The court found that if the facts show that faulty workmanship caused unintended property damage, such as cracking or collapsing due to negligence, then there is coverage under a Commercial General Liability (CGL) policy. A contractor’s liability for defective work is not necessarily uninsurable if pursued by the property owner as a breach of contract.
The insured contractor repaired a home’s concrete garage floor using an overlay product but failed to install control joints, which were required. That mistake led to unintended property damage. The new surface developed voids and cracks leaving the garage floor in worse shape than before. The homeowner then entered into a repair agreement with the contractor, which had very specific performance requirements for the new floor, but the contractor failed to meet those requirements.
The homeowner was successful in arbitration against the contractor for defective work. The homeowner in seeking to execute the judgment (having failed against the contractor) proceeded against the contractor’s insurers. The policy indemnified the contractor for their liability for property damage or injuries caused by “an occurrence” defined in part as an “accident” under the policy.
The homeowner argued that the contractor’s poor workmanship had caused accidental “property damage” to the garage floor triggering the indemnity.
Facts were presented supporting negligent defective workmanship that caused physical damage.
The court found that the term “occurrence” was ambiguous and interpreted in favour of coverage. It said “plaintiffs were not required to formally allege a tort (delictual) claim or obtain an award in tort. Rather, plaintiffs were required to establish that there was a basis in fact for imposing tort liability.”
The judgment does not mean that every contract breach is insurable. There must be actual “property damage” stemming from “an accident.” On the facts, the insured’s subcontractor failed to follow critical installation steps, ignored warnings, and lied about manufacturer approval. This was behaviour that met the standard for negligence. The garage floor was physically damaged. The judgment affirms that “occurrence” as defined includes unintended harm from negligent workmanship. Faulty work is not necessarily merely a business risk. Where defective work causes damage beyond the work itself, it is usually accidental.