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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________

No. 12-2268

___________

ZURICH AMERICAN INSURANCE COMPANY;

NORTHERN INSURANCE COMPANY OF NEW YORK

v.

R.M. SHOEMAKER CO.; COUNTY OF MONMOUTH

v.

PENNSYLVANIA MANUFACTURERS ASSOCIATION

INSURANCE COMPANY

 R.M. Shoemaker Company,

 Appellant

_______________________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

D.C. Civil Action No. 2-12-cv-00873

(Honorable Harvey Bartle, III)

______________

Submitted Pursuant to Third Circuit LAR 34.1(a)

March 4, 2013

Before: SCIRICA, JORDAN, and ROTH, Circuit Judges.

(Filed: March 27, 2013)

_________________

OPINION OF THE COURT

_________________
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SCIRICA, Circuit Judge.

Insurance companies brought declaratory judgment actions to determine whether 

they must defend and indemnify their insured in a lawsuit pending in New Jersey state 

court. The district court granted summary judgment to the insurance companies, finding 

the commercial general liability policies between the insurance companies and the 

insured did not afford coverage under the circumstances of the underlying action. We will 

affirm.

I.

The County of Monmouth brought suit against R.M. Shoemaker Company in New 

Jersey state court (the “Underlying Action”), alleging Shoemaker, a construction 

contracting firm, faultily constructed an addition to the Monmouth County Correctional 

Institution in Freehold, New Jersey. Among other things, Monmouth alleges Shoemaker 

negligently supervised its subcontractor, thereby permitting the subcontractor to engage 

in willful misconduct and resulting in damage to both structural elements and personal 

property of the County Correctional Institution.1 Monmouth alleges Shoemaker‟s 

negligence permitted water to intrude into the County Correctional Institution, reduced its 

structural integrity, and damaged interior property including “the electrical systems, the 

suspended acoustic tile ceilings and miscellaneous equipment.” 

Zurich American Insurance Company (“Zurich”) and Northern Insurance 

 

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The contract between Monmouth and Shoemaker provided that Shoemaker was 

responsible for the “construction means, methods, techniques, sequences and procedures” 

associated with “all portions of the Work under the Contract,” and was obligated to 

“[c]oordinate, manage, inspect and supervise all phases” of that work.
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Company of New York (“Northern”) sought a declaratory judgment in the United States 

District Court for the Eastern District of Pennsylvania that they were not required to 

defend or indemnify Shoemaker, their insured, in the Underlying Action. Shoemaker 

served a third-party complaint against another of its insurers, Pennsylvania 

Manufacturers Association Insurance Company (“PMA”), and sought declaratory 

judgments that Zurich, Northern, and/or PMA had the duty to defend and indemnify 

Shoemaker in the Underlying Suit.2

The commercial general liability policies between Insurance Companies and 

Shoemaker use the same language, and only provide coverage for property damage 

caused by an “occurrence.” The term “occurrence” is defined in the policies as “an 

accident, including continuous or repeated exposure to substantially the same general 

harmful conditions.” 

Insurance Companies moved for summary judgment under Fed. R. Civ. P. 56. 

Finding Pennsylvania substantive law governed the dispute, the district court held 

Insurance Companies were not required to defend Shoemaker because Monmouth‟s 

allegations in the Underlying Action did not arise from an “occurrence” as the 

Pennsylvania Supreme Court has construed that term. Shoemaker appeals and seeks to 

certify this case to the Pennsylvania Supreme Court. We will affirm the judgment of the 

district court.3

 

2

Zurich and Northern (plaintiffs-appellees) as well as PMA (third-party defendantappellee) are hereafter referred to as “Insurance Companies” for ease of discussion. 

3 The district court had jurisdiction of the original action under 28 U.S.C. § 1332(a)(1) 

and supplemental jurisdiction of Shoemaker‟s third-party complaint under 28 U.S.C. § 
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II.

This case involves the intersection of two Pennsylvania Supreme Court cases 

construing what may constitute an “occurrence.” In Kvaerner, the court held an insurance 

company was not required to defend its insured against claims of faulty workmanship 

because such claims were not sufficiently fortuitous to constitute an accident. 908 A.2d at 

899. Insurance Companies argue that since Monmouth‟s allegations amount to claims of 

faulty workmanship, they cannot be required to defend the suit. But in Donegal Mutual 

Insurance Company v. Baumhammers, the court held an insurance company may be 

required to defend its insured against claims arising from the intentional acts of a third 

party, at least where the insured‟s negligence enabled the third party‟s actions. 938 A.2d 

286, 293 (Pa. 2007). Shoemaker contends that since its negligent supervision facilitated 

its subcontractor‟s willful misconduct, Baumhammers dictates that Insurance Companies 

must defend Shoemaker in the Underlying Action. 

