In a construction defect action, does an insurance company have a duty to defend an insured-contractor when the claimants’ complaint does not specifically allege that construction defects resulted in “property damage” to other property? Relying on a difference in requirements for pleading “general” damages, as distinguished from “special or collateral” damages, the Oregon Court of Appeals recently answered that a defendant-insurer had no duty to defend an insured-contractor in such a negligence action.
In State Farm Fire and Cas. Co. v. American Family Mut. Ins. Co., the court reasoned that the defendant-insurer had no duty to defend the insured-contractor unless the underlying complaint, without amendment, could result in liability for water damage to other components or contents of the building separate and apart from the “‘cost of repairs’” to correct the defective performance. The court concluded that the third-party claimants were required to specifically plead such resulting water damage before evidence could be properly admitted on that issue at the trial of the underlying action. Accordingly, the allegations of the underlying complaint did not allege “property damage” or injury to property covered by the defendant-insurer’s policy. The defendant-insurer, therefore, had no duty to defend.
If you are interested in learning more about the nuances of insurer-provided defense in claims and actions against insureds, please contact the leader of Dunn Carney’s Insurance Defense Team, Eric Kekel, or any member of our Insurance Defense Team, at http://www.dunncarney.com/practice-areas/insurance-defense-and-coverage/.