The Massachusetts Appellate Court recently held that a subcontractor’s erroneous actions were not a fortuitous event under landscaper’s CGL policy. Pacific Indemnity Company v. Lampro, et. al., 86 Mass. App. Ct. 60 (2014).
The case arose after homeowners, Steven and Sue Levkoff (the “Levkoff’s”) contracted with Steven Michael Designs (“SMD”) to remove trees and brush on their property. The property was considered an environmentally sensitive area and the town’s conservation commission issued permits allowing SMD to perform the work and directed AMD to abide by certain environmental regulations. SMD hired a subcontractor to perform the landscaping work. For reasons not made clear in the record, the subcontractor failed to follow the conditions outlined in the permits and the engineering plans. The Levkoff’s incurred about $140,000 in remediation costs. The Levkoff’s homeowners’ insurer covered the costs and brought a subrogation claim against SMD’s insurer claiming that SMD’s CGL policy covered the subcontractor’s actions.
The trial court concluded that there was no coverage for the subcontractors actions under SMD’s insurance policy. The appellate court affirmed, holding that the insuring agreement extended coverage to SMD only for property damage caused by an “occurrence.” The policy defined an “occurrence” as “an accident, including continuous or repeated exposure to the same general harmful conditions.” The court held that SMD’s subcontractor failed to follow the directions in the permit and the engineering plans, but that failure was not “an unexpected happening without intention or design,” and as such, could not be deemed a “fortuitous or unexpected consequence” of the work. The court went on to note that the business risk exclusions – the traditional exclusions (j)(5) and (j)(6) – also applied, because the property damage occurred to areas of the property on which SMD’s subcontractor was performing operations, and because the Levkoff’s were seeking damages that resulted from work that was improperly done.