Forster v. State Farm Fire & Casualty Co.
307 Ga. App. 89
| Ga. Ct. App. | 2010Background
- Forster purchased the house on December 15, 2005 to renovate and possibly rent, sell, or occupy, and obtained a Rental Dwelling Policy (RDP) linked to a Personal Liability Umbrella Policy (PLUP) with State Farm.
- Goldbergs entered a New Construction Purchase and Sale Agreement on February 19, 2006 to have Forster renovate the house for purchase, with a stated price of $706,114 plus $38,000 in upgrades and repairs.
- Forster provided a one-year warranty against defects in labor and materials; renovations were performed by Mitchell Galloway, not Forster personally.
- Near closing in April 2006, the Goldbergs alleged numerous unfinished or defective items and later filed suit against Forster, Galloway, and Residential Environments, LLC seeking breach of contract, breach of warranty, and attorney fees; they alleged negligent construction against Galloway and Residential.
- State Farm filed a declaratory judgment action to determine whether the RDP or PLUP provided coverage for the Goldbergs’ claims; the trial court granted summary judgment to State Farm, which the Court of Appeals partially reversed and partially affirmed.
- The court held that a covered 'occurrence' can include negligent construction causing damage to other property, potentially triggering coverage, but holds no coverage for pure construction defects that only affect the construction project itself.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy cover breach of contract or warranty claims? | Forster/State Farm contends damages tied to construction defects may still fall within coverage as 'occurrence' if they cause property damage. | State Farm argues construction defects themselves are not an 'occurrence' and thus not covered. | No coverage for breach of contract or warranty damages to the construction project. |
| Are damages to other property from defective work potentially covered? | Negligently performed faulty workmanship causing damage to other property can be an 'occurrence' triggering coverage. | Only defects in the contract work itself are at issue; damages to other property are not guaranteed coverage unless proven. | Coverage could apply to damages to other property from negligent workmanship, so not out of hand for all such claims. |
| Is there a genuine issue of material fact about which damages relate to the contract work versus other property? | Record shows various listed deficiencies; some relate to contract work, some to other property, unclear which claims fall where. | Bifurcation not necessary; no basis to conclude coverage for contract-related damages exists as a matter of law. | Cannot determine at this stage; affirm in part for contract/warranty defects, reverse in part for damages to other property. |
Key Cases Cited
- City of Atlanta v. St. Paul Fire & Casualty Co., 231 Ga.App. 206 (1998) (insurer’s duty to defend depends on allegations and contract terms)
- Custom Planning, etc. v. American National Fire Ins. Co., 270 Ga.App. 8 (2004) (accident in policy terms; construction defects may not be covered unless causation shows an 'occurrence')
- SawHorse, Inc. v. Southern Guaranty Ins. Co. of Ga., 269 Ga.App. 493 (2004) (negligent construction causing damage to other property may constitute an occurrence)
- Hathaway Development Co. v. American Empire Ins. Co., 301 Ga.App. 65 (2009) (damages to construction project may be outside coverage; negligent workmanship may trigger coverage if other property is damaged)
- Ga. Farm, etc. Ins. Co. v. Hall County, 262 Ga.App. 810 (2003) (burden on insured to show claim falls within policy coverage)
- Allstate Ins. Co. v. Grayes, 216 Ga.App. 419 (1995) (duty to defend depends on policy language and asserted claims)