SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the 

convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the 

interest of brevity, portions of any opinion may not have been summarized.)

Cypress Point Condominium Association, Inc. v. Adria Towers, L.L.C., et al. (A-13/14-15) (076348)

Argued April 25, 2016 -- Decided August 4, 2016

SOLOMON, J., writing for a unanimous Court.

In this appeal, the Court determines whether rain water damage caused by a subcontractor’s faulty 

workmanship constitutes “property damage” and an “occurrence” under a property developer’s commercial general 

liability (CGL) insurance policy.

This dispute arose from the construction of Cypress Point, a luxury condominium complex in Hoboken. 

Co-defendants Adria Towers, LLC, Metro Homes, LLC, and Commerce Construction Management, LLC 

(collectively, the developer) served as the project’s developer and general contractor, and subcontractors carried out 

most of the work. During construction, the developer obtained four CGL policies from Evanston Insurance 

Company, covering a four-year period, and three from Crum & Forster Specialty Insurance Company, covering a 

subsequent three-year period (collectively, the policies). The policies, which are modeled after the 1986 version of 

the standard form CGL policy promulgated by the Insurance Services Office, Inc. (ISO), provide coverage for 

“those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property 

damage’ . . . caused by an ‘occurrence’ that takes place in the ‘coverage territory’ . . . [and] . . . occurs during the 

policy period.”

Under the policies, “property damage” includes “[p]hysical injury to tangible property including all 

resulting loss of use of that property,” while an “occurrence” is defined as “an accident, including continuous or 

repeated exposure to substantially the same general harmful conditions.” The policies also contain an exclusion, for 

“Damage to Your Work” (the “your work” exclusion), which eliminates coverage for “‘[p]roperty damage’ to ‘your 

work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.’” Notably, this 

exclusion “does not apply if the damaged work or the work out of which the damage arises was performed on [the 

insured’s] behalf by a subcontractor.”

After completion of the complex, several residents began experiencing problems, such as roof leaks and 

water infiltration around windows in units and common areas. Plaintiff the Cypress Point Condominium 

Association (the Association) brought an action against the developer and several subcontractors, alleging faulty 

workmanship during construction and claiming various consequential damages. Ultimately, a question arose as to 

whether the Association’s claims were covered by the insurers’ CGL policies. Subsequently, the insurers moved for 

summary judgment, arguing, in part, that they were not liable because the subcontractors’ faulty workmanship did 

not constitute an “occurrence” that caused “property damage” as defined by the policies. The trial court agreed and 

granted the motion. 

In a published decision, Cypress Point Condominium Association, Inc. v. Adria Towers, L.L.C., 441 N.J. 

Super. 369, 373 (App. Div. 2015), the Appellate Division reversed, holding that, under the plain language of the 

CGL policies, the unintended and unexpected consequential damages caused by the subcontractors’ faulty 

workmanship constituted “property damage” and an “occurrence.” The Court granted the insurers’ petitions for 

certification. 223 N.J. 355 (2015). 

HELD: The consequential damages caused by the subcontractors’ faulty workmanship constitute “property 

damage,” and the event resulting in that damage – water from rain flowing into the interior of the property due to the 

subcontractors’ faulty workmanship – is an “occurrence” under the plain language of the CGL policies at issue here. 

1. Since there is no genuine issue of material fact before the Court, it reviews de novo the trial court’s conclusion 

that the insurers were not obligated to defend and indemnify the developer against the Association’s claims. The 

Court has long recognized that the general principles governing the interpretation of insurance policies must be 

analyzed under the rules of contract law. When interpreting the meaning of a provision in an insurance contract, 

courts look first to its plain language. If the terms of the provision are clear, it will be enforced as written. If the 

provision is subject to more than one reasonable interpretation, a court will look to extrinsic evidence to aid in its 

interpretation. With respect to insurance contracts specifically, if the policy’s controlling language supports two 

meanings, the interpretation favoring coverage should be applied. (pp. 13-16)
2. A CGL policy protects business owners against liability to third-parties. The most commonly purchased CGL 

policy is based on a standard form issued by the ISO. The ISO promulgated standard form CGL policies in 1973 

and again in 1986. The 1986 policy, which was used here, defines an “occurrence” in a way that does not directly 

include “property damage,” stating that an “occurrence” is “an accident, including continuous or repeated exposure 

to substantially the same general harmful conditions.” Unlike the 1973 ISO policy, the 1986 policy also includes a 

significant exception to the “your work” exclusion clause, which eliminates coverage for “‘property damage’ to 

‘your work’ arising out of it or any part of it.” The exception, which has never been directly addressed by this 

Court, provides that the exclusion “does not apply if the damaged work or the work out of which the damage arises 

was performed on your behalf by a subcontractor.” (pp. 16-19)

3. The seminal New Jersey cases addressing whether construction defects are covered under CGL policies 

construed the 1973 ISO standard form CGL policy. The issue was first addressed in Weedo v. Stone-E-Brick, Inc., 

81 N.J. 233 (1979), under which the Court found that the replacement or repair of faulty goods and works is a 

business expense, to be borne by the insured, and that CGL policies did not indemnify insureds where the claimed 

damages are the cost of correcting the alleged defective work. Building on these principles, the Appellate Division 

in Firemen’s Insurance Co. of Newark v. National Union Fire Insurance Co., 387 N.J. Super. 434 (App. Div. 2006), 

held that claims against an insured general contractor for the cost of replacing materials installed by subcontractors 

did not qualify as covered “property damage” caused by an “occurrence.” The panel distinguished the case from 

Weedo, explaining that damage for breach of contractual warranty is limited and an expected cost of doing business, 

whereas liability for damage to a person or property is unpredictable and almost limitless. The CGL policy is 

designed to ensure against the latter risk. (pp. 19-23)

4. Since this Court has never addressed the question of coverage for consequential damages caused by faulty 

workmanship under the 1986 ISO standard form CGL policy, review of other state and federal decisions is 

instructive. The Supreme Court of Florida has held that a subcontractor’s defective work can constitute “property 

damage” caused by an “occurrence” under the 1986 policy, noting that an interpretation precluding recovery for 

damages caused by a subcontractor’s defective work would undermine the subcontractor exception to the “your 

work” exclusion. The Fourth Circuit Court of Appeals held that the 1986 policy provides coverage for damages 

caused by a subcontractor’s faulty workmanship, but not for the cost of replacing and/or repairing the faulty 

workmanship itself. These cases, while not controlling, represent a strong recent trend of interpreting the term 

“occurrence” to encompass unanticipated damage to nondefective property resulting from poor workmanship. (pp. 

23-28)

5. Turning first to the question of whether the policies here provide an initial grant of coverage, the Court concludes 

that the post-construction consequential damages, which resulted in loss of use of the affected areas by residents, 

were covered “property damage” under the terms of the policies. In order to address the threshold question of 

whether the subcontractors’ faulty workmanship and resultant damages constitute an “occurrence” triggering an 

initial grant of coverage, the Court must give meaning to the term “accident,” which is not defined in the policies. 

