The Nebraska Court of Appeals has ruled that a home builder that fails to adequately compact the soil does not have insurance coverage to repair damages to the home caused by the settling soil. In “insurance speak”, there was no occurrence to trigger coverage.
In this case, Cizek Homes, Inc. v Columbia National Insurance Company, a home builder contracted with a buyer to build a house. A lot was selected and the home was built. After the buyer moved in, the house started to settle, causing damage to the house. The buyer told the builder about these problems and the builder agreed to fix the problems. The builder also contacted its insurance company and requested coverage for the buyer’s claim. The insurer rejected the claim, determining that the buyer’s claim was not covered by the builder’s Commercial General Liability (CGL) insurance.
The insurer then filed suit asking the court to interpret the insurance policy and to determine whether the CGL insurance covered the claim. The court looked to the buyer’s allegations that the builder failed to construct the home in accordance with accepted construction and industry standards and that the builder was negligent in designing and constructing the home. The builder admitted that it was obligated to pay for the costs of repairs, but denied that it was negligent in constructing the home.
The first question for the court was whether there was an occurrence under the policy. Under the policy, an occurrence is defined as an accident including continuous or repeated exposure to substantially the same harmful conditions. Relying on established case law in Nebraska, the court determined that faulty workmanship, standing alone, is not an occurrence under a CGL policy. This means that if the faulty workmanship only damages the work, such as a roofer’s faulty work damaging only the roof, there is no occurrence.
Looking again to the allegations between the buyer and the builder, the court found that the there were no facts presented that would support an inference that the damage was caused by anything other than the builder’s negligence. Moreover, the only damage claimed was to the house, which means that the only damage was to the work itself, and thus there was no occurrence. Because there was no occurrence, coverage was never triggered.
This opinion makes clear in Nebraska that a contractor’s faulty work, that only damages the work that contractor performed, will not be covered by the contractor’s commercial general liability insurance.