Builders Mutual Insurance v. Mitchell, 210 N.C. App. 657

Charles McKinney sued Umstead Construction for damages from faulty repair; BMI insured Umstead and settled the McKinney case, paying damages and defense costs.
BMI sought declaratory judgment against Maryland Casualty to recover one-half of the defense costs and settlement, arguing coverage under Maryland Casualty’s CGL policy.
Maryland Casualty moved for summary judgment; the trial court granted, finding no duty to defend or coverage for the McKinney action.
BMI appealed, arguing that damage to previously undamaged property and potential “occurrence” could fall within policy coverage.
The appellate court held material issues of fact existed regarding whether there was an “occurrence” and whether damages occurred during Maryland Casualty’s policy period, reversing and remanding.
The opinion discusses duty to defend and potential exclusions, emphasizing that any doubt in coverage favors the insured and that damages to undamaged property may be covered if an accident occurred.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether there was an occurrence under the policy.	BMI contends damages to undamaged property may be an occurrence.	Maryland Casualty asserts only repair costs or work-related damage fall under coverage.	Issue of material fact; not limited to repair costs; requires trial.
Whether the damage to previously undamaged property is “property damage” under the policy.	Damages to undamaged property may constitute property damage.	Only damage to the insured’s work/product may be excluded; exclusions not clearly applicable.	Material facts present; not resolved on summary judgment.
Whether the damages occurred during Maryland Casualty’s policy period.	Damages began within the Maryland Casualty window per Waters' affidavit.	Date can’t be known with certainty; summary judgment appropriate.	Issue of fact; needs trial to determine timing.
Whether Maryland Casualty had a duty to defend Umstead in the McKinney action.	There were potentially covered claims; insurer had a duty to defend.	No duty to defend if claims are outside coverage.	Duty to defend existed; case remanded for further proceedings.

Tayloe v. Indemnity Co., 257 N.C. 626, 127 S.E.2d 238 (N.C. 1962) (definition of ordinary ‘accident’ for coverage)
Prod. Sys., Inc. v. Amerisure Ins. Co., 167 N.C.App. 601, 605 S.E.2d 663 (N.C. Ct. App. 2004) (damages for faulty workmanship may be outside coverage; but not always)
Iowa Mutual Ins. v. Fred M. Simmons, Inc., 258 N.C. 69, 128 S.E.2d 19 (N.C. 1962) (whether damage is an ‘accident’ is for jury to decide)
Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 340 S.E.2d 374 (N.C. 1986) (duty to defend broad; determination of coverage favors insured)
Hobson Const. Co. v. Great Am. Ins. Co., 71 N.C.App. 586, 322 S.E.2d 632 (N.C. Ct. App. 1984) (duty to defend based on potential coverage; burden shifting)
Nationwide Mut. Ins. Co. v. Aetna Casualty & Surety Co., 1 N.C.App. 9, 159 S.E.2d 268 (N.C. Ct. App. 1968) (coverage established when insuring language embraces claim)
W. World Ins. Co. v. Carrington, 90 N.C.App. 520, 369 S.E.2d 128 (N.C. Ct. App. 1988) (distinguishes work product exclusion application)
Duke Univ. v. St. Paul Fire & Marine Ins. Co., 96 N.C.App. 635, 386 S.E.2d 762 (N.C. Ct. App. 1990) (duty to defend depends on pleadings and related facts)
Prod. Sys., Inc. (repeated), 167 N.C.App. 601, 605 S.E.2d 663 (N.C. Ct. App. 2004) (see above)