IN THE SUPREME COURT OF IOWA 

No. 14–1274 

Filed June 10, 2016 

NATIONAL SURETY CORPORATION, an Illinois Corporation, 

 Appellant, 

vs. 

WESTLAKE INVESTMENTS, LLC, an Iowa Limited Liability Company, 

 Appellee. 

 On review from the Iowa Court of Appeals. 

 Appeal from the Iowa District Court for Polk County, Robert B. 

Hanson (summary judgment) and Eliza J. Ovrom (summary judgment 

and trial), Judges. 

 An insurer seeks further review of a court of appeals decision 

affirming in part a district court judgment finding it liable under the 

terms of an excess commercial general liability insurance policy for 

property damage arising due to defective workmanship by the insureds’ 

subcontractor. DECISION OF THE COURT OF APPEALS AFFIRMED; 

DISTRICT COURT JUDGMENT AFFIRMED IN PART AND REVERSED 

IN PART; CASE REMANDED WITH INSTRUCTIONS. 

 Todd S. Schenk and Amber Coisman of Tressler LLP, Chicago, 

Illinois, and Mollie Pawlosky of Dickinson, Mackaman, Tyler & Hagen, 

P.C., Des Moines, for appellant. 
2 

 Todd M. Lantz of Weinhardt & Logan, P.C., and Steven R. Eckley of 

Belin McCormick, P.C., Des Moines, for appellee. 

 Jeffrey A. Stone of Simmons Perrine Moyer Bergman PLC, Cedar 

Rapids, for amici curiae Hubbell Realty Company, Home Builders 

Association of Iowa, and Associated Builders & Contractors of Iowa. 

 Brenda K. Wallrichs of Lederer Weston Craig PLC, Cedar Rapids, 

for amici curiae American Insurance Association and Property Casualty 

Insurers Association of America. 

 
3 

WIGGINS, Justice.

An insurer sought a declaratory judgment stating it was not liable 

to the assignee of an excess commercial general liability (CGL) insurance 

policy for damages awarded to the assignee in federal district court. The 

assignee brought a counterclaim against the insurer for breach of 

contract. A jury concluded the insurer was liable to the assignee for the 

damages under the excess CGL policy. On appeal, the court of appeals 

affirmed the verdict against the insurer but reversed the district court 

award of prejudgment interest and remanded the case to the district 

court with instructions. The insurer sought further review, which we 

granted. On further review, we affirm the court of appeals decision 

affirming the district court judgment. We conclude the district court did 

not err in instructing the jury to determine whether the claimed damages 

arose due to an “accident” constituting an “occurrence” under the policy 

by considering “the viewpoint of the insureds and what they intended or 

should reasonably have expected.” Additionally, we conclude the district 

court did not err in ruling defective work performed by an insured’s 

subcontractor may constitute an occurrence under the policy. The court 

of appeals decision will stand as the final decision of this court with 

respect to all other issues raised on appeal. 

I. Background Facts and Proceedings. 

In 2002, developers and a general contractor began construction 

on an apartment complex in West Des Moines. In the spring of 2003, 

while the complex was still under construction, Westlake Investments, 

LLC, (Westlake) entered into negotiations to purchase it. In June, 

Westlake executed a purchase agreement. 

That summer, the developers and general contractor (the insureds) 

purchased a primary CGL insurance policy with a $1,000,000 policy 
4 

limit from Arch Insurance Group (Arch) and an excess CGL insurance 

policy with a $20,000,000 policy limit from National Surety Corporation 

(NSC). The terms of the Arch policy defined the scope of coverage under 

the NSC policy, as the NSC policy followed the form of and incorporated 

by reference the terms, conditions, and exclusions of the Arch policy. 

Both policies became effective on July 1, 2003, and expired on July 1, 

2004. 

During construction, numerous problems surfaced within the 

complex, including visible water penetration issues in several buildings. 

These problems did not hamper the sale to Westlake because the parties 

believed them to be aesthetic. However, that turned out not to be true. 

After the sale closed in November 2003, the construction defects 

throughout the complex continued to cause widespread water 

penetration issues. 

In February 2008, Westlake sued the insureds in federal district 

court, seeking to recover lost profits, repair costs, and other damages 

under tort and contract theories. The insureds in turn sued numerous 

third-party defendants, including the architect who designed the complex 

and the subcontractors who helped to construct it. 

As the primary insurer, Arch defended the suit on behalf of the 

insureds. After extensive pretrial litigation and discovery, Westlake and 

the insureds entered into settlement negotiations. Those negotiations 

culminated in a settlement agreement between Westlake, the insureds, 

and all but one of the subcontractors in September 2011. See Westlake 

Invs., LLC v. MLP Mgmt., LLC, 842 F. Supp. 2d 1121–25 (S.D. Iowa 2012). 

In February 2012, the federal district court entered a consent 

judgment for $15,600,000 in favor of Westlake. Arch contributed 

$1,000,000 (the policy limit on the primary CGL policy) toward 
5 

satisfaction of the judgment, and the third-party defendants contributed 

$1,737,500. Following these contributions, $12,762,500 awarded in the 

judgment remained unsatisfied. Pursuant to the settlement agreement, 

the insureds assigned their claims against NSC on the excess CGL policy 

to Westlake. 

In October 2011, shortly after the parties agreed to settle but 

before the federal district court entered the consent judgment against the 

insureds, NSC initiated this declaratory judgment action in state district 

court. Specifically, NSC sought entry of a declaration stating it had no 

obligation under the NSC policy to pay any portion of the judgment 

awarded to Westlake. Westlake counterclaimed for breach of contract 

and sought entry of a declaration stating the NSC policy obligated NSC to 

pay Westlake the unsatisfied portion of any judgment awarded to 

Westlake. 

Following discovery, Westlake and NSC filed competing motions for 

summary judgment on various grounds, one of which is relevant to this 

appeal. Westlake argued property damage resulting from defective work 

performed by an insured’s subcontractor may constitute an accident that 

qualifies as an occurrence covered by the Arch policy (and therefore the 

NSC policy). In response, NSC argued property damage caused by 

defective workmanship does not constitute an accident or an occurrence 

under a CGL insurance policy. 

Following a hearing, the district court granted Westlake’s motion 

for partial summary judgment and denied NSC’s motion for summary 

judgment. The district court concluded property damage resulting from 

defective work performed by an insured’s subcontractor may constitute 

an accident and an occurrence under a post-1986 CGL insurance policy 

written to a general contractor. 
6 

The case proceeded to a jury trial in March 2014. Over the course 

of three weeks, the jury heard testimony from numerous witnesses, and 

the district court admitted hundreds of exhibits. At the close of the 

evidence, both parties moved for a directed verdict. The court denied 

both motions and declined to disturb its summary judgment ruling that 

property damage resulting from defective work performed by an insured’s 

subcontractor may constitute an accident and an occurrence under the 

Arch policy. 

Before the district court submitted the case to the jury, both 

parties objected to several jury instructions. Of particular relevance to 

this appeal, NSC objected to the jury instruction defining the terms 

“accident” and “occurrence” on the ground that the meaning of the term 

“accident” is objective rather than subjective. Accordingly, NSC proposed 

an instruction on the meaning of the term “occurrence” that defined the 

term “accident” as “an undesigned, sudden and unexpected event.” 

The district court overruled all the objections to the jury 

instructions, noting its instruction on the meaning of the term 

“occurrence” relied on cases cited by both parties and concluding the 

instruction represented an accurate statement of Iowa law. Thus, the 

following jury instructions were among those the court submitted to the 

jury: 

Instruction No. 19 

[T]o prove the National Surety policy covers the 

consent judgment damages, Westlake must show that: 

1. Some or all of the consent judgment damages resulted 

from “property damage” that was caused by an 

“occurrence,” and 

2. Some or all of the consent judgment damages resulted 

from “property damage” that happened between July 

1, 2003 and July 1, 2004. 
7 

Instruction No. 20 

As used in Instruction No. 19, “property damage” 

means 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. 

You are instructed that property damage happened at 

the Westlake apartment complex at some point in time due 

to water intrusion. You must determine whether property 

damage happened during the policy period of July 1, 2003 to 

July 1, 2004. 

Instruction No. 21 

As used in Instruction No. 19, an “occurrence” is an 

accident, including continuous or repeated exposure to 

substantially the same general harmful conditions. Defective 

construction work performed by an insured is not covered by 

the policy; however, defective construction work performed 

by subcontractors may be an “occurrence” under the policy. 

“Accident” means an unplanned, sudden, and 

unexpected event. 

Whether something is an “accident” must be 

determined from the viewpoint of the insureds and what they 

intended or should reasonably have expected. An accident is 

unexpected so long as the insured does not expect both it 

and some damage. 

The jury deliberated for just over an hour before returning a verdict 

in favor of Westlake. Following the jury verdict, the district court entered 

a judgment awarding Westlake $12,439,500 with interest accruing at the 

statutory rate from the date of the filing of the counterclaim.1 

Westlake moved to amend the judgment with respect to 

prejudgment and postjudgment interest. Westlake argued the 

prejudgment interest on the damages awarded in the declaratory 

 1The judgment awarded by the district court reflected the portion of the consent 

judgment award that remained unsatisfied when the declaratory judgment was entered. 

By the time the declaratory judgment was entered, Westlake had been awarded an 

additional $253,000 following a bench trial to determine the liability of the 

subcontractor who declined to join in the settlement agreement. 
8 

judgment action properly accrued from the date the federal suit settled 

rather than the date the counterclaim in the declaratory judgment action 

was filed on the theory that the damages became liquidated damages 

when the parties settled. Westlake also requested an order clarifying the 

postjudgment interest on the damages awarded in the declaratory 

judgment action would accrue at the rate of five percent under Iowa Code 

section 535.2 (2013). 

The district court denied the motions. First, the court concluded 

the damages awarded in the consent judgment in the underlying action 

were not liquidated until the jury in the declaratory judgment action 

found them to be reasonable. Accordingly, the court determined 

prejudgment interest on the damages awarded in the declaratory 

judgment action accrued from the date Westlake filed its counterclaim, 

not the date the parties settled the underlying federal suit. The ruling 

did not expressly state which Iowa Code section governed the rate at 

which prejudgment interest accrued, however. Second, the court 

determined Iowa Code section 535.3 properly governed the rate at which 

postjudgment interest on the damages awarded in the declaratory 

judgment action would accrue. 

