Oregon “property damage” caused by an “occurrence,” earth movement/subsidence exclusion, Subcontractor exception to Your Completed Work exclusion l.

In Willmar Development, LLC v. Illinois National Insurance Co., 726 F. Supp. 2d 1280 (D. Ore. 2010), Willmar was the general contractor for a house that it sold to Walton.  Walton sued Willmar for breach of contract and negligence alleging that Willmar built the house on improperly compacted soil which caused the sheetrock in the house to crack.   After Willmar’s CGL insurer, AIG, declined a defense, Willmar sued AIG.  The federal district trial court granted Willmar’s motion for partial summary judgment on the duty to defend.  Applying Oregon law, the court held in turn:  (1) the cracking sheetrock constituted “property damage” as physical injury to tangible property,  (2) absent an allegation that Willmar intended, expected, or anticipated the damage, it was caused by an “occurrence,” (3) negligent performance of a contract, as opposed to failure to complete a contract or untimely performance of a contract, can constitute an “occurrence,” (4) absent language indicating an intent to include human-caused events, the subsidence exclusion applied to natural events only, and (5) the allegation that some or all of Willmar’s work was performed by its “agents” sufficiently implicated the exclusion l. subcontractor work exception.  On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed in all respects.  Willmar Dev., LLC v. Ill. Nat’ Ins. Co., No. 10-35979 (9th Cir. Dec. 27, 2011)(unpublished).