Based on the plain meaning of the term and case law interpreting it in the context of homeowner’s policies, the 

Court finds that “accident” encompasses unintended and unexpected harm caused by negligent conduct. In other 

words, under the Court’s interpretation of the term “occurrence” in the policies, consequential harm caused by 

negligent work is an “accident.” Therefore, because the result of the subcontractors’ faulty workmanship –

consequential water damage to the completed and nondefective portions of Cypress Point – was an “accident,” it is 

an “occurrence” under the policies and is provided an initial grant of coverage. (pp. 28-34)

6. Since the Association’s claims are covered under the policies’ general insuring agreement, the Court next 

examines the pertinent exclusions and, if applicable, any exceptions. Standing alone, the “your work” exclusion, 

which precludes coverage for “property damage” to “your work,” eliminates coverage for water damage to the 

completed sections of Cypress Point. However, the exception to this exclusion, which was added to the 1986 ISO 

standard form CGL policy, narrows the exclusion by expressly declaring that it does not apply if the damaged work 

or work out of which the damage arises was performed by a subcontractor. Thus, because the water damage here is 

alleged to have arisen out of faulty workmanship performed by subcontractors, it is a covered loss. (pp. 34-39)

The judgment of the Appellate Division is AFFIRMED and the matter is REMANDED to the trial court 

for proceedings consistent with this opinion.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, PATTERSON, and 

FERNANDEZ-VINA join in JUSTICE SOLOMON’s opinion. JUDGE CUFF (temporarily assigned) did not 

participate. 

2
1

SUPREME COURT OF NEW JERSEY

A-13/14 September Term 2015

076348

CYPRESS POINT CONDOMINIUM 

ASSOCIATION, INC.,

Plaintiff-Respondent,

v.

ADRIA TOWERS, L.L.C.; D. 

LOUREIRO MASONRY CONTRACTOR; 

DEAN MARCHETTO ASSOCIATES, 

P.C.; PEREIRA CONSTRUCTION, 

L.L.C.; AMERICAN 

ARCHITECTURAL RESTORATION; 

METRO HOMES, L.L.C.; COMMERCE 

CONSTRUCTION MANAGEMENT, 

L.L.C.; WATERFRONT MANAGEMENT 

SYSTEMS, L.L.C.; NCF GLAZING 

& ERECTING, INC.; and MDNA 

FRAMING, INC.,

Defendants,

and

WEATHER-TITE,

Defendant/Third-Party 

Plaintiff,

and

PEREIRA CONSTRUCTION, L.L.C.; 

and AMERICAN ARCHITECTURAL 

RESTORATION,

Third-Party Defendants,

and

EVANSTON INSURANCE COMPANY,

Defendant/Third-Party 
2

Plaintiff-Appellant,

and

NATIONAL INDEMNITY COMPANY,

Third-Party Defendant,

and

CRUM & FORSTER SPECIALTY 

INSURANCE COMPANY,

Third-Party DefendantAppellant.

Argued April 25, 2016 – Decided August 4, 2016

On certification to the Superior Court, 

Appellate Division, whose opinion is 

reported at 441 N.J. Super. 369 (App. Div. 

2015).

Elliott Abrutyn argued the cause for 

appellant Evanston Insurance Company (Morgan 

Melhuish Abrutyn, attorneys; Mr. Abrutyn and 

Thomas G. Rantas, on the briefs).

Gary S. Kull argued the cause for appellant 

Crum & Forster Specialty Insurance Company 

(Carroll McNulty Kull and Hardin, Kundla, 

McKeon & Poletto, attorneys; Mr. Kull and 

John S. Favate, of counsel; Mr. Kull, Mr. 

Favate, Denise Marra DePekary, and Arthur A. 

Povelones, Jr., on the briefs).

Mark M. Wiechnik argued the cause for 

respondent (Ansell Grimm & Aaron, attorneys; 

Breanne M. DeRaps, on the letter brief).

John Randy Sawyer argued the cause for 

amicus curiae Community Association 

Institute (Stark & Stark, attorneys; Mr. 

Sawyer and Gene Markin, on the brief).
3

Timothy P. Law, Jay M. Levin, and Jill N. 

Priscott submitted a brief on behalf of 

amicus curiae United Policyholders (Reed 

Smith, attorneys).

John P. DiBiasi submitted a brief on behalf 

of amici curiae Associated General 

Contractors of America and Associated 

Construction Contractors of New Jersey 

(Lewis & McKenna, attorneys; Patrick J. 

Wielinski, a member of the Texas Bar, of 

counsel).

Michael A. Barrese and Bethany L. Barrese

submitted a brief on behalf of amicus curiae

Turner Construction Company (Saxe 

Doernberger & Vita, attorneys; Gregory D. 

Podolak, a member of the Connecticut Bar, of 

counsel).

Carlton T. Spiller, Ellen A. Silver, and 

Steven B. Gladis, submitted a brief on 

behalf of amici curiae National Association 

of Home Builders, New Jersey Builders 

Association, and Leading Builders of America 

(Greenbaum, Rowe, Smith & Davis, attorneys).

JUSTICE SOLOMON delivered the opinion of the Court.

In this appeal, we are called upon to determine whether

rain water damage caused by a subcontractor’s faulty workmanship 

constitutes “property damage” and an “occurrence” under a 

property developer’s commercial general liability (“CGL”) 

insurance policy.1 Here, a condominium association sued its 

developer/general contractor for damage to the interior 

 

1 CGL policies protect business owners against liability to third 

parties, encompassing a wide variety of potential claims. 3 

Jeffrey E. Thomas, New Appleman on Insurance, Law Library 

Edition § 16.02[3][a][i], LexisNexis (2015).
4

structure, residential units, and common areas of the 

condominium complex, which was allegedly the result of defective 

work performed by subcontractors. The condominium association 

also sued the developer’s CGL insurers, seeking a declaration 

that claims against the developer were covered by the policies. 

The trial court granted summary judgment to the insurers, 

finding that there was no “property damage” or “occurrence,” as

defined and required by the policies, to trigger coverage. The 

condominium association appealed, and the Appellate Division 

reversed, concluding that “consequential damages caused by the 

subcontractors’ defective work constitute[d] ‘property damage’ 

and an ‘occurrence’ under the polic[ies].”

We affirm the judgment of the Appellate Division and hold 

that the consequential damages caused by the subcontractors’ 

faulty workmanship constitute “property damage,” and the event 

resulting in that damage –- water from rain flowing into the 

interior of the property due to the subcontractors’ faulty 

workmanship –- is an “occurrence” under the plain language of 

the CGL policies at issue here. 

I.

We begin with a review of the pertinent facts that gave 

rise to the instant dispute, which arose from the construction 

of Cypress Point, a luxury condominium complex in Hoboken 

consisting of fifty-three residential units. 
5

Construction of Cypress Point began in 2002 and was 

substantially completed in 2004. During construction, codefendants Adria Towers, LLC (“Adria Towers”), Metro Homes, LLC 

(“Metro Homes”),2 and Commerce Construction Management, LLC 

(“Commerce Construction”)3 (collectively, “the developer”) served 

as the project’s developer and general contractor and hired 

subcontractors to carry out a substantial majority of the work. 

Adria Towers also controlled the Cypress Point Condominium 

Association (“the Association” or “plaintiff”) until the fall of 

2004, when control of the Association transferred to the unit 

owners of Cypress Point’s condominiums.4

During construction of Cypress Point, the developer was 

issued four CGL policies by Evanston Insurance Company 

(“Evanston”) covering the time period from May 30, 2002 to July 

15, 2006, and three by Crum & Forster Specialty Insurance 

 

2 According to the complaints filed with the trial court, Metro 

Homes “is a corporation which was the co-sponsor, co-developer 

and/or general contractor that created, coordinated, designed 

and constructed the Association’s building, units and common 

elements.” 

3 According to the complaints filed with the trial court, 

Commerce Construction “is a construction/project management firm 

that was responsible for overseeing the construction of the 

Association’s building, units, and common elements.”