Meanwhile, NSC moved for a judgment notwithstanding the 

verdict, arguing once again that property damage caused by defective 

workmanship does not constitute an accident or an occurrence under 

Iowa law. NSC also moved for a new trial asserting the verdict was 

contrary to law and not supported by substantial evidence. Westlake 

resisted the motions. 

Following oral argument, the district court denied both motions, 

finding there was substantial evidence in the record to support the jury 

finding that Westlake’s damages resulted from property damage 
9 

occurring within the policy period. NSC filed an expedited motion to 

enlarge and amend the district court ruling, requesting the district court 

to specifically rule on additional arguments raised in its posttrial 

motions. The district court denied the motion, but its ruling specified 

additional grounds for its denial of the posttrial motions. 

NSC appealed. NSC argued the district court erroneously 

instructed the jury as to the meaning of the term “occurrence” because 

construction defects and resulting damage never constitute an 

occurrence under Iowa law. NSC also contended the court erroneously 

denied its motion for a new trial, arguing the jury did not deliberate 

before making its findings, the jury findings were not supported by 

substantial evidence, and the jury verdict was internally inconsistent. 

Finally, NSC asserted the court abused its discretion in declining to 

submit two proposed jury instructions to the jury. 

In response, Westlake argued the district court correctly permitted 

the jury to decide the occurrence issue and correctly denied the motion 

for new trial. Westlake also cross-appealed, arguing the court 

erroneously denied its motion to amend the judgment regarding 

prejudgment interest. 

We transferred the appeal to the court of appeals. The court of 

appeals affirmed the district court rulings on NSC’s posttrial motions, 

concluding the district court did not err in instructing the jury regarding 

the meaning of the term “occurrence.” The court of appeals also rejected 

NSC’s arguments that the jury did not deliberate, the jury findings were 

not supported by substantial evidence, and the jury verdict was 

internally inconsistent. On cross-appeal, the court of appeals concluded 

the district court correctly determined the date from which prejudgment 

interest on the damages awarded in the declaratory judgment action 
10 

accrued but failed to specify the applicable statutory default interest rate 

in its ruling. The court of appeals thus reversed the district court ruling 

on prejudgment interest and remanded the case for entry of a 

supplemental judgment specifying Iowa Code section 535.2(1)(a) set the 

rate at which the prejudgment interest accrued. 

NSC sought further review, which we granted. 

II. Issues. 

On further review, we may exercise our discretion to review all the 

issues raised on appeal or in the application for further review or only a 

portion thereof. Gits Mfg. Co. v. Frank, 855 N.W.2d 195, 197 (Iowa 

2014). In this case, we exercise that discretion to consider only whether 

the district court erroneously instructed the jury as to what constitutes 

an occurrence covered by the Arch policy language incorporated by 

reference into the NSC policy. To decide this question, we must 

determine whether property damage caused by defective work performed 

by an insured’s subcontractor may constitute an accident, and therefore 

an occurrence, for which coverage exists under the policy language 

included in post-1986 standard-form CGL insurance policies. The court 

of appeals decision will stand as the final decision of this court with 

respect to all other issues raised on appeal. Hills Bank & Trust Co. v. 

Converse, 772 N.W.2d 764, 770 (Iowa 2009). 

III. Scope of Review. 

When a party challenges a jury instruction on the ground that the 

instruction was erroneous, we review the instruction for correction of 

errors at law. Anderson v. State, 692 N.W.2d 360, 363 (Iowa 2005). In 

contrast, we review a district court ruling refusing to give a requested 

instruction for an abuse of discretion. Id. 
11 

To the extent our review of a district court ruling rests upon its 

interpretation of an insurance policy, we ordinarily review that 

interpretation for correction of errors at law. Boelman v. Grinnell Mut. 

Reins. Co., 826 N.W.2d 494, 500 (Iowa 2013). 

We likewise review a district court ruling denying a motion for a 

directed verdict for correction of errors at law. Crow v. Simpson, 871 

N.W.2d 98, 105 (Iowa 2015). 

IV. The Policy Language. 

The NSC policy contains the following insuring agreement: 

This coverage only applies to injury or damage covered 

by the Primary Insurance. The definitions, terms, 

conditions, limitations and exclusions of the Primary 

Policies, in effect at the inception date of this policy, apply 

to this coverage unless they are inconsistent with provisions 

of this policy or relate to premium, subrogation, other 

insurance, an obligation to investigate or defend, the amount 

or limits or insurance, payment of expenses, cancellation or 

any renewal agreement. 

Subject to the other provisions of this policy, We will 

pay on behalf of the Insured those sums in excess of 

Primary Insurance that the Insured becomes legally 

obligated to pay as damages. . . . 

If a Primary Policy applies on the basis of injury or 

damage which occurs during the period of that policy, then 

this coverage shall only apply on the same basis and in a like 

manner to injury or damage which occurs during Our Policy 

Period. 

The NSC policy also identified the Arch policy as the “primary policy.” 

Accordingly, NSC acknowledges the NSC policy followed the form of and 

incorporated by reference certain terms, conditions, and exclusions of 

the Arch policy, including those defining the scope of the coverage it 

afforded the insureds.2

 2It is common for an excess insurance policy providing coverage in addition to 

that provided by an underlying primary insurance policy to “follow the form” of and 
12 

The NSC policy incorporated the following insuring agreement in 

the Arch policy: 

We will pay those sums . . . that the insured becomes 

legally obligated to pay as damages because of “bodily injury” 

or “property damage” to which this insurance applies. . . . 

This insurance applies only to “bodily injury” and “property 

damage” which occurs during the policy period. The “bodily 

injury” and “property damage” must be caused by an 

“occurrence.” 

The NSC policy also incorporated the following definitions 

appearing in the Arch policy: 

“Occurrence” means an accident, including continuous or 

repeated exposure to substantially the same general harmful 

conditions. 

. . . . 

“Property damage” means: 

a. Physical injury to tangible properly, including all 

resulting loss of use of that property. All such 

loss of use will be deemed to occur at the time of 

physical injury that caused it; or 

b. Loss of use of tangible property that is not 

physically injured. All such loss will be deemed 

to occur at the time of the “occurrence” that 

caused it. . . . 

(Emphasis added.) Although the term “accident” appeared in the 

definition of the term “occurrence” in the Arch policy, neither the Arch 

policy nor the NSC policy explicitly defined it. 

________________________ 

incorporate the scope of coverage afforded under the primary policy. 4 Philip L. Bruner 

& Patrick J. O’Connor, Jr., Bruner & O’Connor on Construction Law § 11:542, Westlaw 

(database updated Mar. 2016). However, the extent to which the scope of coverage 

afforded by a follow-form excess policy mirrors that of the underlying primary policy 

ultimately depends upon the language it contains. Id. In this case, the parties do not 

dispute which terms of the Arch policy defined the scope of coverage afforded under the 

NSC policy. 
13 

The NSC policy also incorporated the following exclusions from 

coverage appearing in the Arch policy, each of which is relevant to this 

appeal: 

This insurance does not apply to: 

a. Expected or Intended Injury 

“Bodily injury” or “property damage” expected or 

intended from the standpoint of the insured. . . . 

. . . . 

j. Damage to Property 

“Property damage" to: 

. . . . 

(5) That particular part of real property on which 

you or any contractors or subcontractors 

working directly or indirectly on your behalf are 

performing operations, if the “property damage” 

arises out of those operations; or 

(6) That particular part of any property that must 

be restored, repaired, or replaced because “your 

work” was incorrectly performed on it. 

. . . . 

Paragraph (6) of this exclusion does not apply to 

“property damage included in the “products–completed 

operations hazard. 

. . . . 

l. Damage to “your work” 

“Property damage” to “your work” arising out of it or 

any part of it and included in the “products–completed 

operation hazard.” 

This 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. 
14 

m. Damage to lmpaired Property or Property Not 

Physically lnjured 

. . . . 

This exclusion does not apply to the loss of use of 

other property arising out of sudden and accidental

physical injury to “your product” or “your work” after it 

has been put to its intended use. 

(Emphasis added.) 

The NSC policy incorporated the following definition of the phrase 

“your work” appearing in the Arch policy: 

“Your work”: 

a. Means: 

(1) Work or operations performed by you or 

on your behalf, and 

(2) Materials, parts, or equipment furnished 

in connection with such work or 

operations. . . . 

Finally, the NSC policy incorporated the following endorsement 

addressing “property damage to construction projects” from the Arch 

policy: 

This insurance does not apply to property damage to the 

“project” or any party of the “project” that occurs during the 

course of construction. The project or part of the project will 

be deemed to be within the course of construction until it 

satisfies the definition of “products-completed operations 

hazard” as defined in this endorsement. 

. . . . 

a. “Products-completed operations hazard” includes all 

“bodily injury” and “property damage” arising out of 

“your product” or “your work” except:

i. Products that are still in your physical 

possession; or 

ii. Work that has not yet [been] completed or 

abandoned. 
15 

b. “Your work” will be deemed completed at the earliest of 

the following times: 

i. Completion and acceptance of the entire 

“project” by all parties designated in its 

construction agreement; 

ii. When all of the work to be done at the site has 

been completed if the “project” calls for work at 

more than one site; 

iii. When that part of the work done at the “project” 

has been put to its intended use by any person 

or organization other than another contractor or 

subcontractor working on the same “project;” or 

[sic] 

Work that may need service maintenance, correction, repair or 

replacement, but which is otherwise complete, will be treated 

as completed.

(Emphasis added.) 

With the exception of the endorsement defining the scope of the 

“products-completed operations hazard” under the Arch policy, the terms 

of the Arch policy relevant to this appeal mirror those appearing in the 

1986 standard-form CGL policy drafted by the Insurance Services Office, 

Inc. (ISO). ISO is an association of domestic property and casualty 

insurers that develops standard-form policies widely used in the 

insurance industry. Hartford Fire Ins. Co. v. California, 509 U.S. 764, 

772, 113 S. Ct. 2891, 2896, 125 L. Ed. 2d 612, 623 (1993). As the 

Supreme Court has noted, “most CGL insurance written in the United 

States is written on these forms.” Id. Today, virtually every contractor in 

the construction industry carries a CGL policy that is substantially 

identical to one of the ISO’s standard-form CGL policies. See James 

Duffy O’Connor, What Every Court Should Know About Insurance 

Coverage for Defective Construction, 5 J. Am. C. Constr. Law. No. 1, at 1, 

1 (2011) [hereinafter O’Connor]. 
16 

V. Interpretive Principles. 

In order to determine whether the district court erred, we must 

determine the meaning of the policy language governing the scope of 

coverage afforded by the NSC policy. We therefore begin our analysis by 

describing the principles that guide our interpretation of insurance 

policies. 

