Cypress Point Condominium Association, inc v. Adria Towers, Llc(076348)
143 A.3d 273
| N.J. | 2016Background
- Developer/general contractor built Cypress Point condominium; subcontractors performed much of the work. Construction completed 2004; post-occupancy residents reported roof/window leaks and water intrusion causing mold and damage to units and common areas.
- Developer held a sequence of commercial general liability (CGL) policies (1986 ISO form) from Evanston and Crum & Forster covering construction and post-completion periods.
- Association sued developer and subcontractors for faulty workmanship and consequential property damage; sought a declaration that developer’s CGL insurers must defend/indemnify.
- Insurers moved for summary judgment, arguing subcontractor faulty workmanship is not an "occurrence" causing "property damage" under the policies; trial court granted summary judgment for insurers.
- Appellate Division reversed; New Jersey Supreme Court affirmed, holding the consequential water damage from subcontractor faulty work was "property damage" and the rain infiltration was an "occurrence," and that the 1986 policy’s subcontractor exception to the "your work" exclusion preserved coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether consequential water damage from subcontractor faulty workmanship is "property damage" under the CGL policies | Association: damage to completed, nondefective portions and loss of use is "physical injury to tangible property" and thus property damage | Insurers: damage to the project is a business risk/repair cost, not covered property damage | Held: Yes — consequential water damage and loss of use qualify as "property damage" |
| Whether subcontractor faulty workmanship constitutes an "occurrence" (i.e., an "accident") | Association: unexpected, unintended harm from negligent subcontractor is an "accident" and thus an "occurrence" | Insurers: faulty workmanship is foreseeable business risk and lacks fortuity; not an "accident" | Held: Yes — "accident" includes unintended/unexpected harm from negligence; thus an "occurrence" |
| Whether the "your work" exclusion bars coverage for the damages alleged | Insurers: exclusion eliminates coverage for property damage to the insured’s work | Association: 1986 ISO form contains a subcontractor exception that restores coverage where damage arises from subcontractor work | Held: Subcontractor exception applies; exclusion does not bar coverage for these damages |
| Whether precedent (Weedo/Firemen’s) controls to deny coverage | Insurers: cite Weedo/Firemen’s to show contractor bears repair costs; expect court to deny coverage | Association: those cases addressed older ISO forms and/or exclusions; 1986 subcontractor exception changes analysis | Held: Weedo/Firemen’s do not preclude coverage under the 1986 ISO form with subcontractor exception; court distinguishes them |
Key Cases Cited
- Weedo v. Stone-E-Brick, Inc., 81 N.J. 233 (N.J. 1979) (held cost to repair insured’s defective work is a business risk excluded by pre-1986 CGL policy)
- Firemen’s Ins. Co. of Newark v. Nat’l Union Fire Ins. Co., 387 N.J. Super. 434 (App. Div. 2006) (applied Weedo under pre-1986 policy language; replacement costs not covered)
- U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007) (1986 ISO form can treat subcontractor defective work as an "occurrence" causing covered property damage to nondefective portions)
- French v. Assurance Co. of Am., 448 F.3d 693 (4th Cir. 2006) (under 1986 form, insurer covers consequential damage caused by subcontractor negligence but not the cost to repair the defective work itself)
- Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007) (construction-defect consequential damages can be an "occurrence" when property damage is unexpected and unintended)