4 When a condominium is developed, the condominium association is 

initially controlled by the developer; as units are sold, 

control of the association must transfer from the developer to 

the unit owners. N.J.S.A. 46:8B-12.1.
6

Company (“Crum & Forster”), covering the time period from July 

15, 2006 to July 15, 2009 (collectively, “the policies”). The 

policies, which are modeled after the standard form CGL policy 

promulgated by the Insurance Services Office, Inc. (“ISO”),5

provide coverage for “those sums that the insured becomes 

legally obligated to pay as damages because of ‘bodily injury’ 

or ‘property damage’ . . . caused by an ‘occurrence’ that takes 

place in the ‘coverage territory’ . . . [and] . . . occurs 

during the policy period.” 

Pursuant to the terms of the policies, “property damage” 

includes “[p]hysical injury to tangible property including all 

resulting loss of use of that property.” An “occurrence” is 

defined as “an accident, including continuous or repeated 

exposure to substantially the same general harmful conditions.” 

The policies also contain “[v]arious provisions [that] . . 

. restrict coverage[,]” including an exclusion for “Damage to 

Your Work” (“the ‘your work’ exclusion”), which eliminates 

coverage for “‘[p]roperty damage’ to ‘your work’ arising out of 

 

5 “ISO is an influential organization within the insurance 

industry that promulgates standard form insurance policies, 

including CGL policies, that insurers across the country use to 

conduct their business.” Christopher C. French, Construction 

Defects: Are They ‘Occurrences’?, 47 Gonz. L. Rev. 1, 5 n.7 

(2011-12) (citing U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So.

2d 871, 879 n.6 (Fla. 2007)). Most CGL insurance policies in 

the United States are written on standard forms developed by ISO 

and made available with state insurance regulators. Ibid.
7

it or any part of it and included in the ‘products-completed 

operations hazard.’”6 Notably, this exclusion “does not apply if 

the damaged work or the work out of which the damage arises was 

performed on [the insured’s] behalf by a subcontractor.”7

(Emphasis added). 

After completion of the condominium complex and transfer of 

control to the Association, several condominium owners began 

experiencing problems, such as roof leaks and water infiltration 

at the interior window jambs and sills of the residential units. 

The Association also became aware of damage caused by water 

intrusion into the common areas and interior structures of 

Cypress Point. As a result, the Association brought an action

against the developer and several subcontractors. It alleged

faulty workmanship during construction, including but not 

limited to, defectively built or installed roofs, gutters, brick 

facades, exterior insulation and finishing system siding, 

 

6 Under the policies, “products-completed operation hazard” 

“[i]ncludes all ‘bodily injury’ and ‘property damage’ occurring” 

off-site and/or after the project is deemed “completed.”

7 The policies define “[y]our work” as “[w]ork or operations 

performed by you or on your behalf . . . and . . . [m]aterials, 

parts or equipment furnished in connection with such work or 

operations.” “Your work” includes “[w]arranties or 

representations made at any time with respect to the fitness, 

quality, durability, performance or use of ‘your work’ . . . and 

. . . [t]he providing of or failure to provide warnings or 

instructions.”
8

windows, doors, and sealants. The Association claimed 

consequential damages, consisting of, among other things, damage 

to steel supports, exterior and interior sheathing and 

sheetrock, and insulation, to Cypress Point’s common areas, 

interior structures, and residential units (“the consequential 

damages”).8 

After the Association filed suit, Adria Towers requested 

that Evanston defend and indemnify it against the Association’s

claims. When Evanston refused, and Adria Towers failed to file 

a declaratory judgment action against Evanston, the Association

filed an amended complaint, seeking a determination whether its 

claims against the developer were covered by Evanston’s CGL 

policies. Evanston subsequently filed an amended answer to the 

Association’s complaint, denying any obligation to defend and 

indemnify the developer, as well as a third-party complaint 

against Crum & Forster, alleging that if Evanston did owe such 

an obligation, the rights and responsibilities under the Crum & 

Forster CGL policies should also be adjudicated.

 

8 In the complaint, which was amended several times between 2010 

and 2012 to add claims and parties, the Association asserted 

claims of negligence, breach of express warranties, breach of 

implied warranties, negligent misrepresentation, violations of 

the Planned Real Estate Development Full Disclosure Act, and 

breach of contract.
9

Evanston and Crum & Forster (collectively, “the insurers”) 

filed motions for summary judgment, arguing, among other things,

that they were not liable because the subcontractors’ faulty 

workmanship did not constitute an “occurrence” that caused 

“property damage” as defined by the policies. The trial court

agreed, concluding that faulty workmanship does not constitute 

an “occurrence” and that the consequential damages caused

therefrom were not “property damage” under the terms of the

policies because the damage arose entirely from faulty work 

performed by or on behalf of the developer. Accordingly, the 

trial court granted Evanston’s motion for summary judgment and 

dismissed Crum & Forster’s motion for summary judgment as moot. 

The Association filed a motion for reconsideration, which was 

denied. 

In a published opinion, the Appellate Division reversed the 

trial court’s grant of summary judgment in favor of the 

insurers, holding that “unintended and unexpected consequential 

damages [to the common areas and residential units] caused by 

the subcontractors’ defective work constitute ‘property damage’ 

and an ‘occurrence’ under the [CGL] polic[ies].” Cypress Point 

Condo. Ass’n, Inc. v. Adria Towers, L.L.C., 441 N.J. Super. 369, 

373 (App. Div. 2015). The panel found that, under the plain 

language of the CGL policies, the damages alleged in the 

Association’s claim satisfied the policies’ definitions of 
10

“property damage” and “occurrence.” Id. at 375-77. The panel 

also distinguished two prior New Jersey cases relied upon by the 

trial court in finding for the insurers, Weedo v. Stone-E-Brick, 

Inc., 81 N.J. 233 (1979), and Firemen’s Insurance Co. of Newark 

v. National Union Fire Insurance Co., 387 N.J. Super. 434 (App. 

Div. 2006), “because they (1) involved only replacement costs 

flowing from a business risk, rather than consequential damages 

caused by defective work; and (2) interpreted different language 

than the policy language in this appeal,” which was based on the 

1986 standard CGL form rather than the 1973 version at issue in

Weedo and Firemen’s. Cypress Point, supra, 441 N.J. Super. at 

377. 

Thereafter, we granted the insurers’ petitions for 

certification. 223 N.J. 355 (2015).

II.

The pertinent contentions of the parties are as follows.

The insurers urge this Court to overturn the Appellate 

Division’s finding that the policies provided coverage for the 

Association’s claims against the developer. Citing Weedo and 

Firemen’s, the insurers argue that the panel’s holding conflicts 

with established law that CGL policies are only intended to 

provide coverage for damage caused by faulty workmanship to 

other property and not to the project itself, as was the case 

here. In doing so, the insurers assert, the panel improperly 
11

shifted the risks inherent in constructing a building from the 

developer and general contractor, who are in the best position 

to control a subcontractor’s work, to their insurers. 

The insurers further contend that the Appellate Division 

failed to apply the correct definition of “accident” as it 

relates to a covered “occurrence” under the policies. According 

to the insurers, a subcontractor’s faulty workmanship does not 

have the fortuity element required for the faulty workmanship to 

constitute an “accident,” and is therefore not an “occurrence” 

under the terms of the policies. In other words, damage to any 

portion of the project caused by defective construction is not 

accidental because it is one of the normal, frequent, and 

predictable consequences of the construction business. 

Relatedly, the insurers assert that the panel

inappropriately invoked the “subcontractor exception” to the 

“your work” exclusion to trigger coverage for the Association’s 

claims against the developer. According to the insurers, there 

was no coverage because faulty workmanship is not “property 

damage” or an “occurrence” under the terms of the policies and, 

therefore, the panel should not have considered whether the 

policies’ exclusions, let alone exceptions to those exclusions, 

apply here. 