When we interpret an insurance policy, we determine the meaning 

of the words that govern its legal effect. See Thomas v. Progressive Cas. 

Ins. Co., 749 N.W.2d 678, 681 (Iowa 2008). The cardinal principle 

guiding our interpretation is that the intent of the parties at the time the 

policy was sold controls. LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 

307 (Iowa 1998). To determine the parties’ intent, we look to the 

language of the policy unless the meaning of that language is ambiguous. 

Id. When the language of the policy is ambiguous, we adopt the 

construction most favorable to the insured. Boelman, 826 N.W.2d at 

502. Because insurance policies are contracts of adhesion, an insurer 

assumes a duty to define in clear and explicit terms any limitations or 

exclusions to the scope of coverage a policy affords. Id. Nevertheless, 

where no ambiguity exists, we will not write a new policy to impose 

liability on the insurer. Id.

The mere fact that parties disagree as to the meaning of terms in 

an insurance policy does not establish the policy is ambiguous. Id. 

Rather, we determine whether an insurance policy is ambiguous by 

applying an objective test. Id. at 501. Policy language is ambiguous 

when, considered in the context of the policy as a whole, it is susceptible 

to two plausible interpretations. Id. Thus, we determine whether an 

ambiguity exists not by examining clauses seriatim, but by interpreting 
17 

the policy in its entirety, including all endorsements, declarations, or 

riders attached. Id. at 501–02. 

When interpreting an insurance policy, we give each policy term 

not defined in the policy its ordinary meaning. Id. at 501. We determine 

the ordinary meaning of the words in an insurance policy from the 

standpoint of a reasonable ordinary person, not from the standpoint of a 

specialist or an expert. Grinnell Mut. Reins. Co. v. Jungling, 654 N.W.2d 

530, 536 (Iowa 2002). We strive to interpret every term in an insurance 

policy in a manner that will not render it superfluous unless it is evident 

that adopting an interpretation giving meaning to a term would be 

unreasonable when we consider the term in context. Kibbee v. State 

Farm Fire & Cas. Co., 525 N.W.2d 866, 869 (Iowa 1994). 

VI. Analysis. 

The district court instructed the jury that the term “accident” 

means “an unplanned, sudden, and unexpected event . . . determined 

from the viewpoint of the insureds and what they intended or should 

reasonably have expected.” The court provided the jury a separate 

instruction stating, “Defective construction work performed by an 

insured is not covered by the policy; however, defective construction 

work performed by subcontractors may be an ‘occurrence’ under the 

policy.” 

Before the court submitted the case to the jury, NSC objected to 

the jury instruction defining the terms “accident” and “occurrence.” 

Specifically, NSC proposed a jury instruction defining an accident as “an 

undesigned, sudden and unexpected event” and argued the term should 

be interpreted objectively. NSC subsequently moved for a directed 

verdict, arguing that defective workmanship does not constitute an 

accident or an occurrence under controlling Iowa law. On appeal, NSC 
18 

argued the district court erroneously instructed the jury as to the 

meaning of “occurrence” because construction defects and resulting 

damage never constitute an occurrence.3

We first consider whether the district court erroneously instructed 

the jury to determine whether an accident occurred by considering “the 

viewpoint of the insureds and what they intended or should reasonably 

have expected.” We previously concluded an intentional act resulting in 

unexpected and unintended property damage qualifies as an accident 

that amounts to an occurrence covered by a CGL policy so long as the 

insured did not expect and intend both the act itself and the resulting 

harm in West Bend Mutual Insurance Co. v. Iowa Iron Works, Inc., 503 

N.W.2d 596, 600–01 (Iowa 1993). 

The standard-form CGL policy we interpreted in West Bend defined 

the term “occurrence” as “an accident, including continuous or repeated 

 3The jury instruction NSC proposed on the meaning of “occurrence” did not 

explicitly exclude all property damage arising due to defective construction. In relevant 

part, it stated, 

To establish that the “property damage” was caused by an “occurrence,” 

Westlake must prove that reasonable and prudent parties in the 

positions of [the insureds] did not know of or expect, and should not 

have known of or expected, property damage resulting from defective 

construction. You do not, however, have to find that [the insureds] knew 

of, expected or should have known of, or should have expected, the full 

extent of the damages resulting from the defective construction in order 

to find there was no “occurrence.” 

NSC requested a separate instruction that stated, 

Damages resulting from “property damage” to the Westlake apartments 

caused by defective construction are not caused by “occurrence.” 

Westlake must prove by a preponderance of the evidence that the 

property damage was not caused by defective construction. 

Westlake argues NSC waived its argument that property damage caused by defective 

workmanship never constitutes an occurrence by requesting neither a jury instruction 

reflecting this theory nor a judgment in its favor on this basis. For purposes of our 

analysis, we assume without deciding that NSC preserved error. 
19 

exposure to conditions, which results in bodily injury or property damage 

neither expected nor intended from the standpoint of the insured.” Id. at 

600. In contrast, the modern standard-form CGL policy upon which the 

Arch policy was based defines the term “occurrence” as “an accident, 

including continuous or repeated exposure to substantially the same 

general harmful conditions.” However, it also contains an exclusion and 

an exception to an exclusion particularly relevant to the meaning of the 

term “accident.” Namely, it contains an exclusion from coverage for 

property damage “expected or intended from the standpoint of the 

insured”4 and an exception to an exclusion from coverage assuring the 

insured may collect certain damages “arising out of sudden and 

accidental physical injury” to work product in limited circumstances.5

An undefined term in an insurance policy must be construed in 

light of the entire policy, including any exclusions. See Boelman, 826 

N.W.2d at 501–02. Hence, we previously recognized a CGL policy 

containing an exclusion precluding coverage for damage “expected or 

intended from the standpoint of the insured” relies on the “common 

definition” of the term “accident” as “an unexpected and unintended 

event.” United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 

648, 652 (Iowa 2002) (quoting Weber v. IMT Ins. Co., 462 N.W.2d 283, 

287 (Iowa 1990)). Moreover, we previously found the use of the words 

“sudden and accidental” in a CGL insurance policy forecloses any 

interpretation of the term “sudden” that would render that term 

redundant in light of our interpretation of the term “accidental.” Iowa 

 4See exclusion (a) reproduced in section IV of this opinion. 

5See exclusion (m) reproduced in section IV of this opinion. 
20 

Comprehensive Petroleum Underground Storage Tank Fund Bd. v. 

Farmland Mut. Ins. Co., 568 N.W.2d 815, 818 (Iowa 1997). 

Applying the same logic, we conclude that in the context of a 

modern standard-form CGL policy containing an exclusion precluding 

coverage for property damage “expected or intended from the standpoint 

of the insured,” the term “accident” means “an unexpected and 

unintended event.” See Shelly Funeral Home, 642 N.W.2d at 652; cf. 4 

Douglas L. Patin, Law & Practice of Insurance Coverage Litigation § 45:9, 

Westlaw (database updated July 2015) (concluding “there is no 

significant difference” between the definition of “occurrence” contained in 

the 1973 and 1986 standard-form CGL policies). An intentional act 

resulting in property damage the insured did not expect or intend 

qualifies as an accident amounting to an occurrence as defined in a 

modern standard-form CGL policy so long as the insured did not expect 

and intend both the act itself and the resulting property damage. See W. 

Bend Mut., 503 N.W.2d at 600–01. 

Considered from the standpoint of the insured, “a deliberate act, 

performed negligently, is an accident if the effect is not the intended or 

expected result; that is, the result would have been different had the 

deliberate act been performed correctly.” Lamar Homes, Inc. v. MidContinent Cas. Co., 242 S.W.3d 1, 8 (Tex. 2007); see Shelly Funeral 

Home, 642 N.W.2d at 653 (rejecting the argument that “the standpoint of 

the insured is irrelevant” in determining whether an accident 

constituting an occurrence triggering CGL coverage took place). 

Accordingly, an intentional act does not constitute an accident that 

qualifies as an occurrence covered by a modern standard-form CGL 

policy when the resulting harm “was the natural and expected result of 

the insured’s actions, that is, was highly probable whether the insured 
21 

was negligent or not.” Lamar Homes, 242 S.W.3d at 9; see Shelly Funeral 

Home, 642 N.W.2d at 653–55 (concluding injuries resulting from an 

insured’s negligent supervision of an employee constituted an occurrence 

because the insured did not know harmful consequences would flow 

from its own acts or omissions). 

Accordingly, we conclude the district court correctly instructed the 

jury to determine whether the claimed damages arose due to an accident 

that constituted an occurrence eligible for coverage under the insuring 

agreement in the Arch policy by considering “the viewpoint of the 

insureds and what they intended or should reasonably have expected.”6 

Whether an event amounts to an accident that constitutes an occurrence 

triggering coverage under a modern standard-form CGL policy turns on 

whether the event itself and the resulting harm were both “expected or 

intended from the standpoint of the insured.” 

We next consider whether the district court erroneously denied 

NSC’s motion for directed verdict. The court denied NSC’s motion 

because it concluded defective work performed by an insured’s 

subcontractor may constitute an occurrence under the Arch policy. NSC 

claims defective workmanship cannot constitute an accident or an 

occurrence as a matter of law. 

 6Though the jury instruction defined “accident” as “an unplanned, sudden, and 

unexpected event” rather than “an unexpected and unintended event,” we need not 

consider whether the district court’s inclusion of a temporal component in this 

definition was erroneous because NSC’s proposed instruction on the meaning of 

“occurrence” defined “accident” to mean “an undesigned, sudden and unexpected 

event.” In any event, we note that ongoing exposure to harmful conditions appears to 

qualify as an accident that constitutes an occurrence covered by the Arch policy, as the 

policy defined “occurrence” as “an accident, including continuous or repeated exposure 

to substantially the same general harmful conditions.” 
22 

The cornerstone of NSC’s argument that defective workmanship 

never constitutes an accident or an occurrence under Iowa law is Pursell 

Construction v. Hawkeye-Security Insurance, 596 N.W.2d 67 (Iowa 1999). 

