Pennsylvania Appeals Court Reverses Trial Court, Finds Coverage for Multiple Lawsuits Alleging Defective Windows and Doors

A Pennsylvania appellate court ruled that a commercial umbrella insurance policy covered product-liability-based tort claims.  In doing so, it rejected the trial court’s decision that the underlying lawsuits involved only claims of “faulty workmanship.”

The Case 

Homeowners and other property owners filed multiple out-of-state lawsuits against two companies, alleging that their windows and doors had been defectively designed or manufactured. The defects resulted in water leakage that caused physical damage, such as mold and cracked walls, in addition to personal injury. The companies brought a coverage action against their commercial umbrella insurance carrier. The trial court ruled that the insurer had no obligation to defend or indemnify the companies. It viewed the underlying lawsuits as involving solely “faulty workmanship,” and therefore, as not constituting an “occurrence” as defined in the policy. 

The companies appealed. 

The Appellate Court’s Decision 

The appellate court reversed. 

It distinguished a Pennsylvania Supreme Court decision that held the definition of “accident” required to establish an “occurrence” could not be satisfied by claims based on faulty workmanship. The appellate court reasoned that the claims against the companies in the underlying lawsuits “were brought under the laws of five different states [and] involved product-liability-based tort claims.” It added that because the claims were “based on damages to persons or property, other than the insured[s’] product, we cannot conclude that the claims are outside the scope of the coverage.” 

The appellate court also specifically rejected preclusion based on a “gist of the action” theory, which generally forecloses tort claims arising solely from the contractual relationship between the parties.  It reasoned that this doctrine had not been adopted by the Pennsylvania Supreme Court in an insurance coverage context, and that application of the doctrine in this context “would be inconsistent with the duty to defend, which is broader than the duty to indemnify and applicable when a claim is potentially covered.” 

The case is Indalex Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. 612 WDA 2012 (Pa. Super. Ct. Dec. 3, 2013).

Rivkin Comment:

Courts vary as to whether “faulty workmanship” can be an “occurrence.”  This decision may likely not be the final word in Pennsylvania on “faulty workmanship” claims or the “gist of the action” theory.