Finally, the insurers ask us to follow authority from other 

jurisdictions, which they claim supports the proposition that 
12

CGL policies do not provide coverage for faulty workmanship that 

causes damage to any portion of the work that the insured was 

obligated to deliver. See, e.g., Columbia Ins. Grp., Inc. v. 

Cenark Project Mgmt. Servs., 2016 Ark. 185 (Ark. 2016).

The Association, conversely, asserts that the Appellate 

Division’s ruling in favor of coverage for the consequential 

damages caused by a subcontractor’s faulty workmanship is in 

line with both judicial precedent and the plain language of the 

policies. Citing to Weedo, Firemen’s, and S.N. Golden Estates, 

Inc. v. Continental Casualty Co., 293 N.J. Super. 395 (App. Div. 

1996), the Association contends that our courts have 

consistently found that, while a construction defect itself is 

not covered under a CGL policy, the damage caused as a 

consequence of the defect is covered. Thus, plaintiff argues

that consequential damages stemming from faulty workmanship 

constitute a covered “occurrence” under the terms of the 

policies, and that the Appellate Division’s holding supporting 

such an interpretation should not be disturbed.

The Association also notes that the Weedo and Firemen’s

decisions were based on the 1973 ISO form CGL policy, whereas 

the instant case involves the 1986 ISO form CGL policy, which 

contains a subcontractor exception to the “your work” exclusion 

that was not included in the 1973 ISO form. The Association 

argues that the existence of the subcontractor exception implies 
13

that the policies’ definition of an “occurrence” includes 

construction defect claims, because interpreting the contract 

otherwise would render the subcontractor exception meaningless. 

Finally, this Court granted leave to appear as amicus 

curiae to five entities or groups of entities: Associated 

General Contractors of America and Associated Construction 

Contractors of New Jersey; the Community Association Institute; 

the National Association of Home Builders, New Jersey Builders 

Association, and Leading Builders of America; Turner 

Construction Company; and United Policyholders. All five amici 

support the Association’s positions.

III.

A.

We begin our discussion of the law applicable to this 

appeal by noting that we review the trial court’s grant of 

summary judgment de novo under the same standard as the trial 

court. Mem’l Props., LLC v. Zurich Am. Ins. Co., 210 N.J. 512, 

524 (2012). That standard commands that summary judgment be 

entered “if the pleadings, depositions, answers to 

interrogatories and admissions on file, together with the 

affidavits, if any, show that there is no genuine issue as to 

any material fact challenged and that the moving party is 

entitled to a judgment or order as a matter of law.” R. 4:46-

2(c). When no issue of fact exists, and only a question of law 
14

remains, this Court affords no special deference to the legal 

determinations of the trial court. Manalapan Realty, L.P. v. 

Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Because 

there is no genuine issue of material fact before us, we review

de novo the trial court’s conclusion that the insurers were not 

obligated to defend and indemnify the developer against the 

Association’s claims.

B.

With that standard in mind, we turn to the general 

principles governing the interpretation of insurance policies, 

which we have long recognized must be analyzed under the rules

“of simple contract law,” Kampf v. Franklin Life Ins. Co., 33 

N.J. 36, 43 (1960), requiring us “to read the document as a 

whole in a fair and common sense manner,” Hardy ex rel. Dowdell 

v. Abdul-Matin, 198 N.J. 95, 103 (2009). 

Well-settled contract law provides that “[c]ourts enforce 

contracts based on the intent of the parties, the express terms 

of the contract, surrounding circumstances and the underlying 

purpose of the contract.” Manahawkin Convalescent v. O’Neill,

217 N.J. 99, 118 (2014) (citations and internal quotation marks

omitted). Thus, “[w]hen the terms of an insurance contract are 

clear, it is the function of a court to enforce it as written 

and not to make a better contract for either of the parties.” 

Kampf, supra, 33 N.J. at 43 (citation omitted). It follows that 
15

“[i]n attempting to discern the meaning of a provision in an 

insurance contract, the plain language is ordinarily the most 

direct route,” Chubb Custom Ins. Co. v. Prudential Ins. Co. of 

Am., 195 N.J. 231, 238 (2008), and that when “the language of a 

contract is plain and capable of legal construction, the 

language alone must determine the agreement’s force and effect,” 

Manahawkin, supra, 217 N.J. at 118 (citations and internal 

quotation marks omitted). However, “[w]hen the provision at 

issue is subject to more than one reasonable interpretation, it 

is ambiguous, and the ‘court may look to extrinsic evidence as 

an aid to interpretation.’” Templo Fuente de Vida Corp. v. 

Nat’l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 200 

(2016) (quoting Chubb Custom, supra, 195 N.J. at 238). 

As to insurance contracts specifically, “the general rule 

of construction [is] that if the controlling language of a 

policy will support two meanings, one favorable to the insurer 

and the other to the insured, the interpretation favoring 

coverage should be applied.” Butler v. Bonner & Barnwell, Inc.,

56 N.J. 567, 575 (1970) (citing Mazzilli v. Accident & Cas. Ins.

Co., 35 N.J. 1, 7 (1961)); see also Doto v. Russo, 140 N.J. 544, 

556 (1995) (noting that “New Jersey courts often have construed 

ambiguous language in insurance policies in favor of the insured 

and against the insurer”). Moreover, “[w]hile specific words may 

not be ambiguous, the context in which they are used may create 
16

an ambiguity. The court’s responsibility is to give effect to 

the whole policy, not just one part of it.” Arrow Indus. 

Carriers, Inc. v. Cont’l Ins. Co. of N.J., 232 N.J. Super. 324, 

334 (Law Div. 1989) (citing Boswell v. Travelers Indem. Co., 38 

N.J. Super. 599, 604 (App. Div. 1956)). 

C.

Having reviewed our jurisprudence on the interpretation of 

insurance policies, we turn to CGL policies, generally, with a 

special emphasis on the CGL policy at issue here. A CGL policy 

“protects business owners against liability to third-parties.” 

3 Jeffrey E. Thomas, New Appleman on Insurance, Law Library 

Edition § 16.02[3][a][i], LexisNexis (2015) (Appleman). The 

policy was first developed in the 1940s as “the result of a 

voluntary effort in the insurance industry to address the 

misunderstanding, coverage disputes, and litigation that 

resulted from the unique language used by each liability 

insurer.” U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 

877-78 (Fla. 2007) (citations omitted). In 1966, the ISO CGL 

policy was “broadened to cover ‘occurrences,’ which included 

coverage for both ‘accidents’ and ‘continuous exposure to 

conditions.’ This change permitted coverage for accidental 

events that were not abrupt and short-lived, such as seepage and 

long-term exposure to hazardous substances.” Appleman, supra, § 

16.02[3][a][iv]. 
17

The most commonly purchased CGL policy is the standard form 

CGL policy, which “is revised every few years by the [ISO].” 

Id. at § 16.02[3][a][iii]. Although not required to do so, most 

insurers prepare their CGL policies based on the ISO’s standard 

forms. Id. at § 16.02[3][a][iv]. 

Since 1966, the ISO has promulgated two standard form CGL 

policies, one in 1973 and another in 1986. As the Appellate 

Division aptly noted, there are important differences between 

the 1973 and 1986 standard form CGL policies which are of 

particular importance in the instant dispute. “First . . .[t]he 

1973 ISO [policy] defines ‘occurrence’ as ‘an accident . . . 

which results in . . . property damage neither expected nor 

intended from the standpoint of the insured’” while the 1986 ISO

“policy defines ‘occurrence’ as ‘an accident, including 

continuous or repeated exposure to substantially the same 

general harmful conditions.’” Cypress Point, supra, 441 N.J. 

