American Empire Surplus Lines Ins. Co. v. Hathaway Development Co., Inc., No. S10G0521, 2011 W.L. 768117 (Ga. Mar. 7, 2011).

     Hathaway Development Co. (“Hathaway”) served as general contractor on several residential construction projects.  Hathaway hired Whisnant Contracting Co. (“Whisnant”) to perform plumbing work on the projects.  Whisnant’s work was improperly performed on three of the projects, which caused damage to neighboring properties being built by Hathaway.

    Hathaway sued Whisnant in Georgia state court.  Whisnant failed to answer the complaint and a default was entered against it; Hathaway then turned to Whisnant’s CGL insurer, American Empire Surplus Lines Insurance Co. (“AESLIC”) for payment of the judgment.  AESLIC argued that there was no coverage for Hathaway’s claim because there was no “occurrence.”  The trial court sided with the insurer and granted its motion for summary judgment.  The court of appeals reversed, and the supreme court granted certiorari to determine whether the appellate court erred in its interpretations of the term “occurrence.”

     The supreme court’s decision assessed the “occurrence” issue clearly and cites some major pro-policyholder decisions from other jurisdictions, including U.S. Fire Insurance Co. v. J.S.U.B., 979 So.2d 871 (Fla. 2007), American Family Mutual Insurance Co. v. American Girl, 673 N.W.2d 65 (Wis. 2004), and Lamar Homes v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007).  The court ruled: “an occurrence can arise where faulty workmanship causes unforeseen or unexpected damage to other property.”  Hathaway, 2011 W.L. 768117, at *2.

     One judge dissented, arguing that the key for determining whether there is an “occurrence” is whether the injury results from accidental acts, not whether injury was accidentally caused by intentional acts: “Here, the plumber did not conduct his work by ‘accident.’” Id. at *3 (Melton, J., dissenting).  The majority opinion anticipated this argument, however, stating:

[W]e reject out of hand the assertion that the acts of Whisnant could not be deemed an occurrence or accident under the CGL policy because they were performed intentionally. “[A] deliberate act, performed negligently, is an accident if the effect is not the intended or expected result; that is, the result would have been different had the deliberate act been performed correctly.”

Id. at *2, citing Lamar, 242 S.W.3d at 16.