New Jersey/New York “occurrence”

In National Union Fire Insurance Co. of Pittsburgh, PA v. Turner Construction Co., 986 N.Y.S.2d 74 (N.Y. App. Div. 2014), Turner was the general contractor for a high rise office building constructed in New Jersey for owner GSJC.  Turner subcontracted with Permasteelisa for the building’s exterior curtain wall which consisted of granite and glass with an attached network of decorative pipe rails.  A segment of the pipe rails fell from the building onto the street.  GSJC determined that a significant percentage of the pipe rail connections to the curtain wall did not conform to specifications or were defective.  GSJC sued Turner and Permasteelisa in New Jersey state court for breach of contract, breach of warranty, and negligence, seeking damages for the damage to the curtain wall and the danger of additional pipe rail falling in the future.  National Union, which had issued an OCIP policy for the project, defended Turner and Permasteelisa under a reservation of rights and then filed a declaratory judgment action in New York state court.  The New York trial court entered judgment for National Union.  On appeal, the intermediate court of appeals affirmed.   As to choice of law, the court stated that

it is undisputed that the law of New Jersey governs this action, which turns on insurance policy interpretation, and that New Jersey and New York law are consistent as to the issues in dispute here.

The court then held that, under both New York and New Jersey law, faulty workmanship which results in damage to the insured’s work only, regardless of whether any of the faulty work was performed by the insured’s subcontractor, does not constitute an “occurrence.”  The court rejected the argument that National Union’s expansion of the definition of “occurrence” beyond an “accident,” to also include an “event or happening,” dictated a different result:

[T]he addition of “happening” or “event” to the definition of “occurrence” does not change the fact that fortuity is still an essential consideration under New Jersey and New York law when determining whether there is coverage under such a policy, and a claim for faulty workmanship simply does not involve fortuity.