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(A revised version of this article appears in The Construction
Lawyer, Volume 20, No. 3, July 2000, published by the
American Bar Association's Forum on the Construction Industry.)
By John W. Ralls
Howrey LLP
A
general contractor built a custom home. The general contractor
hired a subcontractor to paint the cabinets and other interior
woodwork. The paint applied by the subcontractor did not
cure and had to be replaced. The general contractor spent
approximately $10,000 to strip and refinish the cabinets
and woodwork. The general contractor sought reimbursement
from its liability insurance carrier. The general contractor
filed suit when the insurer refused to reimburse it for
the cost of stripping and refinishing the cabinets and woodwork.
The
insurance carrier moved for summary judgment on the grounds
that the claim was not covered. The trial court granted
the motion. The Oregon Supreme Court affirmed. Oak Crest
Constr. Co. v. Austin Mut. Ins. Co., 329 Ore. 620, 2000
Ore. LEXIS 92 (Ore. 2000).
The
policy covered property damage to the extent such damage
was "caused by an occurrence." The policy defined
"occurrence" as "an accident." The court
concluded that there was no "accident" within
the meaning of the CGL policy because the "resulting
damage [was] merely a breach of contract."
The
court acknowledged that the same conduct might be actionable
under both tort and contract theories. However, the court
found that the general contractor's claim arose solely from
a breach of contract and therefore was not covered by the
policy. "[T]he record… cannot support a conclusion
that the problem with the cabinetry and woodwork painting
resulted from the subcontractor's breach of a duty to act
with due care." The court cited an affidavit filed
by the general contractor's principal which recited only
that the painting work was not curing properly and required
additional expense to correct. "Had the facts demonstrated
that the claimed problem with the cabinets and woodwork
was the result of [a] breach [of the duty to act with due
care], or that plaintiff might be liable to the owners in
tort for other damage, that might have qualified as an 'accident'
within the meaning of the commercial liability policy."
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For more information about the issues covered in this report, please contact John Ralls in our San Francisco office at 415-848-3362 or at rallsj@howrey.com or contact your Howrey attorney. For more information about Howrey's Construction Practice Group, click here.
©2000
Howrey LLP
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