Wisconsin “property damage” caused by an “occurrence.”

In American Family Mut. Ins. Co. v. American Girl, Inc., 673 N.W.2d 65 (Wis. 2004), the insured general contractor was hired by the owner to design and build a warehouse on the owner’s property.  The general contractor hired a soil engineer to do a soil analysis and make site preparation recommendations.   The soil engineer determined that the soil conditions were poor and recommended a compression process which the general contractor followed.  After the warehouse was completed and the owner took possession, excessive soil settlement caused the foundation to sink which in turn caused structural damage to the warehouse.  The warehouse had to be torn down.  It was determined that erroneous advice from the soil engineer was a substantial cause of the excessive settlement.  Pursuant to the contract, the owner filed a demand for arbitration against the general contractor asserting claims for breach of contract and negligence.  The general contractor’s CGL insurer filed a declaratory judgment action presumably in response to the insured’s demand for a defense in the arbitration.  On summary judgment motions, the trial court held that, because neither the cause—erroneous advice, nor the harm—property damage to the warehouse, was “intended, anticipated, or expected,” there was an “occurrence.”  The court rejected the insurer’s “breach of contract is not an ‘occurrence'” argument by stating:

We agree that CGL policies generally do not cover contract claims arising out of the insured’s defective work, but this is by operation of the CGL’s business risk exclusions, not because a loss actionable only in contract can never be the result of an “occurrence” within the meaning of the CGL’s initial grant of coverage.  This distinction is sometimes overlooked, and has resulted in some regrettably overbroad generalizations about CGL policies in our case law.

673 N.W.2d at 76.   After discussing Weedo v. Stone-E-Brick, Inc., 405 A.2d 788 (N.J. 1979) and an often-cited decision from the Wisconsin intermediate court of appeals as examples of “regrettably overbroad generalizations,” the court goes on to state:

Despite this broad generalization, however, there is nothing in the basic coverage language of the current CGL policy to support any definitive tort/contract line of demarcation for purposes of determining whether a loss is covered by the CGL’s initial grant of coverage.

673 N.W.2d at 77.  The court states that it held never held otherwise.