Third Circuit Vacates Judgment for Insurer on Alleged Construction Defect Claim

    The Third Circuit vacated and remanded to the district court the judgment in favor of the insurer on a construction defect claim. Odedeyi v. AmTrust Financial Services Inc., 2024 U.S. App. LEXIS 24729 (3d Cir. Oct. 1, 2024). 

    Mr. Odedeyi hired a contractor, who was insured by Security National, to perform work on his property. After the property was damaged during the renovations, Odedeyi filed suit against the contractor. Odedeyi was awarded a default judgment against the contractor. 

    Odedeyi then filed suit against Security National and AmTrust Financial under the direct action statute in Pennsylvania. Odedeyi argued that the damage was covered under the contractor's policy and they were liable for the judgment. AmTrust Financial was dismissed b stipulation of the parties. Both Odedeyi and Security National moved for summary judgment. The district court granted Security National's motion because it determined Odedeyi's complaint alleged damages caused by faulty workmanship which was not an occurrence under the policy. 

    While several paragraphs of the underlying complaint described the faulty workmanship of the contractor, two paragraphs described other damage. Paragraph 11 alleged that the contractor had removed the entire chimney of the property without any reason. Paragraph 14 asserted that the contractor damaged concrete pads on the rear and side of the property. Odedeyi contended that the property damage mentioned in these paragraphs could not be attributed to faulty workmanship because the contractor was not hired to work on the chimney or concrete pads. 

    The Third Circuit noted there was nothing in the underlying complaint suggesting that the damage to the concrete pads and the chimney was the result of faulty workmanship on other areas of the property. Thus, there were undetermined facts outside the complaint regarding whether the damage was due to an accident that would trigger coverage under the policy. The allegations of damage to the chimney and concrete pads could potentially constitute occurrences. Therefore, Security National was not entitled to summary judgment on the ground that the underlying allegations could not constitute an occurrence.