No Occurrence CGL, PAP and Dead Body Clean-up

The “No Occurrence” CGL Claim Denial
There has been an increasingly disturbing trend of courts upholding claim denials based on property damage not arising from an “occurrence” in the CGL policy, most recently in South Carolina. Typically, these claims involve contractors and damage to “your work.”

Some courts have found that faulty workmanship is the “ordinary and natural consequence” of the failure to comply with contractual or governmental regulations and that contractors who do so incur an (uninsurable) business risk, gambling that a loss won’t occur or the shoddy construction won’t be noticed.

It makes sense that the “no occurrence” claim denial is valid when the insured deliberately performed the work, or used substandard materials, in violation of contract, construction code, design specifications, or accepted construction practices such that the faulty workmanship was, or should have been, foreseeable and expected.

Clearly, deliberate, knowingly shoddy workmanship is not an accident and, thus, not an “occurrence” under the CGL, but ordinary negligence certainly can be. How many contractors who wish to perpetuate and grow a viable business deliberately perform faulty work?

Certainly, there are fly by night contractors (as is often witnessed in the aftermath of disasters) and their knowingly shoddy work does not constitute an accident; however, they are arguably in the minority. Many, if not most, incidences of faulty workmanship arise out of common negligence. To claim otherwise is to assert that perfection and malfeasance are the only two forms of conduct in the construction industry.

To review a detailed, complete analysis of this problem and why the Big “I” Virtual University faculty believes that negligent workmanship is an “occurrence,” click here.

Does the PAP Protect Against Shopping Carts?
Your insured reports a dent or scratch on her auto apparently from a merchandise cart at a shopping center parking lot. Would this be covered as a simple collision or could it be paid under comprehensive coverage as caused by an act of vandalism or a windstorm-blown cart? The difference could be hundreds of dollars in deductibles or future premium charges.

This is an often-reported auto claim. Typically, there is a damaged vehicle and an adjacent or nearby shopping cart, but no witnesses who saw what happened. It could have been an inadvertent collision by someone pushing the cart, a runaway cart, a cart blown by wind or perhaps even a deliberate act of vandalism.

When there is no conclusive evidence, a determination must be made on circumstantial evidence and common sense as to what most likely happened given weather conditions, congestion, traffic, etc. In most cases, it was probably someone negligently bumping the vehicle or allowing it to roll into another car.

Such accidents constitute collisions unless the insured has some evidence that the vehicle was deliberately damaged or the wind speed was high enough that the loss was more likely attributable to vandalism or windstorm respectively.

For a more detailed analysis, click here.

I See Dead People…Are They Covered?
While it’s an unpleasant topic, sometimes people pass away in their homes and their bodies are undiscovered for weeks. Decomposition can lead to decay and loss of body fluids. Are these clean-up and removal expenses covered by homeowners policies?

The most likely to be cited exclusions for this would be those related to “pollutants” and fungus, though these claim denials seem to be rare. Whether this is a “pollution” claim or not depends on case law in the legal jurisdiction.

Keep in mind that the “pollution” exclusion only appears in the open perils forms such as an HO-3, HO-5 or commercial Special Causes of Loss form. An unendorsed HO-4 tenant’s form doesn’t have this exclusion but would only respond if the damage arose from a covered peril.

In one court case, coverage was found under a named perils form in a shotgun suicide. The court cited the “explosion” peril as the proximate cause of the loss. For a natural death, there is probably no named peril that applies and insureds are at the mercy of pollution case law for open perils coverage.

For the full discussion of this issue by the VU faculty, click here.

Bill Wilson (bill.wilson@iiaba.net) is director of the Big “I” Virtual University, an online learning center for agents and brokers. Do you have coverage questions? If so, log in to the Virtual University at www.independentagent.com/VU and click on the “Experts” link near the top of the page.