I rarely address the “is faulty workmanship an ‘occurrence?’” issue in Coverage Opinions.  The case law is pretty well-developed, the facts often similar and the issue the same.  In general, a contractor performs work on a construction project that turns out to be defective -- and it may or may not have caused damage to other property, perhaps to other work at the project or away from the project. In general, arguments will be made that there is no coverage for the cost to repair or replace the insured’s defective work, as it was not caused by an “occurrence,” but any damage as a consequence of the insured’s defective work was caused by an “occurrence.”

The Alabama federal court’s decision in Frankenmuth Mut. Ins. Co. v. Ivan’s Painting LLC, No. 21-945 (N.D. Ala. Dec. 19, 2022) addresses the “occurrence” issue, but in a less common scenario.  A contractor performed defective work – but what to make of the damage caused?  Was it damage to the contractor’s work – not an “occurrence” -- or something else, thereby satisfying the “occurrence” requirement.

TCC, Inc. was a general contractor for the construction on a home in Tuscaloosa. [Alabama fans, welcome back, after having just taken a second to stop and say Roll Tide.]  TCC hired Ivan’s Painting to pain and clean windows – a lot of them.  The homeowners demanded that Ivan’s relace the 87 windows that it damaged. 

Coverage litigation arose, including an additional insured issue and whether an insurer could intervene in the case.  None of that is important here.

What caught my attention was the “occurrence” issue.  The court started out with a basic statement of Alabama law: “When a contractor performs faulty work ... there is no accident or occurrence, but, when the contractor’s faulty work creates a condition that in turn damages property, under Alabama law, that damage results from an accident.”

What made the issue here a little different was that Ivan’s was hired to paint the window frames.  But, in the course of doing so, it scratched the glass.  Ivan’s explained that the windowpanes were damaged “during the sanding process, to get the wooden frames to the tone desired by TCC and/or owners of the home.”

One insurer argued that there was no “occurrence” as the only damage was to Ivan’s work, with no resulting damage.  Ivan’s [and another insurer] countered that the “damage at issue is the scratched glass and Ivan’s work was limited to the adjacent frames.  Thus, … there is an occurrence under Alabama law because ‘[t]he claim does not simply seek to redo or repair Ivan’s Painting's faulty painting or staining work, which would not be an occurrence.’”

Following a review of Alabama case law on the “occurrence” issue, the court – looking at it from a foreseeability perspective -- concluded that there was no occurrence: “Damage to the tangible property immediately adjacent to the property on which Ivan’s was working was foreseeable, and thus it should be reasonably anticipated.  Indeed, Ivan’s did anticipate as much when it put a protective liquid masking on the glass before the work commenced.  Therefore, this damage cannot be considered an ‘accident’ under Alabama law and consequently it does not fall within the definition of occurrence under the policy.”

Again, it’s a “occurrence” decision, but with a unique aspect to the consequential damages issue.