Faulty Workmanship Claims Amount to Multiple Occurrences

    In a recommended decision, the magistrate found that claims of faulty workmanship against the insured constituted multiple occurrences. Millsap Waterproofing, Inc. v. United States Fire Ins. Co., 2022 U.S. Dist. LEXIS 90112 (S.D. Tex. May 19, 2022).     

    Maravilla Condominiums in Galveston, Texas was damaged by Hurricane Ike in 2008. While repairing the damage caused by the hurricane, an unrelated fire broke out and damaged 77 units. 

    In 2010, the Maravilla Owners Association, Inc. hired several contractors, including Millsap Waterproofing, Inc. Multiple problems arose with the various contractors’ work. In 2016, Maravilla sued the contractors alleging that their shoddy work damaged the condominium complex. More than 80  condominium owners intervened, alleging that Millsap negligently performed work on windows, doorways, walkways, and balconies, resulting in extensive water damage. 

    Millsap had two policies. Amerisure issued a primary policy with limits $1 million per occurrence, subject to a $2 million aggregate limit. Millsap also had an umbrella policy issued by United States Fire Insurance Company with limits $11 million per occurrence in excess of the Amerisure policy. Amerisure agreed to defend. When it became clear that the claims would not settle for less than $1 million, Amerisure argued that the plaintiffs’ damages arose from a single occurrence and refused to contribute more than $1million to a potential settlement. U.S. Fire denied coverage because it determined that the damages stemmed from multiple occurrences and were, therefore, subject to Amerisure policy’s $ 2 million aggregate limit. 

    Millsap settled by adding $550,000 of its own money to the $1 million contributed by Amerisure.

    Millsap sued both insurers and filed a motion for partial summary judgment seeking a determination on whether Millsap’s liability resulted from one or more occurrences. The motion was presented to the magistrate judge.

    Texas applied the “cause” approach to determine the number of occurrences. Under this test, the focus was on the events that caused the injuries and gave rise to the insured’s liability, rather than on the number of injurious effects. The appropriate inquiry was whether there was one proximate, uninterrupted, and continuing cause which resulted in all the injuries and damage. If so, then there was a single occurrence. If the chain of proximate causation was broken by a pause in the negligent conduct or by some intervening cause, then there were multiple occurrences, even if the insured’s negligent conduct which cause each of the injuries was the same kind of conduct.

    Amerisure argued that Millsap’s negligent workmanship was the single proximate, uninterrupted, and continuing cause for damages sought against it. But this overlooked Millsap’s various acts of faulty workmanship. The damages caused by Millsap were not the result of a single, uninterrupted, continuing cause, but from different types of work on multiple areas of separate buildings. The work lasted over a 10 month period and caused damages to both the individual condominium units and common elements. 

    The magistrate judge recommend that the court grant Millsap’s motion to the extent it requested a finding that the claims brought against it involved more than one occurrence, and deny Amerisure’s Motion for Summary Judgment.