Super. at 379 (internal citations omitted). Thus, “‘[p]roperty 

damage,’ . . . is not directly included in the policy’s 

definition of ‘occurrence.’” Id. at 379-80. “Second and most 

importantly, the 1986 ISO [policy] includes a significant 

exception to an exclusion not contained in the 1973 ISO 

[policy].” Id. at 380. 

The exception in the 1986 ISO CGL policy, which has never 

been directly addressed by this Court, is found under the “your 
18

work” exclusion clause of the policy. As outlined above, the 

1986 standard form CGL policy eliminates coverage for “‘property 

damage’ to ‘your work’ arising out of it or any part of it . . 

.”9 However, the policy’s exception to this exclusion, included

in the form by the ISO for the first time in 1986, provides that 

the “your work” exclusion “does not apply if the damaged work or 

the work out of which the damage arises was performed on your 

behalf by a subcontractor.” Appleman, supra, §§ 18.03[12][a], 

[d]. 

In creating the subcontractor exception to the “your work”

exclusion, it has been noted that the ISO was motivated by an 

agreement between policy holders and insurers

that the CGL policy should provide coverage 

for defective construction claims so long as 

the allegedly defective work had been 

performed by a subcontractor rather than the 

policyholder itself. This resulted both 

because of the demands of the policyholder 

community (which wanted this sort of coverage) 

and the view of insurers that the CGL was a 

more attractive product that could be better 

sold if it contained this coverage.

[Christopher C. French, Construction Defects: 

Are They ‘Occurrences’?, 47 Gonz. L. Rev. 1, 

8-9 (2011-12) (citation omitted).]

 

9 In the 1973 ISO Form, the “your work” exclusion was worded 

slightly differently: “[t]his insurance does not apply . . . to 

property damage to work performed by or on behalf of the named 

insured arising out of the work or any portion thereof, or out 

of materials, parts or equipment furnished in connection 

therewith.” Weedo, supra, 81 N.J. at 241.
19

Moreover, the ISO itself addressed the addition of the 

subcontractor exception in a July 1986 circular, which 

“confirm[ed] that the 1986 revisions to the standard CGL policy 

. . . specifically ‘cover[ed] damage caused by faulty 

workmanship to other parts of work in progress; and damage to, 

or caused by, a subcontractor’s work after the insured’s

operations are completed.’” U.S. Fire, supra, 979 So. 2d at 879 

(citing ISO Circular, Commercial Gen. Liab. Program Instructions 

Pamphlet, No. GL-86-204 (July 15, 1986)). 

D.

We now turn to New Jersey’s case law pertinent to 

interpreting CGL policies. In doing so, we note that the 

seminal cases considering whether construction defects are 

covered under such policies construed versions of the standard 

form ISO policy that predated the 1986 version used here.

This Court first addressed the issue of whether a standard 

CGL policy covers construction defects in Weedo, supra, which is 

regularly cited by both state and federal courts as the leading 

case on the issue. French, supra, 47 Gonz. L. Rev. at 22-24; 

see also Fireman’s, supra, 387 N.J. Super. at 442 (noting that 

“[t]he seminal case regarding insurance coverage for a 

contractor’s defective work is Weedo”). In Weedo, two sets of 

homeowners sued a masonry contractor, Stone-E-Brick, for claims 

arising out of faulty workmanship and defective construction 
20

work. Weedo, supra, 81 N.J. at 235-36. In their complaints, 

the homeowners sought damages to cover the cost of correcting 

the construction defects. Ibid. Stone-E-Brick, in turn,

requested that its CGL insurer defend and indemnify it against 

both complaints, but the insurer refused, asserting that CGL 

policies exclude coverage for claims of faulty construction that 

require repair or replacement of a contractor’s work. Id. at 

236. 

The policy at issue in Weedo was the 1973 version of the 

standard form CGL, which contained exclusions for “business 

risks” to the “‘insured products’ (exclusion ‘(n)’) and ‘work 

performed’ (exclusion ‘(o)’),” and read as follows:

* * * This insurance does not apply 

(n) to property damage to the named insured’s 

products arising out of such products or any 

part of such products;

(o) to property damage to work performed by or 

on behalf of the named insured arising out of 

the work or any portion thereof, or out of 

materials, parts or equipment furnished in 

connection therewith.

[Id. at 240-41.] 

After engaging in an extensive discussion of the nature and 

purpose of “business risk” exclusions within CGL policies, and 

determining that “[t]he consequence of not performing well is 

part of every business venture[, and that] the replacement or 

repair of faulty goods and works is a business expense, to be 
21

borne by the insured-contractor in order to satisfy customers,”

the Weedo Court rejected Stone-E-Brick’s claim for coverage. 

Id. at 238-41. In doing so, the Court held that CGL policies 

did not indemnify insureds “where the damages claimed are the 

cost of correcting the [alleged defective] work itself[,]” id.

at 235, but did not address whether the alleged faulty 

workmanship constituted a covered “occurrence” under the 1973 

standard form CGL policy. See id. at 237 n.2 (noting that 

because insurer “conceded . . . that but for the exclusions in 

the policy, coverage would obtain,” Court would “not address the

validity of one of the carrier’s initially-offered grounds of 

non-coverage, namely, that the policy did not extend coverage 

for the claims made even absent the exclusions”). Rather, the 

homeowners’ claims seeking compensation for the repair and 

replacement of the insured’s faulty work was specifically 

excluded and, therefore, the CGL insurer was not obligated to 

provide coverage. Id. at 241 (stating that “given the precise 

and limited form of damages which form the basis of the claims 

against the insured, either exclusion is, or both are, 

applicable to exclude coverage”).

Building on the principles enunciated in Weedo, the 

Appellate Division in Fireman’s, supra, held that claims against 

an insured general contractor for the cost of replacing substandard condominium firewalls installed by subcontractors did 
22

not qualify as covered “property damage” caused by an

“occurrence” under the 1973 ISO standard form CGL policy. 387 

N.J. Super. at 446, 449. In reaching that conclusion, the panel 

noted that Weedo had distinguished between “two kinds of risks, 

one of which is excluded by the standard CGL policy and one of 

which is not”: (1) “‘business risk,’ . . . the risk that the 

contractor’s work may be faulty and may breach express or 

implied warranties”; and (2) “the risk of injury to people and 

damage to property caused by faulty workmanship.” Id. at 442-43 

(citing Weedo, supra, 81 N.J. at 239) (internal quotation marks 

omitted). “[T]he key distinction,” according to the Firemen’s

panel, “is the predictability of the harm: damage for breach of 

contractual warranty is limited and is an expected cost of doing 

business; liability for injury or damage to a person or property 

is potentially ‘almost limitless’ and is ‘entirely 

unpredictable.’ The policy is designed to ensure against the 

latter risk.” Id. at 443 (citing Weedo, supra, 81 N.J. at 239-

40). Thus, because “the alleged damage was the cost of 

replacing sub-standard firewalls [and not] that the firewalls 

caused damage to the rest of the building or to any other person 

or property,” the panel found that, under Weedo, the CGL insurer 

was not obligated to indemnify the insureds. Id. at 443, 445, 

449 (“While Weedo addressed ‘business risk’ in the context of 

whether certain exclusions applied, the Weedo principle has been 
23

extended to the threshold issue of whether the risk was within 

the scope of the standard insuring clause.”). 

