United States: "The Evolving Definition Of Occurrence"

In the immortal words of Bob Dylan, the times they are a-changing. In the often placid world of insurance coverage, this change has been most evident with regard to the definition of the term "occurrence." The meaning of this term is at the heart of coverage in standard commercial general liability (CGL) policies, and how the definition of occurrence is construed by the courts often determines whether coverage exists. This article will briefly review the traditional view of occurrence as it relates to coverage for faulty products or defective work, an emerging national trend, and recent developments in Pennsylvania.

The Traditional View

The traditional view is that defective products or defective work by the insured are not occurrences. In other words, the existence of a defect in a product or an event in which a defective product injures only itself does not constitute an occurrence. Cases exemplifying the traditional view include: Auto-Owners Insurance v. Rhodes, 748 S.E.2d 781, 790 (S.C. 2013); Westfield Insurance v. Custom Agri Systems, 979 N.E.2d 269, 273-74 (Ohio 2012); Cincinnati Insurance v. Motorists Mutual Insurance, 306 S.W.3d 69, 73-74 (Ky. 2010); Essex Insurance v. Holder, 372 Ark. 535, 539-40 (2008); L-J v. Bituminous Fire & Marine Insurance, 621 S.E.2d 33, 35-37 (S.C. 2005); United States Fidelity & Guaranty v. Advanced Roofing & Supply, 788 P.2d 1227, 1233-34 (Ariz. 1989); and National Union Fire Insurance v. Turner Construction, 986 N.Y.S.2d 74, 77 (N.Y. App. Div. 2014). As a result, the traditional view holds that an occurrence requires the defective work or product to cause bodily injury or property damage to property other than the product itself.

Courts in the traditional camp typically justify their conclusion based on historical precedent and the fact that faulty work does not satisfy the requirement that an occurrence be a fortuitous event. In this context, fortuity typically is described as an event that is both unintended and beyond the control of the insured. Moreover, a number of courts assert that allowing faulty work to fall within the definition of occurrence would inappropriately transform CGL policies into surety bonds.

The Emerging Trend

While the traditional view remains the majority view, there is a growing trend in favor of finding that an occurrence can include the circumstance where defective work results in damage only to the work or product itself (so long as the damage was neither intended nor expected by the insured). Cases exemplifying this trend include: Travelers Indemnity Co. of America v. Moore & Associates, 216 S.W.3d 302, 307-09 (Tenn. 2007); Lamar Homes v. Mid-Continent Casualty, 242 S.W.3d 1, 16 (Tex. 2007); U.S. Fire Insurance v. J.S.U.B., 979 So.2d 871, 883-84 (Fla. 2007); and Lee Builders v. Farm Bureau Mutual Insurace, 137 P.3d 486, 491-93 (Kan. 2006).

These courts tend to justify their conclusions based on the intent of the insured and the structure of the policies. First, they note that occurrences are generally defined as accidents, and providing faulty work is usually an accident from the standpoint of the insured. Next, they note that standard CGL forms have an exclusion for the insured's work. This exclusion, they reason, would be unnecessary if the insured's work was not encompassed within the definition of occurrence. Third, they point to the reasonable expectations of the insured and the fact that ambiguities must be construed against the insurer. Finally, these courts often conclude that the "your work" exclusion prevents the policy from becoming a performance bond and the "your product" exclusion prevents the insurance from becoming a manufacturer's warranty.

Pennsylvania Developments

Where Pennsylvania courts fell in this spectrum was, until recently, a matter of significant debate. In Kvaerner Metals v. Commercial Union Insurance, 908 A.2d 888, 900 (Pa. Super. Ct. 2006), Kvaerner Metals was sued for supplying an allegedly defective coke oven battery. One of Kvaerner's insurers, National Union Fire Insurance Co. of Pittsburgh, disclaimed coverage. Kvaerner sued National Union and on appeal the Pennsylvania Supreme Court upheld the disclaimer of coverage, stating that "faulty workmanship does not constitute an 'accident' as required to set forth an occurrence under CGL policies."

The wording of the Kvaerner opinion, in light of Pennsylvania's "gist of the action" doctrine, left some commentators wondering about the status of coverage in the state. This was especially concerning to policyholders, because at least one trial court concluded, based in part on Kvaerner, that faulty workmanship could "never constitute" an accident or occurrence, even where damage resulted to property other than the allegedly defective work, in American Home Assurance v. Trumbull, 2012 Pa. Dist. LEXIS 409, at *32 (Ct. Comm. Pl. Allegheny County Oct. 10, 2012). Therefore, American Home held that the insurers had "no obligation to provide indemnification for any damages caused by faulty workmanship."

