In July 2016 the New Jersey Supreme Court held that damage by rain water leaking into residential condominium premises because of a subcontractor’s faulty workmanship constituted property damage and an accidental occurrence under the property developer’s commercial general liability insurance policy.

Under the policy ‘property damage’ included ‘physical injury to tangible property’ and an ‘occurrence’ was ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions’.

After completion of the complex, several residents experienced problems such as roof leaks and water infiltration around windows in units and the common area. The insurer who was sued under their general liability policy alleged they were not liable because the subcontractor’s faulty workmanship did not constitute an occurrence that caused property damage.

The court held that the consequential damages caused by the subcontractor’s faulty workmanship constituted property damage. The term ‘accident’ plainly encompasses unintended and unexpected harm caused by negligent conduct such as the subcontractor’s faulty workmanship including consequential damage to the completed and non-defective portions of the property.

In South Africa the question would be whether the insured contractor was legally liable to pay third party claims with the contractual liability exception being considered.

(The case is Cypress Point Condominium Association Inc. v Adria Towers LLC)