Tred R. Eyerly | Insurance Law Hawaii | January 26, 2015
The court followed precedent in Illinois and upheld the insurer’s denial of coverage for construction defects that did not damage other property. Design Concrete Founds., Inc. v. Erie Ins. Prop. & Cas. Co., 2014 Ill. App. Unpub. LEXIS 2684 (Ill Ct. App. Nov. 26, 2014).
In 2005, the homeowners contracted with the general contractor to build a home. The general contractor hired Design to do the foundation work. Design performed its work in August 2005. After the work was completed, cracks formed in the foundation, allowing water to enter the basement and an inward shifting of the foundation.
The homeowners sued the general contractor and Design. The complaint alleged that Design failed to build the foundation in a workmanlike manner, resulting in the development of cracks in the foundation.
Design had a CGL policy with Erie. When Design tendered the defense of the homeowners’ suit, Erie denied coverage because the underlying allegations did not allege an “occurrence” or “property damage” under the policy. Design then filed suit against Erie and Eire moved for summary judgment. The trial court entered summary judgment in favor of Erie.
The appellate court affirmed. The underlying complaint sought damages to cover the costs to repair and reinforce the foundation. The alleged defects in the concrete foundation were the natural and ordinary consequence of the alleged faulty workmanship. When the work was defective and necessitated repairing that work, there was no “accident” and no “occurrence.”
Further, there was no property damage. The underlying complaint sought damages for the costs of repair and reinforcement of the foundation which was allegedly caused by Design’s faulty construction work. It alleged damage to the foundation itself. It did not allege that defective workmanship resulted in damage to other property. In Illinois, repair and replacement damages were considered economic losses, not property damage.
via Insurance Law Hawaii: No Coverage For Construction Defect Under Illinois Law.