Pennsylvania “occurrence.”

In National Fire Ins. Co. of Hartford v. Robinson Fans Holdings, Inc., Civ. No. 10-1054 (April 7, 2011), insured Robinson was sued by ADM for breach of contract, breach of warranty, and negligent design, seeking damages resulting from a failure of industrial fans designed, manufactured, and sold by Robinson to ADM.  Robinson tendered its defense to its CGL insurer National Fire.  National Fire agreed to defend Robinson under a reservation of rights and filed a declaratory judgment action against Robinson.  The federal district trial court granted Robinson’s motion for partial summary judgment, holding that National Fire had a duty to defend Robinson against the ADM lawsuit.  The only issue was whether the ADM complaint alleged an “occurrence.”  The court states that, under applicable Pennsylvania law, while a breach of a duty arising out of a contract does not constitute an “occurrence,” a breach a duty imposed by law “via social policy” independent of the contract can constitute an “occurrence.”  Here, if Robinson designed the fans prior to entering into its contract with ADM, any negligence in its design could constitute an “occurrence.”  On the other hand, if Robinson’s contract with ADM included design specifications, any negligence in the design would constitute faulty workmanship and not an “occurrence.”  Because the ADM complaint did not allege whether the fans were designed prior to ADM’s contract with Robinson, it alleged the potential for an “occurrence.”