958 F.3d 748
8th Cir.2020Background
- American Family issued a commercial general liability (CGL) policy to Mid‑American for 2014–2016; the policy covered "property damage" caused by an "occurrence," defined as "an accident."
- Mid‑American (contractor) orally contracted to design/construct a grain facility for Lehenbauer (owner) and worked from Feb 2015 to Mar 2016; Lehenbauer later terminated the contract.
- Lehenbauer counterclaimed in state court against Mid‑American and its agent for breach of contract, breach of implied duties, and negligence, alleging numerous design and construction defects and damages (>$75,000) for repair, investigation, and lost profits.
- Mid‑American tendered the counterclaims to American Family; insurer defended under a reservation of rights and then filed a federal declaratory judgment action seeking a ruling that no coverage (no duty to defend/indemnify) exists because there was no "occurrence."
- The district court granted summary judgment for American Family, holding the counterclaims did not allege an "occurrence" under Missouri law; Mid‑American and Lehenbauer appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lehenbauer's counterclaims allege damages caused by an "occurrence" (an "accident") under the CGL | Lehenbauer/Mid‑American: negligent design/construction and resulting third‑party losses fall within the policy's "occurrence" (CGL protects third‑party business losses) | American Family: damages are the normal, expected consequence of shoddy workmanship and therefore foreseeable, so not an "accident" or "occurrence" | Court: damages were the normal, expected consequence of defective work and thus foreseeable as a matter of law; no "accident" → no "occurrence" → no duty to defend or indemnify |
Key Cases Cited
- American States Ins. Co. v. Mathis, 974 S.W.2d 647 (Mo. Ct. App. 1998) (defective construction whose harms are the normal, expected consequence is not an "occurrence")
- D.R. Sherry Constr., Ltd. v. Am. Family Mut. Ins., 316 S.W.3d 899 (Mo. 2010) (determinative inquiry is whether the insured foresaw or expected the injury or damage)
- View Home Owner's Ass'n v. The Burlington Ins., 552 S.W.3d 726 (Mo. Ct. App. 2018) (shoddy workmanship producing repair costs is not an "occurrence")
- Hawkeye Sec. Ins. Co. v. Davis, 6 S.W.3d 419 (Mo. Ct. App. 1999) (defective work that predictably causes repair/replacement costs is not an "accident")