The Supreme Court of Oregon recently ruled that a general contractor’s tort liability for its defective work may constitute a covered “occurrence” within the meaning of the ISO commercial general liability (“CGL”) policy, providing much needed clarity on the issue under Oregon law.[1] However, property damage arising solely from a contractor’s contractual obligations does not constitute an accident, and thus, is not an “occurrence.” [2]

Plaintiffs, Weston and Carrie Twigg, hired Rainer Pacific Development LLC (“Rainer”), a general contractor, to build their home. Admiral Insurance Company (“Admiral”) insured Rainer under a CGL policy. After substantial completion, the Twiggs notified Ranier of various construction defects, which caused property damage. Ultimately, the Twiggs prevailed against Rainer in an arbitration wherein the Twiggs alleged claims of breach of contract, resulting in property damage.

Rainer tendered the suit to Admiral, who denied coverage, and the Twiggs, as judgment creditors, sued Admiral, seeking to be paid for the damages awarded in the arbitration. Admiral moved for summary judgment, claiming it had no duty to indemnify because the contractor’s breach of contract was not an accident, there was no “occurrence.” The trial court granted Admiral’s motion for summary judgment. The Court of Appeals affirmed. Plaintiffs appealed to the Oregon Supreme Court.