Opinion ID: 1701629
Heading Depth: 1
Heading Rank: 3

Heading: The J.S.U.B. Decision

Text: In J.S.U.B., after the contractor completed the construction of several homes, damage to the foundations, drywall, and other interior portions of the homes appeared. See 979 So.2d at 875. It was undisputed that the damage to the homes was caused by subcontractors' use of poor soil and improper soil compaction and testing. See id. The contractor sought coverage under its CGL policies issued by United States Fire Insurance Company. The insurer agreed that the policies provided coverage for damage to the homeowners' personal property, such as the homeowners' wallpaper, but asserted that there was no insurance coverage for the costs of repairing the structural damage to the homes, such as the damage to the foundations and drywall. See id. at 876. The issue presented to this Court was whether a post-1986 standard form commercial general liability policy with products-completed operations hazard coverage, issued to a general contractor, provides coverage when a claim is made against the contractor for damage to the completed project caused by a subcontractor's defective work. Id. at 877. We addressed this question in two parts. We first determined whether faulty workmanship can constitute an occurrence. See id. at 883. After reviewing our decisions in LaMarche and decisions from other jurisdictions, we held that faulty workmanship that is neither intended nor expected from the standpoint of the contractor can constitute an `accident' and, thus, an `occurrence' under a post-1986 CGL policy. Id. at 888. In doing so, we rejected the insurer's assertion that a subcontractor's faulty workmanship can never be an occurrence, which is defined as an accident, because faulty workmanship results in reasonably foreseeable damages and is a breach of contract not covered by general liability policies. We explained that we previously rejected the use of the concept of `natural and probable consequences' or `foreseeability' in insurance contract interpretation in CTC Development,  id. at 883, and that nothing in the language of the insuring agreement differentiated between tort and contract claims. See id. at 884. We also noted that a construction of the insuring agreement that precludes recovery for damage caused to the completed project by the subcontractor's defective work renders the `products-completed operations hazard' exception to exclusion (j)(6) and the subcontractor exception to exclusion ( l ) meaningless. Id. at 887. Accordingly, we concluded that the subcontractors' defective soil preparation, which was neither intended nor expected by J.S.U.B., was an occurrence. Id. at 888. We then addressed whether the subcontractors' defective soil preparation caused property damage within the meaning of the policy. See id. at 888-89. We held that faulty workmanship or defective work that has damaged the completed project has caused physical injury to tangible property within the plain meaning of the definition in the policy. See id. at 889. In reaching this conclusion, we rejected the insurer's arguments that faulty workmanship that injures only the work product itself does not result in property damage and that there can never be `property damage' in cases of faulty construction because the defective work rendered the entire project damaged from its inception. Id. We also observed that [i]f there is no damage beyond the faulty workmanship or defective work, then there may be no resulting `property damage.' Id. Because structural damage to the completed homes was caused by the defective work, we concluded that there was physical injury to tangible property and thus the claim against the contractor for the structural damage was a claim for property damage within the meaning of the policies. See id. at 890.