Illinois “property damage” caused by an “occurrence”

In CMK Dev. Corp. v. West Bend Mut. Ins. Co., No. 1-08-1155  (Ill. App. 1^st Dist. Oct. 30, 2009), after the insured developer sold a home to the claimants, the claimants filed a demand for arbitration alleging defective construction.  The arbitration demand includes causes of action for breach of contract, breach of implied warranties, misrepresentation, and fraud. The insured tendered the defense of the arbitration demand to its CGL insurer which denied a defense.  The insured defended itself, settled, and then sued the insurer seeking to recover its defense and settlement costs.  The trial court entered judgment for the insured.  The intermediate appellate court reversed.  The parties, as well as the court in citing to Stoneridge, agreed that the issue was whether the arbitration demand alleged damage to “other property.”  However, the parties disagreed on what constituted “other property.”  The insured argued that (1) after closing when the insured’s work became the property of the claimant, it became “other property,” (2) water-runoff damage caused by an alleged defect in an adjacent home also constructed by the insured rendered the claimant’s home “other property,” and (3) an cork floor alleged to have been damaged could have been installed by the claimant.   The appellate court held rejected each of these arguments.  As did the Second District in Stoneridge court, the First District here distinguishes the Fourth District holding in Country Mutual on the basis that Country Mutual included a negligence cause of action.