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Ala. SC: Insurer not responsible for judgment against general contractor

By Jessica M. Karmasek | Sep 27, 2013

MONTGOMERY, Ala. (Legal Newsline) -- The Alabama Supreme Court ruled last week that an insurer does not have to pay a judgment entered against its insured, a general contractor, for water leaks at a newly built $1.2 million home.

Owners Insurance Company initiated a declaratory-judgment action against Jim Carr Homebuilder LLC and Thomas and Pat Johnson, who contracted with JCH to design and build their home.

Owners sought a declaration that it was not obligated to indemnify its insured, JCH, for any judgment entered against it in the Johnsons' separate action, which alleged that the house JCH constructed for them was poorly built.

After the Johnsons prevailed in their action against JCH, the trial court in the declaratory-judgment action entered a summary judgment holding that Owners was required to pay the judgment entered against JCH pursuant to the terms of the Owners policy.

The state's high court, in its Sept. 20 ruling, said because JCH's faulty workmanship was not an "occurrence," the trial court's judgment was in error and should be reversed.

Under the Owners policy, an "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

"JCH was not hired to construct only a part of a house (such as a roof) and JCH's poor workmanship did not thereafter result in damage to other parts of the house outside the scope of the work JCH was hired to complete," Justice Lyn Stuart wrote for in the court's 16-page opinion.

"Rather, the Johnsons contracted with JCH for JCH to build them a house, and any damage that resulted from poor workmanship was damage to JCH's own product."

From Legal Newsline: Reach Jessica Karmasek by email at

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