This debate has largely been settled by Indalex v. National Union Fire Insurance Co. of Pittsburgh, 83 A.3d 418, 424-26 (Pa. Super. Ct. 2013). Indalex involved allegedly defectively designed or manufactured windows and doors. The defects resulted in water leakage, which in turn resulted in personal injury as well as injury to other property. The Indalex court found that the allegations of the underlying complaint fell within the definition of an occurrence. Significantly, Indalex clarified that Kvaerner was "limited to situations 'where the underlying claims were for breach of contract and breach of warranty, and the only damages were to the [insured's] work product.'" As a result, the Indalex opinion returns Pennsylvania to the ranks of the traditional view of an occurrence.

Legislative Changes

A number of state legislatures have weighed in with regard to the definition of occurrence. This appears to have been driven by a perception that it was necessary to act to prevent courts from moving to a more restrictive coverage position, as reflected in American Home. South Carolina, Arkansas and New Jersey are states where it appears that legislation has codified or attempted to codify the traditional understanding of occurrence, while Colorado is consistent with the emerging trend.

Specifically, South Carolina requires, with regard to construction work, that CGL policies contain "or be deemed to contain" a definition of occurrence that includes "property damage or bodily injury resulting from faulty workmanship, exclusive of the faulty workmanship itself," according to S.C. Code Ann. § 38-61-70 (2013). This statute was subsequently found to be unconstitutional to the extent that it was applied retroactively, in Harleysville Mutual Insurance v. South Carolina, 736 S.E.2d 651, 660 (S.C. 2012). The statute's prospective application, however, is constitutional.

Arkansas requires that a CGL policy "offered for sale in this state shall contain a definition of 'occurrence' that includes ... property damage or bodily injury resulting from faulty workmanship," as in Ark. Code Ann. § 23-79-155 (2014). Arkansas' definition is more expansive than South Carolina's, as it is not limited to construction work. Interestingly, while the Arkansas act does not appear to include the faulty work itself within the definition of occurrence, the preamble to the statute arguably suggests that the legislation was intended to include the faulty work, insofar as the preamble criticizes state court holdings regarding the definition of occurrence and expresses the view of the legislature that "insurance consumers purchase commercial liability insurance ... for the express purpose of limiting their liability for faulty workmanship."

Similarly, a bill was introduced in New Jersey late in 2013 that, if passed, would require insurers to define occurrence, with regard to construction work, in a way that includes "property damage or bodily injury resulting from faulty workmanship." The bill is A. No. 4510, 215th Leg., 1st Sess. (N.J. 2013). The changes proposed by New Jersey are limited to contractors or other construction professionals.

Colorado, on the other hand, passed legislation specifically adopting the emerging trend, at Colo. Rev. Stat. § 13-20-808 (2013). The Colorado act was approved in 2010, and overrules General Security Indemnity Co. of Arizona v. Mountain States Mutual Casualty, 205 P.3 529 (Colo. Ct. App. 2009). Specifically, the Colorado act requires that "in the interpretation of insurance policies ... issued to construction professionals ... [a] court shall presume that the work of a construction professional that results in property damage, including damage to the work itself or other work, is an accident unless the property damage is intended and expected by the insured."

Final Thoughts

The construction a court gives to the definition of occurrence can have a powerful impact on coverage. It is, of course, not necessarily the end of the coverage determination. As the Tennessee Supreme Court noted in Moore & Associates, "the recognition that damages may result from an 'occurrence' is only the first step in determining whether damages are afforded coverage under a CGL." If it is determined that an occurrence took place, the analysis must proceed to whether the occurrence is subject to any exclusions contained in the policy, and in product and construction cases the business risk exclusions often play a significant role.

Nevertheless, the definition of occurrence is key. It is the threshold through which any coverage claim must pass, and the times are changing in a significant number of jurisdictions with regard to the construction of this definition. These changes are something both insurers and insureds should monitor closely, as they have the potential to dramatically alter the coverage landscape from one jurisdiction to the next.

Previously published in The Legal Intelligencer - August 2014

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.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.