Virginia Chinese Drywall “property damage” caused by an “occurrence” and number of “occurrences”

In Dragas Management Corp. v. Hanover Insurance Co., No. 2:10cv547 (E.D. Va. July 21, 2011), claimant residential home general contractor and developer DMC filed for arbitration against insured drywall supply and install subcontractor Porter-Blaine seeking damages for  (1) the replacement of defective Chinese drywall, and (2) the repair of resulting property to other components of the DMC homes and homeowners’ personal property in seventy-four homes.  Porter-Blaine’s CGL insurer Citizens and excess insurer Hanover defended Porter-Blaine in the DMC arbitration.   The arbitration resulted in an award against Porter-Blaine in favor of DMC.  The award was converted into a judgment and DMC filed suit against Citizens and Hanover to collect on the judgment.   The federal district trial court entered partial summary judgment in favor of DMC.  Applying Virginia law, the court first held that, while the costs incurred by DMC to replace Porter-Blaine’s defective drywall did not constitute damages because of “property damage” caused by an “occurrence,” the costs incurred by DMC to repair resulting property damage to other components of the homes and homeowners’ personal property did constitute damages because of “property damage” caused by an “occurrence.”  The court then held that, for purposes of the each “occurrence” limit of liability in the Citizens and Hanover policies, the installation of defective drywall in each of the seventy-four homes constituted a separate “occurrence.”