Faulty Installation of Heating and Cooling System Does Not Amount to an Occurrence

    The trial court determined the insurer had no duty to defend or indemnify for the insured's faulty workmanship in installing a heating and cooling system. Knoblich v. Erie Ins. Exchange, 2024 Pa. Super. Unpub. LEXIS 1899 (Pa. Super Ct. Aug. 5, 2024). 

    The Knobiches entered a contract with M&M HVAC, LLC for installation of a Direct Exchange dual site geothermal heating and cooling system. EarthLinked Technologies, Inc. manufactured the geothermal system. After completion, the Knobliches claimed that the system was not functioning properly as the temperatures in some of the rooms differed by as much as 40 degrees. M&M unsuccessfully attempted to adjust the air flows. Eventually, the system completely shut down. EarthLinked also was unsuccessful in fixing the air flow and temperature issues. Ultimately, the Knobliches retained an air balance expert who diagnosed the problem, prepared a report, and recommended a plan to improve the situation. The Knobliches hired a new HVAC contractor to remove and replace the majority of the home's old ductwork and complete the system installation,.

    The Knobliches sued M&M and EarthLinked, seeking damages in excess of $90,000. M&M tendered to Erie, but Erie responded it had no duty to cover M&M due to lack of an occurrence that wold trigger coverage for property damage.

    The Knobliches filed suit for declaratory judgment against Erie and M&M, seeking a declaration that Erie had a duty to defend and indemnify M&M for damages alleged in the underlying action. Erie filed a motion for summary judgment that it had no duty to defend or indemnify M&M. The trial court granted Eri's motion, finding there was no accident that caused the damage to the Knobliches' home. Rather, the court found that M&M's faulty workmanship led to the geothermal system's failure. 

    The decision was appealed. The Knobliches alleged in the underlying action that M&M "failed to complete installation of the Geothermal System in a workmanlike manner, in accordance with the manufacturer's specifications" and, accordingly, M&M "breached its contract to perform all work in a professional manner according to all standard practices." 

    The appellate court agreed there was no triggering "occurrence" under the Erie policy to require it to defend or indemnify M&M where the defective work performed by M&M caused the heating problems. Thus, all consequential damages that followed were not a fortuitous or accidental event triggering Erie's duty to defend or indemnify.