National Union Fire Insurance v. Turner Construction Co.
986 N.Y.S.2d 74
N.Y. App. Div.2014Background
- GSJC owned a 42-story Jersey City office project; Turner was general contractor and Permasteelisa North America subcontractor for the curtain wall.
- A pipe rail segment fell from the 8th floor; a consultant found widespread defects in rail connections and related components.
- GSJC sued Turner and Permasteelisa in New Jersey Superior Court for contract, warranty, and negligence related to design/fabrication/installation defects.
- Project was insured under an OCIP by National Union; policies included CGL and umbrella with exclusions, including professional liability.
- National Union defended under reservation of rights; it sought a declaratory judgment that the policy did not cover the underlying claims.
- Lower court granted summary judgment that there was no coverage and awarded defense-cost reimbursement, which the court later vacated in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does faulty design/work constitute an occurrence or property damage under the CGL policy? | National Union: no occurrence or property damage from defective workmanship. | Turner/Permasteelisa: expanded occurrence covers defects. | No coverage; defective workmanship does not constitute an occurrence or covered property damage. |
| Does the expanded definition of occurrence (including event/happening) expand coverage for faulty workmanship? | Expansion does not alter fortuity requirement. | Expanded terms create coverage for faulty workmanship. | Expansion did not alter fortuity; still not covering faulty workmanship. |
| Does the professional liability exclusion preclude coverage for design-related claims? | N/A (focus on exclusion's scope to preclude coverage). | Professional services exclusion precludes coverage for design-related claims. | Professional liability exclusion excludes coverage for the claims. |
| May insurer recover defense costs paid for uncovered claims under the policy endorsement MS #00004? | Endorsement precludes recourse against insured for any claims under policy. | Endorsement may be read to preclude only for covered claims. | Endorsement unambiguously precludes reimbursement of defense costs; order to reimburse is vacated. |
Key Cases Cited
- Firemen’s Ins. Co. of Newark v. National Union Fire Ins. Co., 387 N.J. Super. 434 (App. Div. 2006) (construction defects do not constitute occurrences under CGL)
- George A. Fuller Co. v United States Fid. & Guar. Co., 200 A.D.2d 255 (1st Dept. 1994) (design/repair defects generally not covered as property damage)
- Weedo v Stone-E-Brick, Inc., 81 N.J. 233 (1979) (faulty workmanship damages are not covered as an accident unless they cause damage to other property)
- Baker Residential Ltd. Partnership v Travelers Ins. Co., 10 A.D.3d 586 (1st Dept. 2004) (damages for defective structural work do not arise from an occurrence)
- Direct Travel v Aetna Cas. & Sur. Co., 214 A.D.2d 484 (1st Dept. 1995) (economic loss from breach of contract not covered under umbrella policy)
- Pavarini Constr. Co. v Continental Ins. Co., 304 A.D.2d 501 (1st Dept. 2003) (coverage for damages caused by an occurrence required)
- Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 N.Y.2d 208 (2002) (fortuity requirement governs occurrence/insurance coverage)