The Tenth Circuit’s Prediction: New York State Likely to Follow Trend Recognizing Damages Caused by Subcontractor’s Faulty Work is a Covered “Occurrence”
The United States Court of Appeals, Tenth Circuit recently issued a favorable decision for policyholders finding property damage arising from a subcontractor’s faulty work arose from an accidental “occurrence” under New York law. In Black & Veatch Corp. v. Aspen Ins. (UK) Ltd, a 2–1 Tenth Circuit panel agreed with Black & Veatch Corp. (“B&V”) that its excess policy — which contained a New York choice-of-law provision — covered claims for property damage to a third party caused by its subcontractor’s faulty work. The Tenth Circuit reversed the district court’s ruling that B&V’s subcontractor’s faulty work caused damage to only B&V’s own work and, therefore, was not a covered “occurrence.” The Tenth Circuit concluded the New York Court of Appeals would likely find the subcontractor’s faulty work was an accidental “occurrence,” following the growing trend of other state high courts that have addressed this coverage issue under commercial general liability (“CGL”) polices. Policyholders — whose policies are governed by New York law — should take notice and consider the implications of this decision on whether New York will soon join the majority view that faulty workmanship by a subcontractor can be an occurrence under CGL policies.