Colorado “property damage” caused by an “occurrence”

In General Security Indem. Co. v. Mountain States Mut. Cas. Co., Nos. 07CA2291 & 07CA2292 (Colo. Ct. App. Feb. 19, 2009), a residential development homeowners association sued the general contractor seeking damages for construction defects resulting in property damage and alleging causes of action for negligence, breach of contract, and breach of warranty. The general contractor filed a third party complaint against insured subcontractor Foster Frames for indemnity. Foster Frames was defended by its CGL insurer, General Security (GSINDA).  Foster Frames filed a fourth party complaint against several sub-subcontractors.  GSINDA filed a separate action against the sub-subcontractors’ CGL insurer seeking a declaratory judgment on their duty to defend Foster Framers, presumably as an additional insured, and reimbursement for defense costs incurred.  The trial court entered summary judgment for the sub-subcontractor insurers, holding that the underlying HOA complaint did not allege that the “property damage” was caused by an “occurrence.” GSINDA appealed.  The Colorado intermediate appellate court affirmed.   The court adopted what it categorized as the majority rule that whether sought in tort or breach of contract, defective workmanship standing alone does not constitute an “occurrence.”  The court recognized as a “corollary” that consequential property damage to a third party does constitute “property damage” caused by an “occurrence,” but finds that it does not apply here.  The court found Monterro Homes, although rendered by another division of the same court, to be “unpersuasive” because it failed to consider the case law from other jurisdictions and relied on Hecla which involved the older definition of “occurrence” which incorporates the “neither expected nor intended from the standpoint of the insured” requirement.  As to the consequential damage “corollary,” the court determined that the underlying complaint did not allege “any damage beyond the work product of Foster Frames or the sub-subcontractors” and that any consequential damages were unrelated to Foster Frames’ work.   The court did not address the subcontractor work exception to the “your work” exclusion.