E.

Because this Court has never addressed questions of 

coverage for consequential damages caused by faulty workmanship 

under the 1986 ISO standard form CGL policy, a brief review of 

other state and federal decisions that have considered this 

issue is instructive. See Weedo, supra, 81 N.J. at 241 

(“Because of the factual similarity and the uniform wording of 

the exclusionary clauses [contained in standard form CGL 

policies], the reasoning in these decisions [from other 

jurisdictions] is thoroughly persuasive.”).

In U.S. Fire, supra, the Supreme Court of Florida held that 

a subcontractor’s defective work, which “is neither expected nor 

intended from the standpoint of the [insured] contractor[,] can 

constitute ‘property damage’ caused by an ‘occurrence’ as those 

terms are defined in a standard form [CGL] policy.” 979 So. 2d 

at 875. There, after a contractor completed construction of 

several homes, the homeowners discovered that improper soil 

compacting and testing by subcontractors caused damage to the 

homes and the homeowners’ personal property. Ibid. The 

contractor sought coverage for the damage under its CGL 

policies, but the insurer denied coverage for the costs of 

repairing the structural damage to the homes and only agreed to 
24

indemnify the contractor for the damage caused to the 

homeowners’ personal property. Id. at 876. The contractor sued 

the insurer, and the dispute reached the Supreme Court of 

Florida, which considered the issue of whether a 1986 standard 

form CGL policy “issued to a general contractor, provides 

coverage when a claim is made against the contractor for damage 

to the completed project caused by a subcontractor’s defective 

work.” Id. at 877. 

In finding that a subcontractor’s faulty workmanship can 

constitute an “occurrence” under the 1986 ISO form, the court in 

U.S. Fire rejected the insurer’s argument that faulty 

workmanship “can never be an ‘accident’ because it results in 

reasonably foreseeable damages,” and noted that “a construction 

of the insuring agreement that precludes recovery for damage 

caused to the completed project by the subcontractor’s defective 

work renders the . . . subcontractor exception to [the ‘your 

work’] exclusion . . . meaningless.” Id. at 883, 887. The 

court also rejected the insurer’s argument that “faulty 

workmanship that injures only the work product itself does not 

result in ‘property damage;’” observing that, “just like the 

definition of the term ‘occurrence,’ the definition of ‘property 

damage’ in the CGL policies does not differentiate between 

damage to the contractor’s work and damage to other property.” 

Id. at 888-89. Thus, the Court found that “faulty workmanship 
25

or defective work that has damaged the otherwise nondefective 

completed project has caused ‘physical injury to tangible 

property’ within the plain meaning of the definition in the 

[1986 CGL] policy.” Id. at 889.10

In French v. Assurance Co. of America, the Fourth Circuit 

Court of Appeals, applying Maryland Law, held that the 1986 

standard form CGL policy provides coverage for damages caused by 

a subcontractor’s faulty workmanship, but not for the cost of 

replacing and/or repairing the faulty workmanship itself. 448 

F.3d 693, 704 (2006). French involved homeowners who sought 

coverage from a general contractor’s CGL insurer after a 

subcontractor’s negligently installed stucco caused moisture 

damage to their otherwise properly-built house. Id. at 696. 

When the CGL insurer refused to indemnify the insureds for 

either the cost of replacing the stucco or the damages resulting 

from the faulty workmanship, the homeowners sued. Ibid. After 

acknowledging that the subcontractor exception “restored 

otherwise excluded coverage for damage caused to construction 

 

10 Interestingly, and of particular relevance to this Court, the 

U.S. Fire Court also explicitly distinguished its finding from 

the holding in Weedo, supra, 81 N.J. 233, holding that Weedo’s

determination that there was no coverage for faulty workmanship 

by a subcontractor was based on specific exclusions in the pre1986 ISO form, and not on the definitions of “property damage” 

or “occurrence” within the policy itself. U.S. Fire, supra, 979 

So. 2d at 881-82. 
26

projects by subcontractor negligence,” the Court determined that 

the standard form 1986 CGL policy precludes coverage to a 

general contractor to replace or repair defective workmanship 

performed by a subcontractor but does provide coverage for the 

damages resulting from the subcontractor’s faulty workmanship. 

Id. at 704, 706. Accordingly, the Fourth Circuit found that the 

subcontractor exception to the “your work” exclusion required 

the CGL insurer to “provide[] liability coverage for the cost to 

remedy unexpected and unintended property damage to the 

contractor’s otherwise nondefective work-product caused by the 

subcontractor’s defective workmanship.” Id. at 706.

Although the holdings in U.S. Fire and French are not 

controlling here, they are informative because they represent “a 

strong recent trend in the case law [of most federal circuit and 

state courts] interpet[ing] the term ‘occurrence’ to encompass 

unanticipated damage to nondefective property resulting from 

poor workmanship.” Greystone Constr. v. Nat’l Fire & Marine 

Ins. Co., 661 F.3d 1272, 1282-83, 1286 (10th Cir. 2011) 

(recognizing body of case law “generally hold[ing] that damage 

caused by faulty workmanship is neither expected nor intended 

from the standpoint of the policyholders and, therefore, 

receives coverage so long as it does not fall under a policy 

exclusion” and finding that “when a subcontractor’s faulty 

workmanship causes unexpected property damage to otherwise 
27

nondefective portions of the builder’s work, [CGL] policies 

provide coverage”); see also Sheehan Constr. Co. v. Cont’l Cas. 

Co., 935 N.E.2d 160, 169-71 (Ind.) (adopting view that 1986 CGL 

policy covers property damage caused by subcontractor’s 

unexpected and unintended faulty workmanship), modified on other 

grounds, 938 N.E.2d 685 (Ind. 2010); Architex Ass’n v. 

Scottsdale Ins. Co., 27 So. 3d 1148, 1162 (Miss. 2010) (finding 

1986 CGL “policy unambiguously extends coverage to [insured 

general contractors] for unexpected or unintended ‘property 

damage’ resulting from negligent acts or conduct of a 

subcontractor, if not excluded by other applicable terms and 

conditions of the policy”); Travelers Indem. Co. of Am. v. Moore 

& Assocs., Inc., 216 S.W.3d 302, 309 (Tenn. 2007) (concluding 

that water damage resulting from subcontractor’s faulty window 

installation constitutes “both an ‘accident’ and an ‘occurrence’ 

for which there is coverage under” the 1986 standard form CGL 

policy); Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 

1, 16 (Tex. 2007) (explaining that “claims for damage caused by 

an insured’s defective performance or faulty workmanship may 

constitute an ‘occurrence’ when ‘property damage’ results from 

the ‘unexpected, unforeseen or undesigned happening or 

consequence’ of the insured’s negligent behavior”) (citation and 

quotation marks omitted); Am. Family Mut. Ins. Co. v. Am. Girl, 

Inc., 673 N.W.2d 65, 70 (Wis. 2004) (holding subcontractor’s 
28

faulty workmanship, which caused building’s foundation to sink, 

was “property damage” caused by “occurrence”). 

IV.

A.

We now turn to the merits of the instant dispute, which 

requires that we determine whether the policies issued by the 

insurers to the developer provide coverage for the Association’s 

claims of consequential water damage caused by the 

subcontractors’ faulty workmanship. In answering this question 

we follow a three-step process. First, we examine the facts of 

the Association’s claims to ascertain whether the policies

provide an initial grant of coverage. If so, the second step

considers whether any of the policies’ exclusions preclude

coverage. Finally, in step three, we determine whether an 

exception to a pertinent exclusion applies to restore coverage.11 

As previously stated, the policies at issue insure against 

liability for “property damage” that “is caused by an 

‘occurrence.’” “Property damage” is defined as:

a. Physical injury to tangible property 

including all resulting loss of use of that 

property. All such loss of use shall be 

deemed to occur at the time of the physical 

injury that caused it; or

 

11 The three-step analytical framework we use here is informed by 

the process employed by the Wisconsin courts. See Design Basics 

LLC v. J&V Roberts Inv., Inc., 130 F. Supp. 3d 1266, 1285 (Wis. 

