Virginia “property damage” caused by an “occurrence.”

In Stanley Martin Cos. v. Ohio Cas. Group, No. 07-2102  (4^th Cir. Feb. 19, 2009)(unpublished), the insured general contractor of a townhouse development was sued by homeowners alleging mold growth. Investigation determined the mold originated from defective wood trusses supplied by a subcontractor.  The insured incurred mold remediation costs.  After the insured’s umbrella insurer refused to contribute to the mold remediation costs, the insured filed suit.   Applying Virginia law, the federal trial court granted summary judgment for the insurer, holding that property damage to the insured general contractor’s work—the townhomes–resulting from a subcontractor’s defective work does not constitute property damage caused by an “occurrence.”  The Fourth Circuit reversed, holding that, while the property damage to the defective trusses did not constitute property damage caused by an “occurrence,” the resulting property damage to property other than the defective trusses did constitute property damage caused by an “occurrence.” The court relies in large part on the subcontractor work exception to the “your work” exclusion.  A partial dissent correctly notes that this “important area of the law” has not been addressed by the Virginia Supreme Court, thus warranting certification to that court.