Does a contractor’s insurance company have a duty to defend the contractor in a lawsuit for faulty workmanship where the contractor has evidence that it did not cause the property damage? A Pennsylvania Court recently held that an insurer had no duty to defend under these facts.
In L.R.Costanzo Co., Inc. v. Am. Fire & Cas. Ins. Co., a general contractor sued his insurance company demanding a defense in a lawsuit between a project owner and the general contractor. In the underlying case, the project owner alleged in the complaint that it sustained property damage as a result of the general contractor’s faulty workmanship. The general contractor obtained the opinions of engineers and consultants who said that the owner’s property damage was caused by the poor design of the architect and not by the general contractor’s faulty workmanship. However, the general contractor’s insurance company refused to defend the general contractor on the basis that faulty workmanship is not an “occurrence” as defined by the insurance policy that would trigger the duty to defend.
The Court agreed with the insurer, finding that faulty workmanship was not an “occurrence” under the insurance policy. More importantly, the Court found that it could look ONLY to the complaint filed in the underlying lawsuit between the project owner and the general contractor to make its coverage decision. If the complaint alleges events, such as faulty workmanship, which are not covered by the insurance policy, the Court must look at those allegations only. The Court stated that it cannot – and will not – look at evidence outside of the four corners of the complaint such as the general contractor’s denials of liability or expert opinions of engineers and consultants to determine whether there is a duty to defend or insurance coverage.
Given the Constanzo case, a contractor’s right to demand that an insurance carrier pick up its defense will rise or fall on the wording of the complaint, and it often comes down to whether an “occurrence” has taken place. Review that complaint and insurance policy closely.
