Finding No “Occurrence” Underlying Homeowners’ Judgment against Builder for Faulty Workmanship, Alabama Supreme Court Rules against Coverage

The Alabama Supreme Court has reversed a trial court’s decision that a builder’s insurance carrier was obligated to pay an arbitration award entered against the builder. The court found that the builder’s alleged faulty workmanship was not an “occurrence.”  

The Case

Thomas and Pat Johnson contracted with Jim Carr Homebuilder, LLC, a licensed homebuilder, for the construction of a new house on Lay Lake in Wilsonville, Alabama. They later contended that water was leaking through the roof, walls, and floors of the home. The Johnsons sued the builder, asserting claims for property damage and bodily injuries.

An arbitrator awarded the Johnsons $600,000, and the trial court entered judgment in favor of the Johnsons. The trial court then found that the insurance carrier that had issued the builder a commercial general liability insurance policy had to fully indemnify the builder for the award, plus post-judgment interest. The insurer appealed to the Alabama Supreme Court.

The Alabama Supreme Court’s Decision

The court reversed.

In its decision, the court found that the insurer was not required to indemnify the builder for damages stemming from the Johnsons’ action because there had been no “occurrence.” As the court explained, the Johnsons hired the builder to build them a house; any damage that resulted from poor workmanship was damage to the builder’s own product. Accordingly, the court ruled there had been no occurrence, and that the trial court erred by requiring the insurer to indemnify the builder for the judgment.

The case is Owners Ins. Co. v. Jim Carr Homebuilder, LLC, No. 1120764 (Ala. Sept. 20, 2013).