In Pursell, we considered whether a CGL policy covered damages arising 

from breach-of-contract and negligence claims brought against an 

insured who failed to construct two houses in a floodplain at the 

elevation required by city ordinance, thereby causing the houses to be 

uninhabitable. Id. at 68. We treated the claim against the insurer as 

one for the cost of repairing the insured’s own defective workmanship, as 

the claimed damages were the cost of raising the elevation of the houses 

by approximately two feet. Id. at 68, 70. We concluded the policy did 

not cover the cost of repairing an insured’s own defective work product 

because “defective workmanship standing alone, that is, resulting in 

damages only to the work product itself, is not an occurrence under a 

CGL policy.” Id. at 71. In arriving at this conclusion, we reasoned that 

interpreting the policy to cover repairs to the insured’s own defective 

workmanship would convert the insurer into “a guarantor of the 

insured’s performance” on a contract, causing the policy to take on “the 

attributes of a performance bond.” Id. (quoting U.S. Fid. & Guar. Corp. v. 

Advance Roofing & Supply Co., 788 P.2d 1227, 1233 (Ariz. Ct. App. 

1989)). 

For several reasons, we reject NSC’s argument that Pursell is 

controlling in this case. First, determining whether defective work 

performed by an insured’s subcontractor may constitute an occurrence 

covered by the Arch policy requires us to consider the entire policy before 

us, including its relevant exceptions and exclusions. See Boelman, 826 

N.W.2d at 501–02. Notably, the standard-form CGL policy upon which 

the Arch policy was based defines the term “occurrence” as “an accident, 
23 

including continuous or repeated exposure to substantially the same 

general harmful conditions,” but it does not define the term “accident.” 

Interpreting an undefined term in an insuring agreement requires us to 

determine whether the term is ambiguous in the context of the policy as 

a whole. Id. Consequently, interpreting the insuring agreement in the 

Arch policy requires us to evaluate the meaning of the term “accident” in 

the context of the policy as a whole. In Pursell, we did not address 

whether language contained in the exceptions and exclusions appearing 

in the body of the policy created any ambiguity with respect to the 

meaning of the term “accident.” See 596 N.W.2d at 69–70. 

Relatedly, Pursell is factually distinguishable from the present 

case. In Pursell, the contractor who performed the defective work was 

the insured. Id. at 68. The only damage alleged to have resulted from 

the defective work was the cost of repairing the insured’s own defective 

work product. Id. at 68, 70–71. In contrast, Westlake proved defective 

installation of the building wrap and flashings resulted in water 

penetration that caused widespread consequential damage to interior 

building components that were not defective, including the wood framing, 

drywall, insulation, carpet, nails, staples, and other metal fasteners 

inside the walls.7 Westlake also established the defective work that led to 

the claimed damages was performed by insureds’ subcontractors, not the 

insureds themselves. 

 7NSC argues the damages in the consent judgment included the cost of 

removing and reinstalling the defectively installed building wrap and flashings. 

However, Westlake established this defective work product resulted from defective work 

performed by the insureds’ subcontractors, not the insureds themselves. In addition, 

Westlake presented evidence demonstrating water penetration caused widespread 

consequential physical damage to interior building components underneath the building 

wrap and flashings such that removing the building envelope was a necessary step in 

repairing the consequential damage to other parts of the complex. 
24 

Most importantly, our holding in Pursell was limited by its plain 

language to situations in which the insured performed defective work 

and sought coverage for the cost of repairing the defective work product. 

Id. at 71. By implication, Pursell anticipated that a CGL policy might 

provide coverage for at least some claims arising from defective 

construction, just not claims seeking coverage for repairing or replacing 

the insured’s own defective work product.8

Finally, although we have never explicitly overruled Pursell, we 

later interpreted identical language defining the terms “accident” and 

“occurrence” in a CGL policy to cover compensatory damages awarded 

based on an insured’s negligent supervision in Shelly Funeral Home. 642 

N.W.2d at 653. As here, the claim we considered in Shelly Funeral Home 

stemmed from a suit against an insured in which one third party who 

was not a party to an insurance contract sought damages against the 

insured for harm caused by another third party who worked under the 

insured’s supervision. Id. at 651. Because the policy explicitly 

precluded coverage for harm “expected or intended from the standpoint 

of the insured,” we reasoned, it relied upon “the common definition” of 

the term “accident” as an “unexpected and unintended” event. Id. at 

652–53 (citing Weber, 462 N.W.2d at 287). We therefore determined 

harm resulting from the insured’s negligent supervision of an employee 

constituted an occurrence for which there was coverage under the 

policy’s insuring agreement because the insured did not expect or intend 

the harmful consequences that flowed from its own acts or omissions. 

 8Because NSC does not dispute that the damage to the apartment complex 

resulted from the insureds’ subcontractors’ defective workmanship, we need not 

consider whether property damage arising due to the insured’s own defective 

workmanship may constitute an occurrence in the context of a modern standard-form 

CGL policy containing the exclusions the Arch policy contains. 
25 

Id. at 653–54. We concluded that when “an injury occurs without the 

agency of the insured, it may be logically termed ‘accidental,’ even 

though it may be brought about designedly by another person.” Id. at 

654 (quoting Silverball Amusement, Inc. v. Utah Home Fire Ins. Co., 842 F. 

Supp. 1151, 1157–58 (W.D. Ark.), aff'd, 33 F.3d 1476 (8th Cir. 1994)). 

Our holding in Shelly Funeral Home calls into question the 

applicability of the holding NSC relies upon in the context of the claim 

before us.9 NSC essentially argues the claimed damages arose due to the 

insureds’ negligent supervision of the subcontractors whose defective 

workmanship resulted in damage to the Westlake complex. 

We are unable to identify any case in which this court previously 

considered the question of whether defective work negligently performed 

by an insured’s subcontractor may constitute an occurrence covered by a 

modern standard-form CGL policy. Our past cases considering whether 

defective workmanship constituted an occurrence triggering coverage 

under an insurance policy based on the modern standard-form CGL 

policy under Iowa law involved defective work performed by the insured, 

not the insured’s subcontractor. See Pursell, 596 N.W.2d at 68; Yegge v. 

Integrity Mut. Ins. Co., 534 N.W.2d 100, 101 (Iowa 1995); see also Liberty 

Mut. Ins. Co. v. Pella Corp., 650 F.3d 1161, 1164 (8th Cir. 2011). 

 9We need not decide whether to overrule Pursell to decide the case before us, as 

the damages Westlake claims arose because defective work performed by the insureds’ 

subcontractors caused extensive property damage to the complex. We note many 

courts that have concluded defective workmanship does not constitute an occurrence 

under circumstances similar to those we considered in Pursell have subsequently 

concluded defective workmanship performed by an insured’s subcontractor may 

constitute an occurrence covered by the insuring agreement in a modern standard-form 

CGL policy. See, e.g., Sheehan Constr. Co. v. Cont’l Cas. Co., 935 N.E.2d 160, 170 (Ind. 

2010); Architex Ass’n, Inc. v. Scottsdale Ins. Co., 27 So. 3d 1148, 1157–61 (Miss. 2010); 

Auto Owners Ins. Co. v. Newman, 684 S.E.2d 541, 544–45 (S.C. 2009); Travelers Indem. 

Co. of Am. v. Moore & Assocs., Inc., 216 S.W.3d 302, 308, 310–11 (Tenn. 2007); Lamar 

Homes, 242 S.W.3d at 8–12; Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 673 N.W.2d 65, 

75–78, 84 (Wis. 2004). 
26 

NSC argues the exceptions and exclusions the Arch policy contains 

are irrelevant to the question of what qualifies for coverage under its 

insuring agreement. We disagree. 

To determine if an insurance policy affords coverage under a 

particular set of circumstances, we generally look first to the insuring 

agreement, then to the exclusions and the exceptions to the exclusions. 

Pursell, 596 N.W.2d at 69. But before we can construe the language in 

an insuring agreement, we must first determine whether it is ambiguous. 

See Boelman, 826 N.W.2d at 501. In making that determination, our 

analysis begins with consideration of the policy as a whole. See id. at 

501–02. Thus, although exceptions and exclusions cannot “create 

coverage that otherwise is lacking” under an insuring agreement, they 

offer insight into whether coverage exists under an insuring agreement 

by shedding light on what the terms it contains mean. Amish 

Connection, Inc. v. State Farm Fire & Cas. Co., 861 N.W.2d 230, 239 (Iowa 

2015) (quoting Hartford Cas. Ins. Co. v. Evansville Vanderburgh, Pub. 

Library, 860 N.E.2d 636, 646 (Ind. Ct. App. 2007)); see U.S. Fire Ins. Co. 

v. J.S.U.B., Inc., 979 So. 2d 871, 886 (Fla. 2007); Sheehan Constr. Co. v. 

Cont’l Cas. Co., 935 N.E.2d 160, 171 (Ind. 2010). 

Reading the Arch policy as a whole, we conclude it plainly 

contemplates coverage for some property damage caused by defective 

work performed by an insured’s subcontractor. In short, interpreting the 

term “accident” or the term “occurrence” so narrowly as to preclude 

coverage for all property damage arising from negligent work performed 

by an insured’s subcontractor would be unreasonable in light of the 

exceptions and exclusions the Arch policy contains. 

For example, the policy’s “damage to property” exclusion generally 

excludes from coverage property damage to the “particular part of any 
27 

property that must be restored, repaired, or replaced” due to work 

“incorrectly performed on it” by or on behalf of the insured.10 

Nonetheless, this exclusion does not apply to property damage included 

within the policy’s definition of “products-completed operations hazard.” 

Thus, property damage requiring property to be restored, repaired, or 

replaced due to work incorrectly performed on it by or on behalf of the 

insured is generally not excluded from coverage if the property damage 

arises out of completed work.11 18 New Appleman on Insurance Law 

Library Edition § 18.03[13][iv], at 18-91 (Jeffrey E. Thomas & Francis J. 

