Columbia Insurance Group, Inc. v. Cenark Project Management Services, Inc.
491 S.W.3d 135
Ark.2016Background
- Homeowners hired CENARK for engineering plans and Arkansas Infrastructure, Inc. (All) to construct foundation pads and related site work; CENARK was to oversee All.
- Homeowners sued All in state court (breach of contract) alleging All failed to follow plans/specifications, causing foundation and structural damage and economic loss; malpractice/negligence claims were time-barred.
- All was insured under a Commercial General Liability (CGL) policy issued by Columbia; Columbia initially defended but then filed a federal declaratory-judgment action seeking a ruling that it had no duty to defend or indemnify.
- The federal court ruled Columbia had a duty to defend and certified two questions to the Arkansas Supreme Court about (1) whether faulty workmanship damaging a third party’s work is an “occurrence,” and (2) whether any policy exclusion bars coverage for such damage.
- Arkansas Supreme Court majority declined to answer the certified questions as moot, holding Unigard controls: the homeowners’ suit is a breach-of-contract claim seeking economic loss, which CGL policies do not cover; therefore no coverage.
Issues
| Issue | Plaintiff's Argument (Columbia) | Defendant's Argument (All/Homeowners) | Held |
|---|---|---|---|
| 1) Whether defective workmanship causing damage to a third party’s work is an "occurrence" under the CGL policy | Faulty workmanship is not an "occurrence" because the policy covers accidental events; insurer owes no coverage | The alleged property damage from faulty work is an occurrence that triggers coverage | Majority: Not reached on the certified question — underlying suit is breach of contract; per Unigard, no coverage for contractual economic loss (certified questions moot) |
| 2) If so, whether any policy exclusion bars coverage for such property damage | Exclusions (e.g., expected/intended injury; "your work") bar coverage | Exclusions do not apply to the alleged accidental property damage; coverage exists | Majority: Not reached (moot) |
| 3) Duty to defend: whether Columbia was required to defend All in the underlying suit | No duty because the policy does not cover breach-of-contract damages | Duty to defend exists if the complaint possibly alleges covered claims | Federal court (not reversed): Columbia had a duty to defend; Arkansas Supreme Court did not disturb that ruling but treated coverage question separately and found no coverage as a matter of law under Unigard |
| 4) Applicability of 2011 statutory definition of "occurrence" (Ark. Code §23-79-155) | Statute inapplicable to claims predating 2011 | Statute would broaden "occurrence" to include property damage from faulty workmanship | Majority: Statute inapplicable because claims arose before July 2011; court did not interpret the statute further |
Key Cases Cited
- Unigard Sec. Ins. Co. v. Murphy Oil USA, Inc., 331 Ark. 211 (Ark. 1998) (CGL policies do not provide coverage for compensatory damages that are economic loss for breach of contract)
- Essex Ins. Co. v. Holder, 370 Ark. 465 (Ark. 2007) (defective workmanship that damages only the insured’s work product is not an "occurrence")
- United States Fid. & Guar. Co. v. Cont. Cas. Co., 353 Ark. 834 (Ark. 2003) (definition of "accident" as an event without foresight or expectation)
- Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 268 Wis. 2d 16 (Wis. 2004) (framework for CGL coverage analysis and discussion of products/completed-operations hazard)
- Travelers Indem. Co. of Am. v. Moore & Assocs., Inc., 216 S.W.3d 302 (Tenn. 2007) (context on standardized CGL policy forms and coverage analysis)