Taylor Morrison Services, Inc. v. HDI-Gerling America Insurance
293 Ga. 456
| Ga. | 2013Background
- Insurer HDI-Gerling issued a standard ISO-form CGL policy to Taylor Morrison (successor to Morrison Homes). Policy insures sums the insured is legally obligated to pay for "bodily injury" or "property damage" caused by an "occurrence" (defined as "an accident").
- California homeowners sued Taylor Morrison alleging defective foundation work (improper gravel, moisture barriers, high water-cement ratio) causing physical damage to homes (water intrusion, cracks, warped flooring) and asserted claims including breach of warranty and fraud; a class was certified for several claims.
- HDI-Gerling initially defended under reservation of rights, then sued in Georgia federal court for a declaratory judgment denying coverage; the district court granted summary judgment for insurer, holding no "occurrence" because alleged damage was to the insured's own work.
- The Eleventh Circuit certified two questions to the Georgia Supreme Court about the meaning of "occurrence" in a standard CGL policy: (1) whether "occurrence" requires damage to property other than the insured's completed work; (2) if not, whether coverage requires claims not be based on breach of contract, fraud, or breach of warranty for failure to disclose.
- Georgia Supreme Court reviewed prior Georgia precedent (notably American Empire v. Hathaway) and multi-jurisdictional authority, focusing on the ordinary meaning of "accident" and the distinct roles of the insuring agreement and policy exclusions (business-risk exclusions).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an "occurrence" requires damage to "other property" (property other than the insured's completed work) | Taylor Morrison: "accident" can exist even when only the insured's work is damaged; "occurrence" should be read by ordinary meaning | HDI-Gerling: "occurrence" requires damage to third-party property; repairs to insured's own work are not an "occurrence" | No — "occurrence" does not require damage to other property; ordinary meaning of "accident" controls, but other policy terms/exclusions limit coverage for pure faulty workmanship |
| Whether claims premised on fraud can constitute an "occurrence" | Taylor Morrison: some tort labels might still involve accidental harms | HDI-Gerling: fraud claims are not accidental and therefore not an "occurrence" | Yes — fraud claims generally are inconsistent with "accident" and thus do not involve an "occurrence" (in most cases) |
| Whether claims premised on breach of warranty (including contractual warranty) can constitute an "occurrence" | Taylor Morrison: breach of warranty can be strict liability and may result from accidental faulty workmanship, so can be an "occurrence" | HDI-Gerling: breach of warranty equates to contract/business risk and cannot be an "occurrence" | No — breach of warranty does not categorically preclude an "occurrence"; warranty breaches can arise from accidental conduct and may meet the "occurrence" definition, though coverage still depends on "property damage" and exclusions |
| Role of policy exclusions and "property damage" definition in faulty-workmanship cases | Taylor Morrison: do not collapse exclusions into "occurrence" analysis; let "property damage" and business-risk exclusions perform their limiting roles | HDI-Gerling: narrow "occurrence" avoids making exclusions necessary | Held: Court rejects conflating analyses — "occurrence" should be read by ordinary meaning; limitations on coverage for defective work typically arise from "property damage" definition and business-risk exclusions rather than from reading "occurrence" narrowly |
Key Cases Cited
- American Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., 288 Ga. 749 (Ga. 2011) (held faulty workmanship can be an "occurrence" when it causes unforeseen damage to other property)
- HDI-Gerling Am. Ins. Co. v. Morrison Homes, Inc., 701 F.3d 662 (11th Cir. 2012) (certified questions to Georgia Supreme Court regarding "occurrence" in construction-defect context)
- Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007) (defective workmanship may be an "occurrence" when it causes unexpected damage to nondefective property)
- U.S. Fire Ins. Co. v. J.S. U.B., Inc., 979 So.2d 871 (Fla. 2007) (distinguishes claims to repair defective work from claims for damage caused by defective work)
- American Family Mut. Ins. Co. v. American Girl, Inc., 673 N.W.2d 65 (Minn. 2003) (explains that business-risk exclusions — not the initial grant of coverage — typically bar coverage for defective work itself)
- Greystone Constr., Inc. v. Nat. Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011) (observes trend finding "occurrence" when negligent work causes unanticipated damage to nondefective property)
- Auto-Owners Ins. Co. v. Pozzi Window Co., 984 So.2d 1241 (Fla. 2008) (mere inclusion of a defective component does not constitute "property damage" unless it injures other tangible property)