United States Fid. & Guar. Corp. v. Advance Roofing & Supply Co

In United States Fid. & Guar. Corp. v. Advance Roofing & Supply Co., 163 Ariz. 476, 482, 788 P.2d 1227, 1233 (App. 1989), a roofing company performed faulty work for a homeowners' association. 163 Ariz. at 477-78, 788 P.2d at 1228-29. The association filed suit alleging that "the work . . . performed . . . was not completed in accordance with the contract requirements and was not performed in a good and workmanlike manner." Id. at 478, 788 P.2d at 1229. There was no allegation that the faulty work caused other property damage. Advance Roofing tendered the defense of the claim to USF&G, its CGL insurer, which refused to defend or indemnify Advance Roofing because, inter alia, faulty workmanship did not constitute an occurrence. Id. The trial court granted USF&G summary judgment on that basis. Id. at 479, 788 P.2d at 1230. On appeal Advance Roofing relied on Ohio Casualty Insurance Co. v. Terrace Enterprises, Inc., 260 N.W.2d 450 (Minn. 1977), to establish that faulty work alone constitutes an occurrence under a CGL policy. Id. at 482, 788 P.2d at 1233. The Court rejected that assertion and noted that in Ohio Casualty an occurrence existed not because the work was faulty but because the faulty work caused other damage to the home: "The court held that the settling of a building as a result of faulty workmanship was the occurrence." Id. Thus, the damage caused by the faulty work, not the faulty work itself, constituted an occurrence, and where no property damage was alleged as a result of the faulty work, there was no occurrence.