Shoemaker oversimplifies Baumhammers, contending it stands for the proposition 

that an “occurrence” has taken place whenever the insured‟s negligence leads to a third 

 

1367. See In re Texas E. Transmission Corp. PCB Contamination Ins. Coverage Litig., 

15 F.3d 1230, 1238 (3d Cir. 1994) (“We hold that the additional non-diverse 

counterclaim defendants do not destroy diversity jurisdiction in the . . . action because 

there is complete diversity of citizenship between the originally named parties.”). We 

review the interpretation of an insurance policy de novo. Kvaerner Metals Div. of 

Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 897 (Pa. 2006). The 

court first looks to the language of the insurance policies to determine in which instances 

they provide coverage, and then examines the underlying complaint “to determine 

whether the allegations set forth therein constitute the type of instances that will trigger 

coverage.” Id. at 896-97. If coverage is triggered, “the insurer has a duty to defend . . . . 

Although the duty to defend is separate from and broader than the duty to indemnify, 

both duties flow from a determination that the complaint triggers coverage.” Gen. 
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party‟s willful misconduct. Baumhammers‟ holding actually hinged upon the randomness 

of the third party‟s misconduct—a shooting rampage, perpetrated by Richard 

Baumhammers—from the perspective of the insured, his parents. Id. at 288. The families 

of the shooting victims brought suit against Richard‟s parents, alleging the parents were 

negligent in permitting Richard to have a gun and failing to procure mental health 

treatment for him. Id. at 288-89. The Pennsylvania Supreme Court held that Donegal 

Insurance—which insured the parents under a general liability policy similar to the 

present case—was required to defend the parents against the victims‟ suits. Id. at 293. 

The court explained:

The extraordinary shooting spree embarked upon by Baumhammers 

resulting in injuries to Plaintiffs cannot be said to be the natural and 

expected result of Parents [sic] alleged acts of negligence. Rather, 

Plaintiffs‟ injuries were caused by an event so unexpected, undesigned and 

fortuitous as to qualify as accidental within the terms of the policy. Because 

the alleged negligence of Parents resulted in the tragic accidental injuries to 

the individual plaintiffs, Donegal is therefore required to defend Parents.

Id. As Baumhammers indicates, the crucial inquiry dictating whether a general liability 

insurer must defend its insured under an occurrence-based policy is whether an event was 

sufficiently fortuitous from the perspective of the insured to qualify as an “occurrence.” 

See id. at 292 (“An injury . . . is not „accidental‟ if the injury was the natural and expected 

result of the insured‟s actions.”). 

Kvaerner and cases following it make clear that faulty workmanship under a 

contract is not sufficiently fortuitous to qualify as an “occurrence.” In Kvaerner, a steel 

company brought suit against Kvaerner for breach of contract and breach of warranty, 

 

Accident Ins. Co. of Am. v. Allen, 692 A.2d 1089, 1095 (Pa. 1997) (citation omitted).
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alleging a coke oven battery Kvaerner designed and built was damaged and failed to meet 

contract specifications. 908 A.2d at 891. In determining that Kvaerner‟s insurer did not 

have to defend the suit, the Pennsylvania Supreme Court explained that “[t]he key term in 

the ordinary definition of „accident‟ is „unexpected.‟ This implies a degree of fortuity that 

is not present in a claim for faulty workmanship.” Id. at 898. Therefore, the court held 

the definition of “accident” required to establish an “occurrence” under the 

policies cannot be satisfied by claims based upon faulty workmanship. 

Such claims simply do not present the degree of fortuity contemplated by 

the ordinary definition of “accident” or its common judicial construction in 

this context. To hold otherwise would be to convert a policy for insurance 

into a performance bond. We are unwilling to do so, especially since such 

protections are already readily available for the protection of contractors.

Id. at 899 (footnotes omitted). The court further rationalized this rule, stating that such 

policies cover “tort liability for physical damages to others and not . . . contractual 

liability of the insured for economic loss because the product or completed work is not 

that for which the damaged person bargained.” Id. at 899 n.10 (quoting Insurance 

Protection for Products Liability and Completed Operations; What Every Lawyer Should 

Know, 50 Neb. L. Rev. 415, 441 (1971)).