2015) (citing Am. Girl, Inc., supra, 673 N.W.2d at 73). 
29

b. Loss of use of tangible property that is not 

physically injured. All such loss of use 

shall be deemed to occur at the time of the 

“occurrence” that caused it.

Here, the Association alleged that water infiltration, 

occurring after the project was completed and control was turned 

over to the Association, caused mold growth and other damage to 

Cypress Point’s completed common areas and individual units. 

Those post-construction consequential damages resulted in loss 

of use of the affected areas by Cypress Point residents and, we 

hold, qualify as “[p]hysical injury to tangible property 

including all resulting loss of use of that property.” 

Therefore, on the record before us, the consequential damages to 

Cypress Point were covered “property damage” under the terms of 

the policies. 

Next, the policies define an “occurrence” as “an accident, 

including continuous or repeated exposure to substantially the 

same general harmful conditions.” The term “accident” is not 

defined in the policies. Thus, we must first give meaning to 

the term “accident” in order to address the threshold question

whether the subcontractors’ faulty workmanship, and the damages 

that flowed therefrom, constitute an “occurrence” triggering an 

initial grant of coverage for the Association’s claims. 

When interpreting undefined terms within an insurance 

policy, we “resort to the general rule that the terms in an 
30

insurance policy should be interpreted in accordance with their 

plain and commonly-understood meaning.” Morton Int’l v. Gen. 

Accident Ins. Co., 134 N.J. 1, 56 (1993) (citation omitted); 

Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537 (1990) (“[T]he 

words of an insurance policy should be given their ordinary 

meaning[.]”). This common-sense approach often begins with an 

examination of dictionary definitions.

Merriam-Webster’s dictionary defines “accident” as “an 

unforeseen and unplanned event or circumstance.” MerriamWebster’s Collegiate Dictionary 1419 (11th ed. 2012); see also

Black’s Law Dictionary 18 (10th ed. 2014) (explaining that 

“[t]he word ‘accident,’ in accident policies, means an event

which takes place without one’s foresight or expectation. A 

result, though unexpected, is not an accident; the means or 

cause must be accidental.”). A leading treatise on New Jersey 

insurance law tracks substantially the same language as the 

dictionary definition for “accident”:

An unintended or unexpected event. An 

accident is an event or condition occurring by 

chance or arising from unknown or remote 

causes; an unforeseen, unplanned event or 

condition; a usually sudden event or change 

occurring without intent or volition, through 

carelessness, unawareness, ignorance, or the 

like; an unexpected happening causing loss or 

injury not due to fault or misconduct of the 

person injured which may form the basis for 

legal relief.
31

[George J. Kenny & Frank A. Lattal, New Jersey 

Insurance Law app’x A (2d ed. 2000) (citing 

Prop. Cas. Co. of MCA v. Conway, 147 N.J. 322, 

327 (1997) (defining “accident” for purposes 

of determining whether homeowner’s insurance 

policy covers parent’s vicarious liability for 

child’s vandalism of school)) (additional 

citations omitted).]

Although we have yet to define the term “accident” in a CGL 

policy, this Court has considered the word in the context of a 

homeowner’s insurance policy in two prior cases where, as here, 

coverage was limited to damage caused by an “occurrence,” which 

was defined as an “accident.” In Property Casualty Co., supra, 

the Court found that the “ordinary meaning” of the term 

“accident” is “an unintended or unexpected event.” 147 N.J. at 

327, 330 (holding that homeowner’s insurance provides coverage 

for parent’s vicarious liability for child’s vandalism of 

school). In Voorhees v. Preferred Mutual Insurance Co., in 

which the underlying action was a defamation suit brought by a 

teacher against a parent, we determined “that the accidental 

nature of an occurrence is determined by analyzing whether the 

alleged wrongdoer intended or expected to cause an injury.” 128 

N.J. 165, 183 (1992). Thus, we held that if the alleged 

wrongdoer did not intend or expect to cause an injury, then “the 

resulting injury is ‘accidental.’” Ibid. 

Based on those guiding principles, we find that the term 

“accident” in the policies at issue encompasses unintended and 
32

unexpected harm caused by negligent conduct. That construction 

of the term “accident” as it relates to an “occurrence” in a CGL 

policy aligns with both the commonly accepted definitions of 

“accident” and the legal import given to the term by both this 

and other jurisdictions. See, e.g., Greystone, supra, 661 F.3d 

at 1284 (finding “the term ‘accident’ . . . incorporates [both] 

a ‘fortuitous event,’ and ‘an unanticipated or unusual result

flowing from a commonplace cause’”) (internal citations 

omitted); Sheehan Constr., supra, 935 N.E.2d at 170 (“Implicit 

in the meaning of “accident” is the lack of intentionality.”);

Travelers, supra, 216 S.W.3d at 308 (“[C]onclud[ing] that the 

term ‘accident’ as used in the [1986] CGL [policy] means ‘an 

unforeseen or unexpected event’ . . . consider[ed] . . . from 

the perspective of the insured.”); Am. Girl, Inc., supra, 673 

N.W.2d at 76 (finding “accident” and therefore “occurrence” 

where “[n]either the cause nor the harm was intended, 

anticipated, or expected”).

Applying our definition, we must now determine whether the

consequential water damage to the completed, nondefective 

portions of Cypress Point flowing from the subcontractors’ poor

workmanship was foreseeable. Here, no one claims that the 

subcontractors intentionally performed substandard work that led 

to the water damage. Rather, relying on Weedo, the insurers

assert that damage to an insured’s work caused by a 
33

subcontractor’s faulty workmanship is foreseeable to the insured 

developer because damage to any portion of the completed project

is the normal, predictable risk of doing business. Thus, in the 

insurers’ view, a developer’s failure to ensure that a 

subcontractor’s work is sound results in a breach of contract, 

not a covered “accident” (or “occurrence”) under the terms of 

the policies. We disagree. 

To begin with, defendant’s argument that a breach of 

contract cannot give rise to a covered “occurrence” ignores the 

question of initial coverage. Indeed, as the Wisconsin Supreme 

Court highlighted in Am. Girl, Inc., supra,

[while] CGL policies generally do not cover 

contract claims arising out of the insured’s 

defective work or product, . . . this is by 

operation of the CGL’s business risk 

exclusions, not because a loss actionable only 

in contract can never be the result of an

“occurrence” within the meaning of the CGL’s 

initial grant of coverage. This distinction 

is sometimes overlooked, and has resulted in 

some regrettably overbroad generalizations 

about CGL policies in our case law.

[673 N.W.2d at 76 (emphasis added).]

See also U.S. Fire, supra, 979 So. 2d at 884 (rejecting CGL 

insurer’s “argument that a breach of contract can never result 

in an ‘accident,’” because such an assertion “is not supported 

by the plain language of the policies”). 