Mootz, III, eds., 2015); see Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 673 

N.W.2d 65, 81–82 (Wis. 2004). 

Similarly, the policy’s “your work” exclusion generally excludes 

from coverage property damage arising out of completed work performed 

by or on behalf of the insured.12 However, the exclusion contains an 

exception indicating property damage to work performed on behalf of the 

insured remains compensable assuming no other coverage exclusion 

applies if it was performed by the insured’s subcontractor. Specifically, it 

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

the work out of which the damage arises was performed . . . by a 

subcontractor” on behalf of the insured.13 The effect of this 

subcontractor exception to the “your work” exclusion is to preserve 

 10See exclusion (j)(6) and paragraph (a)(1) of the definition of “your work” 

reproduced in section IV of this opinion. 

11See exclusion (j)(6), the exception to exclusion (j)(6), and the definition of the 

“products-completed operations hazard” reproduced in section IV of this opinion. 

12See exclusion (l), paragraph (a)(1) in the definition of “your work,” and the 

definition of the “products-completed operations hazard” reproduced in section IV of 

this opinion. 

13See the exception to exclusion (l) reproduced in section IV of this opinion. 
28 

coverage the “your work” exclusion would otherwise negate. K & L 

Homes, Inc. v. Am. Family Mut. Ins. Co., 829 N.W.2d 724, 737 (N.D. 2013) 

(quoting Lamar Homes, 242 S.W.3d at 12); see 18 New Appleman on 

Insurance Law Library Edition § 18.03[12][d], at 18-95. 

It would be illogical for an insurance policy to contain an exclusion 

negating coverage its insuring agreement did not actually provide or an 

exception to an exclusion restoring it. See Greystone Constr., Inc. v. Nat'l 

Fire & Marine Ins. Co., 661 F.3d 1272, 1287 (10th Cir. 2011); J.S.U.B.,

979 So. 2d at 880; Sheehan Constr., 935 N.E.2d at 171; Lee Builders, Inc. 

v. Farm Bureau Mut. Ins. Co., 137 P.3d 486, 494 (Kan. 2006); Architex 

Ass’n, Inc. v. Scottsdale Ins. Co., 27 So. 3d 1148, 1161 (Miss. 2010). Just 

as we will not strain to interpret an insurance policy to impose liability 

on an insurer, we will not strain to interpret an insurance policy to 

deprive an insured of coverage the policy clearly contemplates. See 

Boelman, 826 N.W.2d at 501–02. Nor will we interpret an insurance 

policy in a manner that renders an exception or exclusion it contains to 

be superfluous unless it is evident interpreting the policy to give meaning 

to a particular exception or exclusion would be unreasonable in the 

context of the structure and format of the policy as a whole. Cf. Kibbee, 

525 N.W.2d at 869. 

We think a reasonable ordinary person who read the modern 

standard-form CGL policy containing the subcontractor exception to the 

“your work” exclusion in its entirety would believe it covered defective 

work performed by the insured’s subcontractor unless the resulting 

property damage was specifically precluded from coverage by an 

exclusion or endorsement. See Jungling, 654 N.W.2d at 536. 

Accordingly, we interpret the insuring agreement in the modern 

standard-form CGL policy as providing coverage for property damage 
29 

arising out of defective work performed by an insured’s subcontractor 

unless the resulting property damage is specifically precluded from 

coverage by an exclusion or endorsement. In addition, we conclude the 

defective work performed by the insureds’ subcontractors falls within the 

definition of “occurrence” in the insuring agreement appearing in the 

Arch policy. 

Our conclusion that the insuring agreement in a modern standardform CGL policy ordinarily covers property damage arising due to 

defective workmanship by an insured’s subcontractor is reinforced by 

both the nature of the ISO’s standard-form CGL policy and its evolution. 

The purpose of CGL policies used in the home-construction industry is to 

protect homebuilders from risks associated with homeowners asserting 

postconstruction claims for damage to homes caused by alleged 

construction defects. Auto Owners Ins. Co. v. Newman, 684 S.E.2d 541, 

545 (S.C. 2009). Construction-specific exclusions narrow the scope of 

coverage afforded by standard-form CGL policies and exclude from 

coverage property damage associated with certain categories of risks. Id. 

Over time, the language contained in the insuring agreements and the 

exclusions appearing in standard-form CGL policies have been 

periodically updated to adjust the scope of coverage such policies afford. 

The precursor to the modern standard-form CGL policy was 

promulgated in 1940 and subsequently underwent five principal 

revisions, the most recent of which occurred in 1986. Sheehan Constr., 

935 N.E.2d at 162. Unlike the 1986 version of the standard-form CGL 

policy upon which the Arch policy was based, prior versions of the 

standard-form CGL policy contained an exclusion precluding coverage for 

“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 
30 

materials, parts or equipment furnished in connection therewith.” Id.

(quoting French v. Assurance Co. of Am., 448 F.3d 693, 700 (4th Cir. 

2006)). Courts interpreted the language of this “work performed” 

exclusion to preclude from coverage property damage resulting from 

work performed by an insured’s subcontractor, including damage to the 

insured’s own work. See French, 448 F.3d at 700. As subcontractors 

grew increasingly integral to the construction industry, however, many 

general contractors became unhappy with the scope of coverage provided 

under standard-form CGL policies. Greystone, 661 F.3d at 1287. 

“General contractors needed coverage for property damage that arose 

from the work of their subcontractors, a risk they could not control by 

the exercise of general supervision and coordination.” O’Connor, 5 J. 

Am. C. Constr. Law., no. 1, at 5. 

The insurance industry responded by offering two versions of an 

optional broad form property damage (BFPD) endorsement intended to 

narrow the “work performed” exclusion. Scott C. Turner, Insurance 

Coverage of Construction Disputes § 3:8, Westlaw (database updated 

June 2016). With respect to ongoing work, both versions of the 

endorsement narrowed the “work performed” exclusion to preclude 

coverage only for “that particular part” of the ongoing work that was 

defective, rather than “any portion” of the insured’s ongoing work. Id. 

With respect to completed work, one version of the endorsement also 

eliminated the “on behalf of” language from the “work performed” 

exclusion. Id. The elimination of this language effectively extended 

liability coverage under a CGL policy including the endorsement to 

damage arising out of work performed by an insured’s subcontractor. 

Greystone, 661 F.3d at 1288. 
31 

By the mid-1970s, insureds were paying higher premiums to add 

the latter endorsement to their CGL policies in order to extend their CGL 

coverage to damage arising out of their subcontractors’ work. See id.; 

French, 448 F.3d at 701. By 1986, the BFPD endorsement extending 

liability coverage to work performed by subcontractors was so popular 

that the ISO incorporated it directly into the body of its standard-form 

CGL policy in the form of a subcontractor exception to the “your work” 

exclusion. See O’Connor, 5 J. Am. C. Constr. Law., no. 1, at 5. “This 

resulted both because of the demands of the policyholder community . . . 

and the view of insurers that the CGL was a more attractive product that 

could be better sold if it contained this coverage.” Greystone, 661 F.3d at 

1288 (quoting 2 Jeffrey W. Stempel, Stempel on Insurance Contracts

§ 14.13[D] (2007)). 

Following the 1986 revisions to its standard-form CGL policy, the 

ISO broadcast to both the construction and insurance industries that the 

revisions were intended to extend CGL coverage under standard-form 

policies to property damage arising from defective construction. 

O’Connor, 5 J. Am. C. Constr. Law., no. 1, at 5–6. In a circular intended 

to provide guidance regarding the impact of the 1986 revisions, the ISO 

confirmed their effect was to provide coverage for “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.” J.S.U.B., 979 So. 2d at 879 (quoting Insurance Services 

Office Circular, Commercial General Liability Program Instructions 

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

The history of the standard-form CGL policy and the industry’s 

own interpretative literature over the course of that history confirm that 

our interpretation of the insuring agreement in the Arch policy is correct. 
32 

Of course, “CGL policy provisions have a special meaning within the 

insurance industry, which includes the insurance brokers and risk 

managers who advise contractors, real estate developers, and others 

within the construction industry as to what CGL coverage to purchase.” 

Turner, Insurance Coverage of Construction Disputes § 3:8. Clearly, the 

1986 standard-form CGL policy upon which the Arch policy was based 

“was specifically designed to provide general contractors with at least 

some insurance coverage for damage caused by the faulty workmanship 

of their subcontractors.” Greystone, 661 F.3d at 1287. Consequently, 

our conclusion that defective work performed by an insured’s 

subcontractor may constitute an occurrence triggering coverage under 

the modern standard-form CGL policy reflects the overwhelming trend 

among courts and commentators interpreting such policies. See, e.g., 

Greystone, 661 F.3d at 1290 (applying Colorado law); French, 448 F.3d at 

706 (applying Maryland law); J.S.U.B., 979 So. 2d at 888 (Florida); 

Sheehan Constr., 935 N.E.2d at 171 (Indiana); Lee Builders, 137 P.3d at 

495 (Kansas); Architex, 27 So. 3d at 1161 (Mississippi); K & L Homes, 

829 N.W.2d at 736 (North Dakota); Auto Owners Ins., 684 S.E.2d at 544 

(South Carolina); Lamar Homes, 242 S.W.3d at 11; Travelers Indem., 216 

S.W.3d at 310 (Tennessee); Am. Girl, 673 N.W.2d at 83–84 (Wisconsin); 

see also Turner, Insurance Coverage of Construction Disputes § 33:9 

(listing cases and commentators interpreting standard-form CGL policies 

to cover property damage caused by subcontractor work in light of the 

subcontractor exception to the “your work” exclusion). 

Finally, our decision is further reinforced by recent decisions of 

other state supreme courts interpreting CGL policies containing the 

subcontractor exception to the “your work” exclusion in the context of 

property damage arising when exposure to moisture resulted from 
33 

defective workmanship. Sheehan Constr., 935 N.E.2d at 171–72; Lee 

Builders, 137 P.3d at 489, 494; Travelers Indem., 216 S.W.3d at 304, 

306. 

