Indalex v. National Union: Carving Away At Gambone

In several decisions over the last few years, courts in Pennsylvania have—inappropriately, in this author's view—taken a narrow view of coverage available under commercial general liability ("CGL") policies for liabilities resulting from construction and product defect claims. In a decision issued on December 3, 2013, Indalex Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2013 Pa. Super 311 (2013), http://www.pacourts.us/assets/opinions/Superior/out/J-A02017-13o%20-%201016361921823493.pdf, the Pennsylvania Superior Court appears to stem the erosion of coverage that has resulted from these decisions, which started with Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 888 (Pa. 2006) ("Kvaerner"), and continued with Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., 941 A.2d 706 (Pa. Super. 2007) ("Gambone") and Erie Ins. Exchange v. Abbott Furnace Co., 972 A.2d 1232 (Pa. Super. 2009) ("Abbott"). The Kvaerner and Gambone cases rely in part on a determination that has no basis in standard CGL language: i.e., that defective construction can never be an occurrence because it is not "accidental." See, e.g., Kvaerner, 908 A.2d at 899 ("We hold that the definition of 'accident' required to establish an 'occurrence' under the policies cannot be satisfied by claims of faulty workmanship" because such claims "do not present the degree of fortuity contemplated by the ordinary definition of 'accident.'")

Given the effort it makes to distinguish these earlier cases—and Gambone in particular—the Superior Court's opinion in Indalex seems to reflect a recognition that Kvaerner and its progeny went too far in restricting coverage for the types of liabilities arising in the construction and manufacturing businesses that seem plainly to fall within the scope of CGL coverage: accidental property damage and bodily injury resulting from defective work or a defective product.

In Indalex, the insured (Indalex) manufactured windows and doors. Lawsuits were filed against Indalex by contractors or property owners alleging that Indalex's products were defective, resulting in "water leakage that caused physical damage, such as mold and cracked walls, in addition to personal injury." 2013 Pa. Super. 311 at 2 (page cites are to website version of the opinion cited above). The lawsuits included claims based on strict liability, negligence, breach of warranty, and breach of contract. Id. at 2-3. The trial court concluded that the...