Arkansas Court Affirms Faulty Workmanship During Installation as Covered ‘Occurrence’
In a significant ruling that clarifies the influence of statutory definitions on insurance coverage in construction disputes, the Arkansas Court of Appeals on April 9, 2025, upheld a lower court decision requiring Nationwide Mutual Insurance Co. to defend and indemnify NWA Restore-It, Inc. in a case involving property damage allegedly resulting from faulty workmanship during flooring installation.
The case originated when homeowner Steven Hattabaugh hired NWA Restore-It in January 2019 to install new flooring following water damage to his home in November 2018. NWA subcontracted the installation to L&A Flooring, who completed the work the same month. Approximately six months later, the floor began showing signs of damage, including rippling and cracking. Despite L&A’s attempted repairs in September 2020, the issues persisted.
In March 2021, Hattabaugh and Amy Woods filed a lawsuit against NWA, alleging that the damage was caused by improper installation. NWA subsequently filed a third-party complaint against Nationwide, seeking a declaratory judgment that it was entitled to defense and indemnity under a commercial general liability policy issued to L&A, with NWA named as an additional insured.
Nationwide denied coverage based on exclusions in the policy’s additional insured endorsement. The Benton County Circuit Court granted NWA’s motion for judgment on the pleadings, holding that Nationwide owed a duty to defend and indemnify. Nationwide appealed, arguing that the exclusions applied since the flooring had been completed and was in use when the damage was discovered.
The Arkansas Court of Appeals disagreed with Nationwide’s arguments, citing Arkansas Code Annotated § 23-79-155. The court emphasized that under state law, the definition of ‘occurrence’ in commercial general liability policies includes ‘property damage or bodily injury resulting from faulty workmanship.’ The court found that the underlying complaint alleged damage occurring during installation, not afterward, and thus did not fall within the cited exclusions.
The appellate court distinguished this case from S.E. Arnold & Co. v. Cincinnati Insurance Co. (2016 Ark. App. 587), where damages were limited to the contractor’s own product. In contrast, the damage in Nationwide v. NWA stemmed from alleged improper installation by a subcontractor, not from the product itself. As the pleadings alleged damage caused by faulty workmanship during ongoing operations, the court concluded that coverage was not clearly excluded, and the duty to defend and indemnify applied.
The judgment of the Benton County Circuit Court was affirmed. The opinion was delivered by Judge Mike Murphy, with Judges Tucker and Wood concurring. Nationwide Mutual Insurance Co. was represented by Michael P. Vanderford of Anderson, Murphy & Hopkins, L.L.P., while NWA Restore-It, Inc. was represented by M. Evan Stallings, Adam D. Franks, and Lauren A. Spencer of Barber Law Firm, PLLC.
This ruling provides significant insight into how statutory definitions can influence insurance coverage in construction disputes, particularly regarding the interpretation of ‘occurrence’ in commercial general liability policies.
