied coverage. The Authority and Kanawha Stone separately appealed; the Supreme Court consolidated the appeals.