Tred R. Eyerly | Insurance Law Hawaii
The Eighth Circuit found there was no coverage for the insured’s faulty workmanship. Am. Family Mut. Ins. Co., S.I. v. Mid-American Grain Distributors, LLC, 958 F.3d 748 (8th Cir. 2020).
Mid-American contracted with Lehenbauer to design and construct a grain storage and distribution facility for Lehenbauer. Before the work was competed, Lehenbauer terminated Mid-American’s services. Mid-American then sued Lehenbauer for breach of contract. Lehenbauer counterclaimed against Mid-American, alleged breach of “implied duties of workmanlike performance and fitness for a particular purpose” and negligence. Mid-American tendered the counterclaim to American Family. American Family accepted the tender under a reservation of rights, but sued Mid-American for a declaratory judgment.
The district court granted American Family’s motion for summary judgment, concluding that the counterclaims did not allege an occurrence.
On appeal, the Eighth Circuit noted that under Missouri law, an “accident” did not include acts that resulted in expected or foreseeable damage. But must the accident be foreseeable to the actual insured, subjectively speaking, or to a reasonable insured, objectively speaking? Here, foreseeability could be inferred as a matter of law given the nature of the act and they type of damages at issue even under the subjective standard.
The damages in question were the inherent results of shoddy workmanship. Therefore, Mid-American’s alleged defective construction work was not an “occurrence.” Lehenbauer’s damages were the normal, expected consequence of Mid-American’s work. They were foreseeable as a matter of law, so Mid-American’s work was not an “accident,” and thus not an “occurrence.” The district court decision was affirmed.