In Town & Country Property, LLC v. Amerisure Insurance Co., No. 1100009 (Ala. June 29, 2012), property owner Town & Country contracted with insured general contractor Jones-Williams for the construction of a car dealership. All of the construction work was performed by Jones-Williams’ subcontractors. After completion, Town & Country sued Jones-Williams for defective construction. Jones-Williams’ CGL insurer Amerisure defended. The case was tried and a judgment was entered against Jones-Williams in favor of Town & Country. After Amerisure denied any obligation to pay the judgment, Town & Country sued Amerisure in a statutory direct action. The trial court entered judgment in favor of Amerisure and against Town & Country. On appeal, on October 21, 2011, the Alabama Supreme Court affirmed in part. Relying on its prior decisions in United States Fid. & Guar. Co. v. Warwick Development Co., Inc., 446 So.2d 1021 (Ala. 1984) and Moss v. Champion Ins. Co., 442 So.2d 26 (Ala. 1983), the court reaffirmed that, even under the 1986 revision of the ISO CGL form which gives back coverage for property damage caused by work performed by a subcontractor, faulty workmanship standing alone does not constitute an “occurrence.” The court goes on to state that faulty workmanship may lead to an occurrence if it subjects personal property or other parts of the structure to “continuous or repeated exposure” to some other “general harmful condition” (e.g. the rain in Moss) and, as a result of that exposure, personal property or other parts of the structure are damaged. Unable to determine on the record before it whether any part of the judgment against Jones-Williams was for damages other than the cost of repairing or replacing the defective work, such as property damage to furnishings or non-defective portions of the building, which would fall within the subcontractor work exception to the “your work” exclusion and thus be covered, the court remanded to the trial court for that determination.
On remand, the trial court determined that $257,500.00 of the $650,100.00 judgment against Jones-Williams was for the repair or replacement of defective work, subtracted that amount from the judgment, and entered judgment in the amount of $392,600 for Town & Country. Amerisure appealed that judgment. On June 29, 2012, the Alabama Supreme Court, with its October 21, 2011 decision still not released for publication, reversed. The court determined that, except for non-defective ceiling tiles damaged by moisture penetrating through a defectively constructed roof and other components, all of the other parts of the building which suffered moisture penetration damages were defectively constructed themselves. The court states:
Even if these items suffered further damage as a result of other defective construction, it would be inappropriate to consider that damage covered under the CGL policy if the inherent defects caused by faulty construction already necessitated the repair or replacement of these items.
The court held that only the property damage to the non-defective ceiling tiles constituted “property damage” caused by an “occurrence.” The court reversed and remanded back to the trial court for entry of judgment for Town & Country for $600.00 for the cost to replace the ceiling tiles.