Michigan Court Affirms That Contractor’s Defective Workmanship Does Not Involve An “Occurrence” As Defined In A Standard Commercial General Liability Policy

In a continuing debate around the country over whether defective workmanship can trigger an “occurrence” under a standard commercial general liability (“CGL”) policy, a recent Michigan court took the view that defective workmanship does not involve an occurrence that would trigger coverage. While some states have taken proactive steps to resolve this controversy by passing legislation as discussed in the companion article, Michigan has not. 

In Kent Companies, Inc  v Wausau Insurance Companies, unpublished opinion per curiam of the Court of Appeals, issued May 3, 2011 (Docket No. 295237); 2011 WL 1687676 (Mich App), a contractor filed a declaratory judgment action to determine its rights under a commercial general liability policy after it incurred additional expenses to repair a concrete slab that was installed by the contractor and damaged by underground snow-melt tubing. Importantly, the contractor did not dispute the fact that the concrete slab was damaged because it failed to drill “weep holes” in the concrete above the snow-melt tubing. In order to repair the concrete, the brick pavers installed by another contractor on the project had to be removed and replaced even though they had been installed correctly.

The general contractor submitted a claim for additional expenses to its insurer, Wausau Insurance Company, but the carrier denied its claim. In granting summary disposition in favor of the carrier, the circuit court determined that coverage was not available for the expenses associated with the removal and replacement of the concrete slab as well as the brick pavers because those expenses did not arise from an “occurrence” as defined in the CGL policy.

In affirming the lower court’s decision, the Michigan Court of Appeals noted that the contractor was attempting to recover the expenses it incurred for replacing its own product due to its own defective work. Under Michigan law, a contractor’s defective workmanship does not involve an occurrence as defined in a typical CGL policy. Further, the cost incurred for removing and replacing the brick pavers, which were not actually physically damaged, could not be recovered. 

The court noted that the general contractor failed to establish a genuine issue of material fact concerning whether its deficient installation of the concrete slab caused the damage to the snow melt tubing, which, in turn, required the removal and reinstallation of the brick pavers. As such, the expenses associated with the removal and replacement of the brick pavers, which also arose out of the defective work performed by the contractor, were not an “occurrence” under the commercial general liability policy.

In affirming the lower court’s decision, the Michigan Court of Appeals noted that the contractor was attempting to recover the expenses it incurred for replacing its own product due to its own defective work. Under Michigan law, a contractor’s defective workmanship does not involve an occurrence as defined in a typical CGL policy. Further, the cost incurred for removing and replacing the brick pavers, which were not actually physically damaged, could not be recovered.

The court noted that the general contractor failed to establish a genuine issue of material fact concerning whether its deficient installation of the concrete slab caused the damage to the snow melt tubing, which, in turn, required the removal and reinstallation of the brick pavers. As such, the expenses associated with the removal and replacement of the brick pavers, which also arose out of the defective work performed by the contractor, were not an “occurrence” under the commercial general liability policy.

Based on these facts, the Michigan Court of Appeals affirmed the lower court’s decision to grant summary disposition in favor of the carrier based upon the language of the commercial general liability policy.