Jury Verdict Upheld for Damages Stemming from Faulty Workmanship of a Subcontractor

Posted on: November 4th, 2015

This case stems from a commercial construction dispute between MLP Management, LLC (MLP) and Westlake Investments, LLC (Westlake), which ended in a consent judgment in favor of Westlake.  The excess insurer for MLP, National Surety Corporation (NSC), appealed on the issues of the district court’s interpretation of the term “occurrence” in the policy and ultimately, the jury’s verdict.  NSC filed a declaratory judgment action requesting a ruling that it had no duty to indemnify Westlake for any amounts awarded under the consent judgment.  Westlake counterclaimed for breach of contract and sought a ruling that NSC owed coverage for the entire consent judgment.  NSC argued the policy did not provide coverage for the claimed damages because they were not property damage caused by an “occurrence.”  Westlake countered that defective construction could be considered an “occurrence” under the policy.

After numerous motions for summary judgment, the case proceeded to a three-week jury trial.  The jury returned a verdict in favor of Westlake, awarding $12,439,500 (the $15,600,000 consent judgment minus the amount that had been satisfied by other sources).  On appeal, NSC argued MLP’s CGL policy did not provide coverage for damages incurred by Westlake following widespread water penetration issues.  Specifically, it challenged the district court’s ruling that the construction defects and resulting damage could be an “occurrence” and the jury instructions on this issue.

The Iowa Court of Appeals found no error with the district court’s decision to allow the jury to decide whether Westlake’s damages were caused by an occurrence and with the way occurrence had been explained to the jury.  While it did not explicitly hold that faulty workmanship of a subcontractor fit within the definition of “occurrence” under a CGL policy, it did affirm the jury’s finding that Westlake’s claim for physical injury and loss of use constituted property damage caused by an occurrence within the meaning of the policy.  See National Surety Corporation v. Westlake Investments, LLC

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