In particular, the Indiana Supreme Court recently determined a 

CGL policy containing the subcontractor exception to the “your work” 

exclusion covered water damage caused by the defective work of the 

insured’s subcontractors. Sheehan Constr., 935 N.E.2d at 163–64. The 

defective workmanship included, 

lack of adequate flashing and quality caulking around the 

windows, lack of a weather resistant barrier behind the brick 

veneer to protect the wood components of the wall, 

improperly installed roofing shingles, improperly flashed or 

sealed openings for the chimney and vents, and inadequate 

ventilation in the crawl space. 

Id. at 163. The court concluded the question of whether repair or 

replacement of “leaking windows, fungus growth on the siding, decayed 

OSB sheathing, deteriorating and decaying floor joists, and . . . water 

stained carpeting” was covered under the policy turned on whether the 

defective workmanship was “intentional from the viewpoint of the 

insured.” Id. at 163, 169–72. In arriving at this conclusion, the court 

noted, 

A shingle falling and injuring a person is a natural 

consequence of an improperly installed shingle just as water 

damage is a natural consequence of an improperly installed 

window. If we assume that either the shingle or the window 

installation will be completed negligently, it is foreseeable 

that damages will result. If, however, we assume that the 

installation of both the shingle and the window will be 

completed properly, then neither the falling shingle nor the 

water penetration is foreseeable and both events are 

“accidents.” 

Id. at 170 (quoting Travelers Indem., 216 S.W.3d at 309). 

 Similarly, the Kansas Supreme Court recently determined a CGL 

policy containing the subcontractor exception to the “your work” 
34 

exclusion covered property damage caused by continuous exposure to 

moisture arising due to faulty materials and workmanship provided by 

the insured’s subcontractor because the resulting damage was “both 

unforeseen and unintended.” Lee Builders, 137 P.3d at 489–91, 495. In 

doing so, the court reasoned that clearly distinguishing between what 

constituted an occurrence and what did not was the obligation of the 

insurer who drafted the policy. Id. at 495. Accordingly, the court 

determined coverage existed in part because, even if the court were to 

assume the policy language defining an “occurrence” as “an accident, 

including continuous or repeated exposure to substantially the same 

general harmful conditions” was ambiguous, it was required to construe 

such ambiguity against the insurer. Id.

Likewise, the Tennessee Supreme Court recently determined 

property damage arising due to water penetration resulting from an 

insured’s subcontractor’s faulty installation of windows constituted an 

occurrence covered by a CGL policy containing the subcontractor 

exception to the “your work” exclusion. Travelers Indem., 216 S.W.3d at 

304, 306. The court rejected the insurer’s argument that water 

penetration was not unforeseen or unexpected from the standpoint of the 

insured because it was a natural consequence of faulty window 

installation. Id. at 308. Interpreting the term “accident” in a manner 

that would exclude from coverage all property damage arising from 

negligence, the court reasoned, would render CGL policies “almost 

meaningless.” Id. Accordingly, the court compared water penetration 

caused by defective window installation “to the automobile accident that 

is caused by the faulty tire.” Id. at 310. The court thus concluded the 

property damage resulting from water penetration constituted an 

occurrence covered by the policy because the insured could not have 
35 

foreseen the water penetration if the work had been completed properly. 

Id. at 311. 

As the United States Court of Appeals for the Tenth Circuit has 

observed, “the degree of business risk that is covered by a CGL policy is a 

negotiated agreement between contractual parties, which should not be 

disturbed by a court’s view of whether business-risk coverage is 

appropriate.” Greystone, 661 F.3d at 1288. Insurers know how to 

modify the allocation of risk in CGL policies should they wish to do so. 

See id.; J.S.U.B., 979 So. 2d at 891; see also Lamar Homes, 242 S.W.3d 

at 12; 18 New Appleman on Insurance Law Library Edition § 18.03[12][d], 

at 18-95. Therefore, we decline to interpret the ambiguous insuring 

agreement in the Arch policy to preclude coverage for the property 

damage Westlake claimed. See Boelman, 826 N.W.2d at 502. 

For the foregoing reasons, we conclude defective workmanship by 

an insured’s subcontractor may constitute an occurrence under a 

modern standard-form CGL policy containing a subcontractor exception 

to the “your work” exclusion. We therefore conclude the court of appeals 

correctly determined the district court correctly interpreted the Arch 

policy. 

VII. Disposition. 

Determining whether coverage exists under an insurance policy 

requires us to determine whether its terms are ambiguous in the context 

of the policy as a whole, including all relevant exceptions and exclusions. 

Accordingly, we conclude defective workmanship by an insured’s 

subcontractor may constitute an occurrence under the terms of the Arch 

policy incorporated by reference into the NSC policy. We thus affirm the 

court of appeals decision affirming the district court rulings as to the 

meaning of the term “occurrence” for purposes of determining the scope 
36 

of coverage afforded by the Arch policy. The court of appeals decision 

shall stand as the final decision of this court with respect to all other 

issues raised on appeal. Therefore, we affirm in part and reverse in part 

the district court judgment and remand the case to the district court 

with instructions to enter a supplemental judgment specifying the 

statutory rate at which prejudgment interest accrued consistent with the 

decision of the court of appeals. 

DECISION OF THE COURT OF APPEALS AFFIRMED; DISTRICT 

COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART; 

CASE REMANDED WITH INSTRUCTIONS. 

All justices concur except Waterman, J., Cady, C.J., and 

Mansfield, J., who dissent. 

 
37 

 #14–1274, Nat’l Surety Corp. v. Westlake Invs. 

WATERMAN, Justice (dissenting). 

I respectfully dissent. In my view, there was no liability coverage 

for the builder under the facts of this case because there was no accident 

as required under the terms of the insurance contract. National Surety 

Corporation, therefore, was entitled to a directed verdict on Westlake’s 

coverage claims. Our precedent defines “accident”—as used in a 

commercial general liability (CGL) occurrence policy with the same 

“occurrence” definition—to mean “an undesigned, sudden, and 

unexpected event.” Pursell Constr., Inc. v. Hawkeye-Sec. Ins. Co., 596 

N.W.2d 67, 70 (Iowa 1999) (emphasis added) (quoting Cent. Bearings Co. 

v. Wolverine Ins. Co., 179 N.W.2d 443, 448 (Iowa 1970)). There is 

nothing sudden about the gradual infiltration of rainwater through leaky 

window frames over several seasons, which the United States Court of 

Appeals for the Eighth Circuit squarely held is not a covered occurrence 

in a recent case applying Iowa law to the same policy language. Liberty 

Mut. Ins. Co. v. Pella Corp., 650 F.3d 1161, 1175–76 (8th Cir. 2011). The 

majority disregards that persuasive decision directly on point and 

instead relies on inapposite Iowa authority finding liability coverage for a 

landlord’s negligent supervision of an employee who flashed tenants. 

United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648, 651 

(Iowa 2002). That makes no sense to me. 

I would honor stare decisis and conclude that defective 

workmanship that allows rainwater to leak into a residence is not an 

accident and, therefore, is not a covered occurrence under the CGL 

policy. The policy defines an occurrence as “an accident, including 

continuous or repeated exposure to substantially the same general 

harmful conditions.” This is the same policy language that we 
38 

interpreted in Pursell and the Eighth Circuit applied in Pella Corp. The 

majority never identifies the “sudden unexpected event” that triggers 

liability coverage for the mold and water damage resulting from leaky, 

defective window frames. The majority in effect converts the liability 

insurance policy into a home warranty. 

 Both parties agreed that an accident required a sudden event. At 

oral argument, Westlake’s counsel contended that rainfall or poor 

workmanship was the sudden event: 

 CHIEF JUSTICE CADY: What is the sudden nature of 

the event? A. I think the sudden nature of the water leaks 

are that they happen primarily when a rain event occurs. A 

rain event doesn’t happen all the time. It can be a sudden 

event from the perspective of a general contractor, and event 

causes damage. Setting that aside, I think the sudden event 

could also be subcontractor work being done defectively. 

Counsel also argued the severe winter in 2003–2004, with hard frosts,14

caused insured damage to the apartment buildings. A majority of courts 

in other jurisdictions hold poor-workmanship claims are not covered 

under CGL policies. See Grp. Builders, Inc. v. Admiral Ins. Co., 231 P.3d 

67, 73 (Haw. Ct. App. 2010) (surveying cases to conclude “[a] majority of 

. . . jurisdictions ha[ve] held that claims of poor workmanship, standing 

alone, are not occurrences that trigger coverage under CGL policies” 

(quoting Gen. Sec. Indem. Co. of Ariz. v. Mountain States Mut. Cas. Co., 

205 P.3d 529, 535 (Colo. App. 2009), superseded by statute, Colo. Rev. 

Stat. Ann. § 13–20–808(1)(b)(III) (effective May 21, 2010)). “In contrast, a 

minority of jurisdictions ha[ve] held that the damage resulting from 

faulty workmanship is an accident, and thus, a covered occurrence, so 

long as the insured did not intend the resulting damage.” Id. (quoting 

 14Westlake cites no case holding frost damage to a building is a covered accident 

under a CGL policy. 
39 

Gen. Sec. Indem. Co., 205 P.3d at 535)). The case directly on point 

applying Iowa law and the majority rule—Pella Corp.—holds there is no 

CGL coverage for water damage from leaky window frames. I would 

follow that authority. 

My colleagues, without finding any ambiguity in the occurrence 

definition, rely heavily on the insurance industry’s drafting history for 

that standard policy language. We should not go beyond the four 

corners of the insurance contract to interpret unambiguous policy 

language. Westlake makes no claim that its assignee relied on any 

industry understanding or drafting history when it purchased the 

insurance policies at issue. More likely, the premiums for the policy 

were priced based on risks under well-settled Iowa law holding poor 

workmanship is not covered. In Iowa Comprehensive Petroleum 

Underground Storage Tank Fund Board v. Farmland Mutual Insurance 

Co., we concluded the drafting history of a CGL policy’s pollution 

exclusion was irrelevant because the contract language was 

unambiguous. 568 N.W.2d 815, 819 (Iowa 1997) (“We reject the 

[insured’s] argument that the court should have considered the industry 

‘understanding’ in 1970 in interpreting the sudden and accidental 

language of the policies.”). The majority ignores that case and the wellsettled principle it applies. 

The majority relies on language in an exception to exclusion “m” to 

change the scope of coverage under the occurrence definition: 

m. Damage to Impaired Property or Property Not 

Physically Injured 

. . . . 

