Opinion ID: 2336887
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Heading: Insuring Agreement and Definitions of Occurrence and Accident

Text: The meaning of occurrence in a modern CGL is a matter of first impression for this Court. But see Gen. Ins. Co. of Am. v. Crawford, 635 S.W.2d 98, 99 (Tenn.1982) (interpreting an earlier CGL containing a different definition of occurrence). The insuring agreement of the policy provides that Travelers will defend Moore against any suit seeking damages caused by an `occurrence.' The primary issue is whether the water penetration resulting from faulty window installation is an occurrence as defined by the policy. [2] An occurrence is defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The term accident is undefined by the policy. We have held that when used in a liability insurance policy the word accident refers to an event not reasonably to be foreseen, unexpected and fortuitous. Gassaway v. Travelers Ins. Co., 222 Tenn. 649, 439 S.W.2d 605, 608 (1969). In Gassaway, we also construed the word accident to include the negligent acts of the insured causing damage which is undesigned and unexpected. Id. at 607 (quoting Mass. Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 400 (Tex.1967)). This construction is consistent with the ordinary use of the word. See Black's Law Dictionary 15 (7th ed.1999) (noting that [t]he word `accident,' in accident policies, means an event which takes place without one's foresight or expectation) and The Oxford English Dictionary 74 (2d ed.1989) (defining accident as [a]nything that happens without foresight or expectation). We therefore conclude that the term accident as used in the CGL in this case means an unforeseen or unexpected event. Furthermore, we consider foreseeability from the perspective of the insured. See Gassaway, 439 S.W.2d at 608-09. Therefore, the policy in this case provides coverage to any property damage caused by an event that was not foreseeable to Moore, including continuous exposure to substantially the same generally harmful conditions. Travelers argues that the water penetration was foreseeable to Moore because water penetration is a natural consequence of improperly installed windows. We are unpersuaded that the foreseeability of damages should be determined under an assumption that the windows would be installed improperly. If foreseeability is determined from the negligent completion of the project, then the negligent acts of the insured will almost never be accidents because, by definition, negligence requires that damages be foreseeable. See Lennar Corp. v. Great Am. Ins. Co., 200 S.W.3d 651, 670 n. 18 (Tex.App.  Houston,2006), petition for review filed May 11, 2006. Holding that a negligent act does not constitute an accident is inconsistent with our previous holding that an accident may include the negligent acts of the insured. See Gassaway, 439 S.W.2d at 607. Other courts have observed that construing accident in a manner that does not cover the insured's negligence would render a CGL almost meaningless. Bundy Tubing Co. v. Royal Indem. Co., 298 F.2d 151, 153 (6th Cir.1962); Sheets v. Brethren Mut. Ins. Co., 342 Md. 634, 679 A.2d 540, 549 (1996). We decline to adopt a construction of accident which would so drastically limit the coverage under a CGL. Therefore, the determination of whether an accident has occurred under the terms of a CGL requires us to determine whether damages would have been foreseeable if the insured had completed the work properly. An example is instructive. Travelers concedes that if a contractor improperly installs a shingle that later falls and hits a passerby, this event is unforeseeable and is an occurrence or accident. However, Travelers simultaneously insists that if a contractor improperly installs windows that leak and cause flood damage to the hotel, this event is foreseeable because it is a natural consequence of improperly installed windows. We are unpersuaded by this distinction. 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. Assuming that the windows would be installed properly, Moore could not have foreseen the water penetration. Because we conclude the water penetration was an event that was unforeseeable to Moore, the alleged water penetration is both an accident and an occurrence for which there is coverage under the insuring agreement. Travelers expresses concern that our holding will transform the common CGL into a performance bond. However, the recognition that damages may result from an occurrence is only the first step in determining whether damages are afforded coverage under a CGL. Coverage for damages granted under the insuring agreement may be precluded by an exclusion. Therefore, our acknowledgment that damages arising from faulty workmanship may be the result of an occurrence does not convert the CGL into a performance bond.