Moreover, the insurers’ argument fails to recognize that 

Weedo and its progeny were decided based upon exclusions 
34

contained within the pre-1986 CGL policy, rather than an 

interpretation of the policy’s terms granting coverage in the 

first instance. See Travelers, supra, 216 S.W.3d at 307 (noting 

that “Weedo . . . is [not] relevant to the determination of 

whether there has been an ‘occurrence’ under the terms of the 

‘insuring agreement’” because “[i]n Weedo, the insurer conceded 

that the ‘insuring agreement’ granted coverage and asserted that 

the sole issue . . . was whether the ‘exclusions’ precluded 

coverage” (citing Weedo, supra, 81 N.J. at 237 n.2)) (emphasis 

added); Am. Girl, Inc., supra, 673 N.W.2d at 77 (same). 

In any event, under our interpretation of the term 

“occurrence” in the policies, consequential harm caused by 

negligent work is an “accident.” Therefore, because the result 

of the subcontractors’ faulty workmanship here –- consequential 

water damage to the completed and nondefective portions of 

Cypress Point -- was an “accident,” it is an “occurrence” under 

the policies and is therefore covered so long as the other 

parameters set by the policies are met. See Weedo, supra, 81 

N.J. at 249 (noting that CGL policies do “not cover an accident 

of faulty workmanship but rather faulty workmanship that causes 

an accident”). 

B.

Having determined that the Association’s claims are covered 

under the policies’ general insuring agreement, we next turn to 
35

the final two steps in our analysis in which we examine the 

policies’ pertinent exclusions and then, if applicable, any 

exceptions to those exclusions. In doing so, our 

“responsibility is to give effect to the whole policy, not just 

one part of it.” Arrow Indus., supra, 232 N.J. Super. at 334 

(citing Boswell, supra, 38 N.J. Super. at 604); see also Herbert 

L. Farkas Co. v. N.Y. Fire Ins. Co., 5 N.J. 604, 610 (1950) 

(reinforcing principal that insurance policies “must be 

considered as a whole and effect given to every part thereof”). 

“In addition, we must also be mindful of the corollary rule of 

construction that if the clause in question is one of exclusion 

or exception designed to limit the protection afforded by the 

general coverage provisions of the policy, a strict 

interpretation is in order.” Bello v. Hurley Limousines, 249 

N.J. Super. 31, 40-41 (1991) (citing Butler, supra, 56 N.J. at

574; Mazzilli, supra, 35 N.J. at 7-8).

The policies at issue here, like those in Weedo and 

Firemen’s, contain numerous exclusions eliminating coverage for 

a variety of business risks including the cost of repairing 

damage to the contractor’s own work –- the “your work” 

exclusion. See Weedo, supra, 81 N.J. at 241; Firemen’s, supra, 

387 N.J. Super. at 441. As outlined above, the “your work” 

exclusion precludes coverage under the policies for “‘property 

damage’ to ‘your work’ arising out of it or any part of it.” 
36

Thus, under the second step of our three-part analysis, and 

viewing that exclusion in isolation, the policies would seem to 

eliminate coverage for the water damage to the completed 

sections of Cypress Point. 

However, the “your work” exclusion contains an important 

exception that “narrow[s] the exclusion by expressly declaring 

that it does not apply ‘if the damaged work or the work out of 

which the damage arises was performed on your behalf by a 

subcontractor.’” Sheehan Constr., supra, 935 N.E.2d at 171 

(quoting 1986 ISO standard form CGL policy). This exception to 

the “your work” exclusion was not contained in the 1976 ISO CGL 

form, but unquestionably applies in this case. Accordingly, the 

third and final step of our inquiry compels the conclusion that, 

because the water damage to the completed portions of Cypress 

Point is alleged to have arisen out of faulty workmanship 

performed by subcontractors, it is a covered loss. 

Indeed, as courts and commentators have acknowledged, the 

1986 ISO standard form CGL policy’s inclusion of the 

“subcontractor exception” “resulted both because of the demands 

of the policyholder community (which wanted this sort of 

coverage) and the view of insurers that the CGL [policy] was a 

more attractive product that could be better sold if it 

contained this coverage.” French, supra, 47 Gonz. L. Rev. at 8-

9 (citation omitted); see also Greystone, supra, 661 F.3d at 
37

1287 (noting that “the evolution of CGL-policy language shows 

that the current standard-form policy, which was used in the 

present case, was specifically designed to provide general 

contractors with at least some insurance coverage for damage 

caused by the faulty workmanship of their subcontractors”);

Lamar Homes, supra, 242 S.W.3d at 12 (“By incorporating the 

subcontractor exception into the ‘your-work’ exclusion, the 

insurance industry specifically contemplated coverage for 

property damage caused by a subcontractor’s defective 

performance.”). Moreover, the ISO itself addressed the addition 

of the subcontractor exception in a July 1986 circular, which 

“confirm[ed] that the 1986 revisions to the standard CGL policy 

. . . specifically ‘cover[ed] damage caused by faulty 

workmanship to other parts of work in progress; and damage to, 

or caused by, a subcontractor’s work after the insured’s 

operations are completed.’” U.S. Fire, supra, 979 So. 2d at 879 

(citing ISO Circular, Commercial Gen. Liab. Program Instructions 

Pamphlet, No. GL-86-204 (July 15, 1986)). 

Furthermore, we agree with other courts that “if the 

insurer decides that this is a risk it does not want to insure, 

it can clearly amend the policy to exclude coverage, as can be 

done simply by either eliminating the subcontractor exception or 

adding a breach of contract exclusion.” Id. at 891; Greystone, 

supra, 661 F.3d at 1288 (“Insurers are of course free to amend 
38

CGL agreements or offer riders so as to reallocate the risk of 

subcontractor negligence.”). The insurers here chose not to 

negotiate away the subcontractor exception and instead issued 

the developer a series of 1986 ISO standard form CGL policies

which explicitly provide coverage for property damage caused by 

a subcontractor’s defective performance. Thus, the 

Association’s claims of consequential damages caused by the 

subcontractors’ faulty workmanship are covered not only by the 

insuring agreements’ initial grant of coverage but also by the 

subcontractor exception to the “your work” exclusion. 

As a final note, we decline to address the issue raised by 

the Appellate Division of whether the subcontractor exception in 

the policies created a “reasonable expectation” that 

“consequential damages caused by the subcontractors’ faulty 

workmanship constituted ‘property damage’ and an 

‘occurrence[,]’” in light of our finding that the policy 

unambiguously provides coverage in such instances. See Di Orio 

v. New Jersey Mfrs. Ins. Co., 79 N.J. 257, 269-70 (observing 

that where insurance policy’s provision is not ambiguous or 

otherwise misleading, courts need not consider “objectively 

reasonable expectation” of average policyholder in interpreting 

the policy). In any event, to the extent that the parties 

interpret the term “accident” in the policy differently, thereby 

raising the specter of ambiguity within the policy itself, we 
39

note that such ambiguities are to be read in favor of the 

insured, not the insurer. See Doto, supra, 140 N.J. at 556

(noting “the importance of construing contracts of insurance to 

reflect the reasonable expectations of the insured in the face 

of ambiguous language and phrasing” in case addressing coverage 

under commercial-umbrella liability policy (citing State v. 

Signo Trading Int’l, 130 N.J. 51, 62 (1992))).

In sum, we hold that the trial court erred in entering 

summary judgement in favor of the insurers because the 

Association’s claims of consequential water damage resulting 

from defective workmanship performed by subcontractors 

constitutes both an “occurrence” and “property damage” under the 

terms of the policies. 

V.

The judgment of the Appellate Division is affirmed and the 

matter is remanded to the trial court for proceedings consistent 

with this opinion.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, 

PATTERSON, and FERNANDEZ-VINA join in JUSTICE SOLOMON’s opinion. 

JUDGE CUFF (temporarily assigned) did not participate.