This exclusion does not apply to the loss of use of 

other property arising out of sudden and accidental
40 

physical injury to “your product” or “your work” after it 

has been put to its intended use. 

(Emphasis added.) The majority erroneously concludes that the phrase 

“sudden and accidental” in exclusion “m” means the term “accident” in 

the occurrence definition does not mean a sudden unintended event. 

Westlake never made that argument, and no other court has reached the 

same conclusion. I would not make that leap. In Iowa Comprehensive,

we interpreted the phrase “sudden and accidental” in a CGL policy’s 

pollution exclusion to hold sudden had a temporal meaning (“abrupt”) 

when paired with accidental. 568 N.W.2d at 818–19. Accordingly, that 

exclusion barred coverage for “pollution [that] occurred over a period of 

many years.” Id. at 819. And we interpreted accidental in the same 

pairing to mean “unexpected and unintended.” Id. at 818 (quoting Weber 

v. IMT Ins. Co., 462 N.W.2d 283, 287 (Iowa 1990)). We did so to give each 

word in the pair a meaning that avoided rendering the other word 

redundant. Id. That is, if we had interpreted accidental to mean 

sudden, then the term “sudden” in that pairing would be surplusage. Id. 

at 818–19. The problem with the majority’s analysis is that the 

occurrence definition uses the word “accident” alone, and as we held in 

Pursell, it means a sudden, unexpected event. Pursell Constr., 596 

N.W.2d at 70. There was nothing sudden about the damage from water 

leaks over the winter of 2003–2004 in this case. See Iowa 

Comprehensive, 568 N.W.2d at 819 (rejecting argument that each leakage 

of pollutants was a discrete, sudden event). 

I acknowledge there is a split in authority on these coverage 

questions. Many courts cited by today’s majority have held defective 

work by a subcontractor can be an occurrence. I agree that defective 

workmanship can lead to an occurrence covered under CGL policies if 
41 

and when there is a sudden and unexpected event resulting in damage to 

a third party, rather than to the poorly constructed building itself. If a 

defectively installed balcony collapses and injures a passerby who sues 

the builder, that strikes me as a covered occurrence under a liability 

policy. But a property owner who sues the builder to replace a sagging 

balcony before it collapses does not allege an occurrence covered under 

the builder’s CGL policy. 

 What Westlake lacks is a sudden event causing damage to 

something other than the buildings. A subcontractor’s faulty work that 

causes gradual water infiltration is not an accident or covered 

occurrence, and the CGL insurer is not required to pay for the resulting 

water damage requiring repairs to the building itself. As the Seventh 

Circuit aptly observed, if “insurance proceeds could be used for damages 

from defective workmanship, a contractor could be initially paid by the 

customer for its work and then by the insurance company to repair or 

replace the work.” Lagestee-Mulder, Inc. v. Consol. Ins. Co., 682 F.3d 

1054, 1057 (7th Cir. 2012) (quoting CMK Dev. Corp. v. W. Bend Mut. Ins. 

Co., 917 N.E.2d 1155, 1168 (Ill. App. Ct. 2009)). Accordingly, the betterreasoned opinions 

require that for an incident to constitute an “occurrence” or 

“accident” in the building construction context, “there must 

be damage to something other than the structure, i.e., the 

building, in order for coverage to exist.” “[T]he natural and 

ordinary consequences of defective workmanship . . . d[o] not 

constitute an occurrence.’ “ 

Cincinnati Ins. Co. v. Northridge Builders, Inc., No. 12 C 9102, 2015 WL 

5720256, at *5 (N.D. Ill. Sept. 30, 2015) (quoting Viking Constr. Mgmt., 

Inc. v. Liberty Mut. Ins. Co., 831 N.E.2d 1, 16 (Ill. App. Ct. 2005)). The 

damages awarded by the jury here were for the costs of repairing the 

apartment buildings, not other property. 
42 

I take issue with my colleagues’ conclusion that most other courts 

would find CGL coverage on this record. Westlake seeks recovery of the 

costs to remedy poor workmanship. The following state supreme courts 

have held that the cost to repair defective construction is not covered 

under a CGL policy. Owners Ins. Co. v. Jim Carr Homebuilder, LLC, 157 

So. 3d 148, 156 (Ala. 2014) (per curiam) (“In sum, the cost of repairing or 

replacing faulty workmanship is not the intended object of a CGL policy 

issued to a builder or contractor.”); Essex Ins. Co. v. Holder, 261 S.W.3d 

456, 460 (Ark. 2008) (per curiam) (“Faulty workmanship is not an 

accident; instead, it is a foreseeable occurrence, and performance bonds 

exist in the marketplace to insure the contractor against claims for the 

cost of repair or replacement of faulty work.”), superseded by statute, 

Ark. Code Ann. § 29–79–155(a)(2) (West 2011); Cincinnati Ins. Co. v. 

Motorists Mut. Ins. Co., 306 S.W.3d 69, 76 (Ky. 2010) (holding there was 

no occurrence because “[o]ne cannot logically say . . . that the allegedly 

substandard construction of the . . . home by the [contractor] was a 

fortuitous, truly accidental, event”); Concord Gen. Mut. Ins. Co. v. Green & 

Co. Bldg. & Dev. Corp., 8 A.3d 24, 28 (N.H. 2010) (holding defective work 

in constructing a chimney that required replacement was not an 

occurrence under CGL policy); Westfield Ins. Co. v. Custom Agri Sys., Inc., 

979 N.E.2d 269, 273 (Ohio 2012) (holding defective work constructing 

grain bin was not an occurrence because faulty workmanship is not 

fortuitous); Oak Crest Constr. Co. v. Austin Mut. Ins. Co., 998 P.2d 1254, 

1257–58 (Or. 2000) (holding deficient performance of a construction 

contract cannot be an accident under a CGL policy); Kvaerner Metals Div. 

of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 899 

(Pa. 2006) (holding owner’s claims against builder arising from faulty 

workmanship constructing industrial facility were not covered under 
43 

CGL policy “intended to insure against accidents”); L-J, Inc. v. Bituminous 

Fire & Marine Ins. Co., 621 S.E.2d 33, 36 (S.C. 2005) (“[B]ecause faulty 

workmanship is not something that is typically caused by an accident or 

by exposure to the same general harmful conditions, we hold that the 

damage in this case did not constitute an occurrence.”), superseded by 

statute, S.C. Code Ann. § 38–61–70(B)(2) (2011); see also Transp. Ins. Co. 

v. AARK Constr. Grp., Ltd., 526 F. Supp. 2d 350, 356–57 (E.D.N.Y. 2007) 

(holding CGL insurer did not cover cost to repair parking garage or loss 

of use of the structure because “[t]o hold otherwise would convert [the 

CGL insurer] into a surety for [the builder’s] performance”); Gen. Sec. 

Indem. Co., 205 P.3d at 535 (discussing the competing approaches and 

adopting the majority approach that faulty construction is not an 

occurrence under a CGL policy); Grp. Builders, Inc., 231 P.3d at 69, 73 

(holding that mold damage to apartment building caused by defective 

construction was not an occurrence); Prod. Sys., Inc. v. Amerisure Ins. 

Co., 605 S.E.2d 663, 666 (N.C. Ct. App. 2004) (“[D]amages based solely 

on shoddy workmanship . . . are not ‘property damage’ within the 

meaning of a standard form CGL policy.” (quoting Wm. C. Vick Constr. Co. 

v. Pa. Nat’l Mut. Cas. Ins. Co., 52 F. Supp. 2d 569, 583 (E.D.N.C. 1999))). 

I would keep our state in this majority. 

In Pursell, we held that defective workmanship is not an 

occurrence under a CGL policy. 596 N.W.2d at 71. Pursell 

Construction, Inc. was hired to build the basements, footings, block 

works, sidewalks, and driveways for two houses in Council Bluffs. Id. at 

68. The homes were built on a floodplain, and Pursell had violated a city 

ordinance that required the basement to be elevated above the floodplain. 

Id. As a result, the homeowner could not legally occupy, rent, or sell the 

houses. Id. The homeowner sued Pursell, alleging breach of contract 
44 

and negligence for failing to build the lowest floor at the required 

elevation. Id. Pursell brought a declaratory judgment action against its 

CGL insurer to determine coverage. Id. The district court held that there 

was an occurrence under the policy requiring the insurer to defend the 

owner’s lawsuit against Pursell. Id. 

 We reversed and held that under the standard CGL policy, an 

occurrence requires an accident. Id. at 70. We defined the term 

“accident” in the CGL policy as 

an undesigned, sudden, and unexpected event, usually of an 

afflictive or unfortunate character, and often accompanied by 

a manifestation of force. . . . [G]iving to the word the 

meaning which a man of average understanding would, we 

think [“accident”] clearly implies a misfortune with 

concomitant damage to a victim, and not the negligence 

which eventually results in that misfortune. 

Id. (quoting Cent. Bearings Co., 179 N.W.2d at 448). We noted that the 

“majority of courts that have considered this issue have concluded that a 

CGL policy does not provide coverage for claims against an insured for 

the repair of defective workmanship that damaged only the resulting 

work product.” Id. “In short, defective workmanship, standing alone, is 

not an occurrence under a CGL policy.” Id. at 71. “If the [CGL] policy is 

construed as protecting a contractor against mere faulty or defective 

workmanship, the insurer becomes a guarantor of the insured’s 

performance of the contract, and the policy takes on the attributes of a 

performance bond.” Id. (quoting U.S. Fid. & Guar. Corp. v. Advance 

Roofing & Supply Co., 788 P.2d 1227, 1233 (Ariz. Ct. App. 1989)); see 

also Auto-Owners Ins. Co. v. Home Pride Cos., 684 N.W.2d 571, 577 (Neb. 

2004) (“[T]he cost to repair and replace the damages caused by faulty 

workmanship is a business risk not covered under a CGL policy.”). 
45 

 The majority gives short shrift to stare decisis. Although the 

majority initially distinguishes Pursell by noting that the court “need not 

consider whether property damage arising due to the insured’s own 

defective workmanship may constitute an occurrence,” the majority goes 

on to state we “call[ed] into question” Pursell in Shelly Funeral Home, a 

case that never mentions Pursell. In Shelly Funeral Home, Ted Shelly, a 

manager for the insured funeral home, took advantage of having keys to 

gain access to rental units owned by his employer. 642 N.W.2d at 650. 

