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\\nBreach of Contract is not an Occurrence\\n\\nIn American Home Assurance Company v. Superior Well Services, Inc., No. \\n22-1498, United States Court of Appeals, Third Circuit (May 31, 2023) \\nAmerican Home Assurance Co. ("American Home") appealed the District \\nCourt\'s order grant of summary judgment for policy holder Superior Well \\nServices, Inc. ("Superior").\\n\\nBACKGROUND\\nThe Underlying State Law Claim\\n\\nU.S. Energy contracted with Superior for hydraulic fracking services to \\nextract natural gas from wells owned by U.S. Energy. In November 2007, \\nSuperior notified its insurance provider, American Home, about the \\npotential claim for damage to wells. In February 2008, American Home \\nagreed to provide Superior with defense counsel, but it also sent \\nSuperior a letter reserving its right to contest insurance coverage.\\n\\nU.S. Energy sued Superior in New York state court, alleging that \\nSuperior had damaged 97 of its wells. After trial the jury found that \\nSuperior breached the contract by failing to perform services with \\nreasonable care, skill and diligence.\\xa0 The jury found Superior had \\ndamaged 53 of the 97 wells and specified that Superior "fail[ed] to \\nperform its contract with U.S. Energy in a workman like manner" and that\\n this "failure" was "a substantial factor in causing damage to the U.S. \\nEnergy wells[.]" Accordingly, it awarded U.S. Energy $6.16 million, a \\nfigure that was increased to approximately $13.18 million after the \\nstate court tabulated interest.\\n\\nTHE DISPUTE BETWEEN SUPERIOR AND AMERICAN HOME\\n\\nSuperior\'s policy provided coverage for "property damage" arising out of\\n an "occurrence." The policy defined "property damage" as both \\n"[p]hysical injury to tangible property, including all resulting loss of\\n use of that property."\\n\\nSuperior also purchased an "underground resources and equipment \\ncoverage" ("UREC") endorsement that amended the CGL policy to provide \\nadditional coverage "against risks associated with well-servicing \\noperations[.]" Specifically, the endorsement "added" coverage "with \\nrespect to \'property damage\' included within the \'underground resources \\nand equipment hazard\' arising out of the operations performed by \\n[Superior] or on [Superior\'s] behalf[.]"\\n\\nAmerican Home sued seeking a declaratory judgment that Superior\'s policy\\n does not indemnify Superior for any damages that might be awarded to \\nU.S. Energy and which were caused by Superior\'s breach of contract.\\n\\nTHE DISTRICT COURT\'S OPINION\\n\\nThe District Court granted summary judgment for Superior and, by \\nextension, for U.S. Energy, and it ordered American Home to indemnify \\nSuperior for the state court judgment. The Court concluded that each of \\nthe 53 damaged wells gave rise to a separate occurrence, triggering an \\nindependent coverage limit for each respective well.\\n\\nDISCUSSION\\n\\nThe definition of "accident" required to establish an "occurrence" under\\n the policies cannot be satisfied by claims based upon faulty \\nworkmanship. Such claims simply do not present the degree of fortuity \\ncontemplated by the ordinary definition of "accident" or its common \\njudicial construction in this context.\\n\\n\\nThe Third Circuit Court of Appeal concluded that the endorsement does \\nnot displace the underlying policy\'s occurrence requirement and reversed\\n the District Court\'s summary judgment order and remanded the case to \\nthe District Court with instructions to enter judgment for American \\nHome.\\n\\nZALMA OPINION\\n\\nThe key to every liability insurance policy is that for coverage to \\napply the loss must be fortuitous, that is neither expected nor intended\\n by the insured, and must fit within the generally understood meaning of\\n the term "accident." Under no definition of fortuity is faulty \\nworkmanship by the insured. Since the jury found the insured responsible\\n for its breach of contract by means of faulty workmanship there was no \\noccurrence and no coverage\\n\\n\\n(c) 2023 Barry Zalma & ClaimSchool, Inc.\\n\\n