United States: Pennsylvania Superior Court Opens Door to Coverage Of Faulty Workmanship Claims

Originally published in Anderson Kill's Pennsylvania Alert (March 2014)

Pennsylvania policyholders can more confidently challenge insurance companies' denials of faulty workmanship claims following the Pennsylvania Superior Court's recent opinion in Indalex Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2013 Pa. Super 311 (Dec. 3, 2013). The Indalex decision reverses a nearly decade-long trend of Pennsylvania decisions narrowing the scope of insurance coverage for construction and defect-related claims under commercial general liability insurance policies. Equally important, the Indalex ruling dealt a blow to the insurance industry's continual efforts to win overbroad expansion of the rulings in Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., and Erie Ins. Exchange v. Abbott Furnace Co., which found that claims of faulty workmanship in some circumstances may not constitute coverage-triggering "occurrences."

Indalex, a manufacturer of windows and doors, was sued by contractors and property owners alleging that Indalex's products were defective and resulted in water intrusion and leakage that caused physical damage, including the presence of mold and cracking in walls. Moreover, the underlying individual plaintiffs alleged that personal injuries also arose from these defects. The underlying complaints asserted claims of negligence, strict liability and breach of contract, as well as breach of warranty.

Following a denial of coverage, Indalex filed suit in the Allegheny County Court of Common Pleas, seeking a determination that it was entitled to defense and indemnity. National Union contended that, under Pennsylvania law and the Kvaerner ruling, the underlying claims failed to allege an occurrence triggering coverage under the commercial general liability insurance policy. The trial court ultimately granted National Union's motion for summary judgment, holding that Kvaerner precluded because there was no "occurrence" as defined under the policy.

On appeal, the Superior Court focused on the meaning of "occurrence" as defined in the policy, and in light of the Pennsylvania Supreme Court's decision in Kvaerner and the Superior Court's own subsequent decisions in Gambone and Abbott. The Superior Court analyzed Kvaerner, which held that claims of faulty workmanship did not "present the degree of fortuity contemplated by the ordinary definition of 'accident'" to establish an "occurrence."

The court noted, however, that the underlying complaint in Kvaerner alleged only property damage from faulty workmanship to the work product itself. Additionally, unlike the underlying complaints in Indalex, Kvaerner involved only claims for breach of contract and breach of warranty, rather than tort claims.

Although the Superior Court could have likely distinguished Indalex from Kvaerner without further analysis, it nevertheless continued to analyze and distinguish its own decisions subsequent to and relying upon Kvaerner. In addressing Gambone the Superior Court again drew a distinction based on the fact that affirmation of summary judgment was predicated on the fact that the Superior Court panel "in Gambone focused on the allegations of faulty workmanship in what they had characterized as the product itself, the home."

In its continuing effort to provide much-needed clarification and limitation to Kvaerner and its progeny, the Superior Court next addressed its opinion in Abbott. The underlying complaint in Abbott not only alleged faulty workmanship and damage to the policyholder's property, but also alleged damage to other property, raising the question of whether a negligence claim was properly pleaded. The Superior Court in Abbott applied the "gist of the action" doctrine to determine whether the gravamen of the complaint sounded in contract or tort, notwithstanding the specific causes of action asserted. The Abbott court ultimately concluded that the underlying complaint failed to adequately plead a negligence claim, and that "the gist of the action, therefore, was a breach of contract that was not an occurrence."

The Indalex court determined neither Kvaerner, Gambone nor Abbott compelled a holding that Indalex was not entitled to coverage. Again the Superior Court went to great lengths to differentiate the holdings in each of the prior rulings, noting that Kvaerner was limited to situations where the underlying claims sounded in breach of contract and warranty and the only damages were to the policyholder's work product. The court next explained that Gambone was unique in the fact that it alleged claims against a homebuilder and the "product" at issue was the home itself, unlike an "off the shelf product" that caused both property damage and personal injury. Moreover, the Indalex court distinguished the fact that in Gambone, the issue was faulty workmanship with the application of stucco, whereas in Indalex, the allegations were in the nature of an "active malfunction" and not merely faulty workmanship.

Finally, the court stated that although it applied the "gist of the action" doctrine in Abbott, the Pennsylvania Supreme Court had not expressly adopted the doctrine; and its application of the doctrine in Abbott was consistent with New Jersey law, which governed the underlying claims in that case. Importantly, the court noted that it would be inconsistent with the duty to defend to apply the "gist of the action" doctrine in the context of a duty to defend analysis, since the doctrine seeks to boil claims down to their essential theory, whereas the duty to defend requires an insurance company to defend so long as one of many alleged claims triggers coverage. Thus, an important limitation was placed on the Abbott decision and its reliance on the "gist of the action" doctrine.

Following this analysis of the Kvaerner trilogy, the Indalex court held that coverage under the commercial general liability policy was triggered because the underlying complaints against Indalex alleged defective products resulting in property loss to property other than Indalex's own products or property. Moreover, the underlying complaints also alleged personal injury claims. Accordingly, the court concluded that such claims constituted an "occurrence" and coverage was not precluded under Kvaerner and Gambone, neither of which had any precedential authority warranting denial of coverage.

In the wake of Indalex, the insurance industry will no doubt be quick to characterize the decision as limited in its scope based on the unique facts of the case. While accurate to suggest the decision was, of course, rendered based on specific facts and allegations of the underlying actions, such efforts are designed to obscure the impact of a decision holding that faulty workmanship claims do under some circumstances constitute coverage-triggering occurrences.

In fact, the Indalex decision signals an effort by the Superior Court to define the limitations of the Kvaerner, Gambone and Abbott holdings, while also firing a warning shot against insurance companies' efforts to expand the holdings in those cases beyond their actual or intended scope. The Superior Court could have simply distinguished Indalex from Kvaerner and reversed the trial court. Instead, it engaged in a painstaking and thorough analysis of each chapter of the Kvaerner triology, and not only distinguished Indalex, but also defined the reach of each previous decision.

Although the Indalex ruling cannot, and likely will not, prevent overzealous insurance companies from continually seeking to advance overbroad interpretations of Kvaerner and its progeny, the decision provides lower courts with guidance on the limitations of those rulings. Moreover, the decision provides policyholders with a sorely needed weapon of their own to combat overextension of Kvaerner, Gambone and Abbott, particularly in the context of the duty to defend.

Darin J . McMullen is a shareholder in the Philadelphia office of Anderson Kill. Mr. McMullen's practice is concentrated in representing policyholders in the area of insurance recovery. He is also a member of Anderson Kill's Financial Services Industry Group, as well as a member of the firm's Hospitality Industry Practice Group.

About Anderson Kill

Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estate, Trusts and Tax Services, Corporate and Securities, Antitrust, Banking and Lending, Bankruptcy and Restructuring, Real Estate and Construction, Foreign Investment Recovery, Public Law, Government Affairs, Employment and Labor Law, Captive Insurance, Intellectual Property, Corporate Tax, Hospitality, and Health Reform. Recognized nationwide by Chambers USA for Client Service and Commercial Awareness, and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes - with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Ventura, CA, Dallas, TX, Stamford, CT, Washington, DC, Newark, NJ, and Philadelphia, PA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions