Erie Insurance Exchange v. Gary H. Maxwell, M2017-00193-COA-R9-CV

Buyers (Paul and Barbara Chapman) purchased the Maxwells’ house; the Maxwells completed a seller disclosure allegedly misrepresenting the property’s propensity to flood.
Five months after purchase the property flooded twice within three days; the Chapmans sued the Maxwells asserting six claims, including negligence and negligent misrepresentation.
The Maxwells notified their insurer Erie and sought defense/indemnity under two Erie policies (Home Protector and Personal Catastrophe Liability).
Erie filed a declaratory judgment action and moved for summary judgment, arguing the Chapman claims did not allege damage caused by an “occurrence” as defined by the policies (an "accident").
The trial court granted summary judgment for Erie on four claims but denied as to negligence and negligent misrepresentation; Erie appealed the denial.
The Court of Appeals reviewed de novo and held the Chapmans’ alleged damages were caused by flooding (the physical event), not by an "occurrence" attributable to the alleged misrepresentations, so Erie had no duty to defend or indemnify.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether claims for negligence/negligent misrepresentation arising from pre-sale disclosures constitute an "occurrence" causing property damage under the policies	Chapmans: alleged negligent misrepresentations caused damages; insurer must defend if any allegation potentially covered	Erie: the damage was caused by flooding (a physical event), not the misrepresentations; misrepresentations are not an "accident/occurrence" under the policies	Held for Erie: misrepresentations did not cause the property damage; no "occurrence" → no coverage → no duty to defend/indemnify

Travelers Indem. Co. of Am. v. Moore & Assocs., 216 S.W.3d 302 (Tenn. 2007) (insurer’s duty to defend determined from underlying complaint; resolved in insured’s favor if ambiguity exists)
Gassaway v. Travelers Ins. Co., 439 S.W.2d 605 (Tenn. 1969) (definition and interpretation of "accident" in policy contexts)
State Farm Lloyds v. Kessler, 932 S.W.2d 732 (Tex. Ct. App. 1996) (seller misrepresentations in home sale not an "occurrence" causing property damage)
Safeco Ins. Co. of Am. v. Andrews, 915 F.2d 500 (9th Cir. 1990) (misrepresentation claims produce economic loss, not property damage covered by homeowner policy)
Aluise v. Nationwide Mut. Fire Ins. Co., 625 S.E.2d 260 (W. Va. 2005) (homeowner policy does not cover economic loss from nondisclosure/misrepresentation in sale)