Hudson Hardware Plumbing & Heating, Inc. v. Amco Insurance Company
15-1677
Iowa Ct. App.Oct 12, 2016Background
- Cedar Bend Humane Society (CBHS) contracted Samuels Group (SG) to build a facility; SG subcontracted HVAC/plumbing to Hudson and design to Bracket Engineering; windows to Allen Glass.
- Hudson procured a commercial general liability (CGL) policy from AMCO naming SG as additional insured and sought coverage after CBHS discovered mold, humidity, and odor allegedly caused by HVAC/window defects.
- CBHS sued SG, Hudson, Engineering, and Glass for breach of contract and sought remediation costs and related damages to building components (HVAC, ceilings, walls, floors, windows, roof, LEED loss, etc.).
- AMCO denied coverage, arguing (1) no “occurrence” (accident) as defined in the policy and (2) alleged damages were not covered "property damage." AMCO moved for summary judgment; the district court granted it.
- On appeal the Iowa Court of Appeals reversed: it concluded the pleadings and evidence could show an unexpected/unintended result (an "occurrence") causing tangible property damage beyond Hudson’s own work, so AMCO owed a duty to defend; indemnity remains unresolved pending factual development.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend under the CGL policy | AMCO must defend Hudson/SG because CBHS alleged property damage caused by an occurrence (unexpected/unintended result) and pleadings are broad | No duty to defend because alleged harms stem from defective workmanship, not an "occurrence" under Pursell | Reversed: factual allegations could show an "occurrence" and tangible property damage, so duty to defend exists |
| Definition of "occurrence"/"accident" | An intentional act performed negligently can be an accident if the resulting harm was not expected or intended by insured | Defective, non‑sudden workmanship is not an "accident" and thus not an "occurrence" (Pursell line) | Westlake controls: defective subcontractor work can be an occurrence if damage was unintended/unexpected from insured's perspective |
| "Property damage" requirement | CBHS pleads tangible property damage beyond Hudson’s own completed work (walls, ceilings, HVAC components, windows, roof) | Damages are economic or repair costs for faulty work (business risk) not covered as "property damage" | Held that, viewed favorably to Hudson, CBHS alleged tangible property damage within policy definition, so coverage is potentially triggered |
| Policy exclusions ("your work" and related exclusions) | Exclusions do not necessarily bar coverage because subcontractor exception and other exceptions may preserve coverage for damage to other property | Exclusions/endorsements bar coverage for insured’s own defective work—no coverage | Court: exclusions must be proved by insurer; here factual record may show damages fall outside exclusions or within subcontractor exception, so exclusions do not defeat duty to defend at summary judgment |
Key Cases Cited
- Pursell Constr., Inc. v. Hawkeye-Security Ins. Co., 596 N.W.2d 67 (Iowa 1999) (held defective workmanship standing alone is not an occurrence when damage is only to insured’s own work)
- Nat’l Sur. Corp. v. Westlake Inv., LLC, 880 N.W.2d 724 (Iowa 2016) (clarified that unintended/unexpected resulting damage from defective subcontractor work can be an "occurrence")
- Yegge v. Integrity Mut. Ins. Co., 534 N.W.2d 100 (Iowa 1995) (duty to defend analyzed by comparing pleadings and policy language; duty broader than indemnity)
- Weedo v. Stone-E-Brick, Inc., 405 A.2d 788 (N.J. 1979) (distinguishes business risk of repairing faulty work from insurable risk of damage to other property or persons)