He “emotionally injured . . . elderly tenants by repeatedly exposing 

himself and subjecting them to displays of pornography” while working 

for Shelly Funeral Home. Id. The funeral home’s liability insurer 

brought a declaratory judgment to determine coverage. Id. at 652. The 

insurer argued its policy did not cover damages intentionally inflicted by 

the employee. Id. at 653. We reframed the coverage question as to 

whether the policy covered claims alleging the employer’s negligent 

supervision, noting “[t]he conduct ascribed to the actor—Shelly Funeral 

Home—is not intentional sexual misconduct but negligent supervision of 

its employee.” Id. at 654. We held the liability policy covered claims 

alleging the employer’s negligent supervision of its employee. Id. Shelly 

Funeral Home in no sense “call[ed] into question” Pursell; those cases 

adjudicated different issues.15 A key difference is that in Shelly Funeral 

Home, we found the liability policy covered the injury claims asserted by 

third-party tenants. Here, and in Pursell, the damages sought were for 

 15Neither Westlake nor the amici ask us to overrule Pursell or argue Shelly 

Funeral Home implicitly or explicitly overruled Pursell. The parties’ briefs in Shelly 

Funeral Home did not even cite Pursell, much less ask us to overrule it. Normally, we 

do not overrule our precedent sua sponte. Nor has the Iowa legislature overruled 

Pursell.
46 

the costs to remedy the construction defects, not harm to a third party or 

other property. 

 Our court of appeals correctly considered Pursell good law in 2009, 

five years after we decided Shelly Funeral Home. W.C. Stewart Constr., 

Inc. v. Cincinnati Ins. Co., No. 08–0824, 2009 WL 928871, at *2–4 (Iowa 

Ct. App. Apr. 8, 2009). In that case, a subcontractor sought 

indemnification for defective subgrading that caused a wall, built by a 

different subcontractor, to crack. Id. at *1. The court applied Pursell

and concluded the policy did not cover the damage. Id. at *3–4. 

 The Eighth Circuit likewise considered Pursell good law in Pella 

Corp., 650 F.3d at 1175. The plaintiff homeowners in the underlying 

lawsuits alleged Pella sold defective windows that allowed water to leak 

through the windows’ aluminum cladding. Id. at 1164. The Eighth 

Circuit, relying on Pursell, held that 

the property damage—whether to the windows themselves or 

the structure of the building near the windows—was caused 

by a defect that Pella was alleged to have known about. 

Under Iowa law, such defective workmanship . . . cannot be 

considered an occurrence, i.e., “an undesigned, sudden, and 

unexpected event.” 

Id. at 1176 (quoting Pursell, 596 N.W.2d at 70). I reach the same 

conclusion here. 

A different result is not warranted because the defective work here 

was performed by subcontractors rather than the insured general 

contractor responsible for their work. “Damage resulting from defective 

work performed by subcontractors is also not an ‘accident’ and thus not 

an ‘occurrence’ within the meaning of a general contractor’s CGL policy 

. . . .” Northridge Builders, Inc., 2015 WL 5720256, at *5. An occurrence 

is “dependent on the nature of the act, not on who performs it.” Hastings 

Mut. Ins. Co. v. Mosher, Dolan, Cataldo & Kelly, Inc., No. 265621, 2006 
47 

WL 1360404, at *3, 6 (Mich. Ct. App. May 18, 2006) (holding mold 

damage in the subfloor material and joists above the basement ceiling 

caused by defective construction was not an occurrence); see also Oak 

Crest Constr. Co., 998 P.2d at 1257–58 (holding subcontractor’s 

“deficient” painting work was not an accident and, therefore, not an 

occurrence under the CGL policy); Millers Capital Ins. Co. v. Gambone 

Bros. Dev. Co., 941 A.2d 706, 715–16 (Pa. Super. Ct. 2007) (holding 

subcontractor’s faulty construction was not an occurrence under a CGL 

policy with a subcontractor exception to a “your work” exclusion). 

The majority improperly relies on the exceptions to the “your work” 

exclusion to create coverage. We recently held that exceptions to 

exclusions cannot be used to broaden the grant of coverage in the 

insuring clause (occurrence definition). Amish Connection, Inc. v. 

State Farm Fire & Cas. Co., 861 N.W.2d 230, 239–40 (Iowa 2015) (“In 

simplistic terms, the process is such: if the insuring clause does not 

extend coverage, one need look no further. If coverage exists, exclusions 

must then be considered.” (quoting Hartford Cas. Ins. Co. v. Evansville 

Vanderburgh, Pub. Library, 860 N.E.2d 636, 646 (Ind. Ct. App. 2007))). 

“[A]n exception to an exclusion does not create coverage or provide an 

additional basis for coverage but, rather, ‘merely preserves coverage 

already granted in the insuring provision.’ ” Stoneridge Dev., 888 N.E.2d 

at 656 (citation omitted) (quoting W. Cas. & Sur. Co. v. Brochu, 475 

N.E.2d 872, 878 (Ill. 1985)); see also Aquatectonics, Inc. v. Hartford Cas. 

Ins. Co., No. 10-CV-2935 (DRH) (ARL), 2012 WL 1020313, at *7 (E.D.N.Y. 

Mar. 16, 2012) (holding a subcontractor exception to a “your work” 

exclusion did not broaden definition of an “occurrence” under the policy); 

Millers Capital Ins. Co., 941 A.2d at 715–16 (declining to find exception in 

“your work” exclusion with a subcontractor exception broadened 
48 

insurance coverage). There is no coverage without a sudden event, 

regardless of whether the defective work was performed by a 

subcontractor instead of the insured general contractor. 

 Some courts cited by the majority hold faulty construction can be 

an occurrence under a CGL policy based on a judicial definition of 

accident that omits the word sudden. For example, in Cherrington v. Erie 

Insurance Property & Casualty Co., the West Virginia Supreme Court 

began its analysis of whether faulty construction can be an occurrence 

as we did in Pursell—by defining accident. 745 S.E.2d 508, 520 (W. Va. 

2013). But it defined accident as “not deliberate, intentional, expected, 

desired, or foreseen” by the insured. Id. (quoting Columbia Cas. Co. v. 

Westfield Ins. Co., 617 S.E.2d 797, 801 (W. Va. 2005)). The court 

concluded that under this definition of accident, faulty construction 

must be an occurrence because “[t]o find otherwise would suggest that 

[the contractor] deliberately sabotaged the very same construction project 

it worked so diligently to obtain.” Id. Such cases are readily 

distinguishable from Pursell in which we defined accident to include the 

temporal requirement that it be sudden. That requirement does not 

encompass Westlake’s claim for gradual damage from water infiltration 

over a period of months. 

The majority cites several state supreme court decisions without 

mentioning the dissents in those cases. Chief Justice Shepard, in his 

dissenting opinion in Sheehan Construction Co. v. Continental Casualty 

Co., noted CGL policies “are neither designed nor priced as coverage for 

whatever demands the insured may face in the nature of ordinary 

consumer claims about breach of warranty.” 935 N.E.2d 160, 172 (Ind. 

2010) (Shepard, C.J., dissenting). He questioned whether there “exist[s] 

in the marketplace an insurance product that ‘covers me when I don’t do 
49 

a very good job.’ ” Id. Another dissenting justice emphasized the 

distinction between an uncovered repair to the building itself and a 

covered accident when defective construction results in harm to another. 

Id. at 172–73 (Sullivan, J., dissenting). Chief Justice Vande Walle, 

dissenting in K & L Homes, Inc. v. American Family Mutual Insurance Co., 

agreed with the Indiana dissent and disagreed with overruling 

South Dakota precedent holding “property damage caused by faulty 

workmanship is a covered occurrence [only] to the extent it causes 

damage to property other than the work product.” 829 N.W.2d 724, 743 

(S.D. 2013) (Vande Walle, C.J., dissenting). Again, Westlake was 

awarded damages for repairs to the building itself. I fall on the side of 

the numerous courts holding those costs are not covered under this CGL 

policy. 

 In Motorists Mutual Insurance Co., the contractor built a home “so 

poorly . . . that it was beyond repair and needed to be razed” within five 

years of its completion. 306 S.W.3d at 71. The Kentucky Supreme Court 

held that defective workmanship, standing alone, is not an occurrence 

under a CGL policy. Id. at 73. The court defined an accident in the 

insurance law context as “something that does not result from a plan, 

design, or . . . intent on the part of the insured.” Id. at 76 (quoting Stone 

v. Ky. Farm Bureau Mut. Ins. Co., 34 S.W.3d 809, 812 (Ky. Ct. App. 

2000)). “[F]ocusing solely upon whether [the contractor] intended to 

build a faulty house is insufficient. Rather, a court must also focus upon 

whether the building of the . . . house was a ‘ “chance event” beyond the 

control of the insured . . . .’ ” Id. (quoting 16 Eric Mill Holmes, Holmes’ 

Appleman on Insurance 2d § 116.1B, at 6 (2000)). Because the 

contractor had control over the construction of the home, whether 
50 

directly or through its subcontractors, there was no accident or covered 

occurrence. Id. 

 The Third Circuit reached the same conclusion in Specialty 

Surfaces International, Inc. v. Continental Casualty Co., 609 F.3d 223, 

238–39 (3d Cir. 2010). In Specialty Services, a general contractor 

installed a turf football field for a school. Id. at 227. Within a year of its 

completion, the field “began to exhibit defects in materials and 

workmanship” caused by a defectively constructed water drainage 

system. Id. at 228. The insured general contractor argued the liability 

insurer owed a duty to defend because the subgrade, which was the 

cause of the drainage problems, was installed by a subcontractor. Id. at 

238. The Third Circuit applied Pennsylvania law and rejected the 

contractor’s coverage claims. Id. The Third Circuit held that “[f]aulty 

workmanship, even when cast as a negligence claim, does not constitute 

such an [occurrence]; nor do natural and foreseeable events like rainfall.” 

Id. at 231. These cases are persuasive and consistent with Pursell. I 

would follow those decisions. 

For these reasons, I respectfully dissent. 

 Cady, C.J., and Mansfield, J., join this dissent.