The Pennsylvania Superior Court expanded upon Kvaerner in Millers Capital 

Insurance Co. v. Gambone Brothers Development Co., 941 A.2d 706 (Pa. Super. Ct. 

2007). The analysis in Gambone is apposite because of its factual similarity to the present 

case. See also Nationwide Mut. Ins. Co. v. Buffetta, 230 F.3d 634, 637 (3d Cir. 2000) 

(stating a federal court should not disregard the opinion of a state‟s intermediate appellate 

court unless convinced by persuasive data that the state‟s supreme court would decide 

differently). Gambone specifically rejected the argument that faulty workmanship by a 
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subcontractor may constitute an “occurrence” or “accident” from the perspective of the 

contractor. 941 A.2d at 715. Gambone further noted that insurance coverage and defense 

was precluded for “natural and foreseeable acts, such as rainfall, which tend to exacerbate 

the damage, effect, or consequences caused ab initio by faulty workmanship,” since such 

acts, like faulty workmanship, were not sufficiently fortuitous. Id. at 713. Moreover, in 

Nationwide Mutual Insurance Co. v. CPB International, Inc., we relied in part on 

Gambone to predict the Pennsylvania Supreme Court would not require a general liability 

insurer to defend an action arising out of a contract dispute—even if the plaintiff in the 

underlying action asserted consequential damages. 562 F.3d 591, 597 (3d Cir. 2009). 

Kvaerner and Gambone control the outcome of this dispute. Faulty 

workmanship—whether caused by the contractor‟s negligence alone or by the 

contractor‟s negligent supervision, which then permitted the willful misconduct of its 

subcontractors—does not amount to an “accident” or “occurrence.” See Bomgardner v. 

State Farm Ins. Co., Civ. No. 10-1287, 2010 U.S. Dist. LEXIS 96379, at *11-12 (E.D. 

Pa. Sept. 14, 2010) (stating Gambone stands for the proposition that “faulty 

workmanship, whether the fault of the insured or a subcontractor” does not constitute an 

occurrence). Nor does a foreseeable act like the subsequent water infiltration into the 

structure. See Specialty Surfaces Int’l, Inc. v. Cont’l Cas. Co., 609 F.3d 223, 231 (3d Cir. 

2010) (“Faulty workmanship, even when cast as a negligence claim, does not constitute 

[an occurrence]; nor do natural and foreseeable events like rainfall.”); Nationwide Mut. 

Ins. Co., 562 F.3d at 596 (finding no insurance coverage because consequential damages 

were “too foreseeable to be considered an accident”). Monmouth‟s allegations do not 
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present the requisite fortuity to qualify as an “occurrence.”4

III.

Because Pennsylvania law dictates the outcome here, we will affirm the judgment 

of the district court and deny Shoemaker‟s motion for certification to the Pennsylvania 

Supreme Court. Insurance Companies are not required to defend or indemnify Shoemaker 

in the Underlying Action because the faulty workmanship on which Monmouth‟s claims 

are based does not constitute an “occurrence” triggering the protections of the policies 

between Insurance Companies and Shoemaker. 

 

4 A more difficult question may be presented when a plaintiff sues a defendant for faulty 

workmanship without an underlying contract between the parties (such as when the 

plaintiff sues a subcontractor directly). See, e.g., Wausau Underwriters Ins. Co. v. State 

Auto. Mut. Ins. Co., 557 F. Supp. 2d 502, 515 (D.N.J. 2008) (finding the existence of a 

contract crucial to the question of whether there has been an “occurrence,” since where 

there is a contract, “it can hardly be said that the insured‟s failure to perform up to its 

own bargained-for, self-imposed standards was fortuitous from the insured‟s point-ofview”); Schuylkill Stone Corp. v. State Auto. Mut. Ins. Co., 735 F. Supp. 2d 150, 158 

(D.N.J. 2010) (finding there is an occurrence where there is no contract between the 

parties and the plaintiff in the underlying action alleges the defendant negligently 

manufactured products in violation of industry standards). But this is not such a case. 

Monmouth‟s claims in the Underlying Action are entirely based on Shoemaker‟s 

allegedly faulty workmanship in the execution of the construction contract. Since this 

case requires a straightforward application of Kvaerner and Gambone, we needn‟t reach 

the issue of whether faulty workmanship constitutes an “occurrence” in the absence of a 

contract between the relevant parties.