Conflicting Precedent from Across the Country
For years, various courts have determined that damage caused by faulty workmanship is covered under a CGL policy, while other courts have reached the opposite conclusion. Two leading cases addressing opposing sides of the debate are discussed below.
Wisconsin establishes coverage for damage unintentionally caused by faulty workmanship. In American Family Mutual Insurance Co. v. American Girl, Inc., the Wisconsin supreme court recognized that construction defects could arise from an occurrence. In American Girl, a building owner sued a contractor for damage caused by substantial soil settlement underneath the completed building. The matter went to arbitration, where the owner’s allegations were couched as breach of contract. Consequently, the contractor’s insurer refused to provide coverage.
However, the Wisconsin supreme court determined there was coverage, recognizing that inadvertent, faulty workmanship was an accidental “occurrence,” potentially covered under the CGL policy. In analyzing the meaning of “occurrence,” the courtconcluded that the damage to the building could only have arisen out of an accident. “No one seriously contend[ed] that the property damage to [the building] was anything but accidental (it was clearly not intentional), nor [did] anyone argue that it was anticipated by the parties.”
Further, American Girl rejected the insurer’s argument that a breach of contract claim could never be an occurrence because the CGL policy was not intended to cover contract claims arising out of the insured’s defective work. The court explained:
[T]here is nothing in the basic coverage language of the current CGL policy to support any definitive tort/contract line of demarcation for purposes of determining whether a loss is covered by the CGL’s initial grant of coverage. “Occurrence” is not defined by reference to the legal category of the claim. The term “tort” does not appear in the CGL policy.
This is not to say a construction defect claim arising from an occurrence is always covered by the CGL policy.
CGL policies generally do not cover contract claims arising out of the insured’s defective work or product, but this is by operation of the CGL’s business risk exclusions, not because a loss actionable only in contract can never be the result of an ‘occurrence’ within the meaning of the CGL’s initial grant of coverage.
Notably, the presence of these exclusions in the CGL policy begs the question: Why would these exclusions be necessary if a construction defect was not an occurrence? As American Girl explains:
If, as [the insurer] contends, losses actionable in contract are never CGL “occurrences” for purposes of the initial coverage grant, then the business risk exclusions are entirely unnecessary. The business risk exclusions eliminate coverage for liability for property damage to the insured’s own work or product—liability that is typically actionable between the parties pursuant to the terms of their contract, not in tort. If the insuring agreement never confers coverage for this type of liability as an original definitional matter, then there is no need to specifically exclude it. Why would the insurance industry exclude damage to the insured’s own work or product if the damage could never be considered to have arisen from a covered “occurrence” in the first place?
Early New Jersey supreme court decision determines no coverage for defective work. The New Jersey supreme court found there was no coverage for construction defects in Weedo v. Stone-E-Brick, Inc. The court reasoned that risks associated with defective construction were not intended to be covered in a general liability policy. The court explained:
Where the work performed by the insured-contractor is faulty, either express or implied warranties, or both, are breached. As a matter of contract law, the customer did not obtain that for which he bargained. The dissatisfied customer can, upon repair or replacement of the faulty work, recover the cost thereof from the insured-contractor as the standard measure of damages for breach of warranties. . . . The consequence of not performing well is part of every business venture; the replacement or repair of faulty goods and works is a business expense, to be borne by the insured-contractor in order to satisfy customers.
Subsequently, many jurisdictions have followed the lead of American Girl, while others are persuaded by the reasoning inWeedo.
Disagreement continues on whether property damage arising from faulty workmanship is an occurrence. Recent cases demonstrate that this dichotomy continues: Does property damage caused by faulty workmanship constitute an occurrence?
For example, the Third Circuit followed Pennsylvania law in determining that damaged caused by faulty workmanship does not arise from an occurrence. The underlying suit alleged that the insured general contractor was negligent in supervising its subcontractor, thereby resulting in structural damage to the building. Relying on Pennsylvania law, the Third Circuit found that faulty workmanship—whether caused by the contractor’s negligence alone or by the contractor’s negligent supervision, which then permitted the willful misconduct of its subcontractors—did not amount to an accident.
The Ohio supreme court decided in 2012 that claims of faulty workmanship are not claims for property damage caused by an occurrence. The court focused on the doctrine of fortuity because it was “[i]nherent in the plain meaning of ‘accident.’” The court reasoned that damage claims arising from faulty workmanship were not fortuitous in the context of a CGL policy.
The Alabama supreme court reached essentially the same result in 2011. While faulty workmanship alone was not an “occurrence,” faulty workmanship could lead to an occurrence “if it subjects personal property or other parts of the structure to ‘continuous or repeated’ exposure to some other ‘general harmful condition’ . . . and, as a result of that exposure, personal property or other parts of the structure are damaged.” Why faulty workmanship damaging the insured’s own work would not be accidental while faulty workmanship damaging the work of another tradesman would be accidental was not explained by the court.
On the other side of the coin, recent cases have found that property damage caused by faulty workmanship arises from an occurrence and is covered under a CGL policy. For example, the North Dakota supreme court found that damage caused by faulty workmanship can be the result of an “occurrence.” The general contractor was sued under breach of contract and breach of implied warranty claims for damage caused by improper compacting of soil, leading to a shifting of the underlying plaintiffs’ house. A prior North Dakota case had held that if faulty workmanship caused damage to other than the insured’s work product, an unintended and unexpected event occurred and coverage existed. There was nothing in the definition of “occurrence,” the court now reasoned, supporting coverage where the faulty workmanship that damaged property of a third party, but denying coverage where faulty workmanship damaged the work or property of the insured contractor. Therefore, faulty workmanship could constitute an occurrence if the faulty work was “unexpected” and not intended by the insured, and the property damage was not anticipated or intentional.
Subsequently, the Georgia supreme court went a bit further than the North Dakota supreme court by holding that an occurrence could arise from “property damage” to the insured’s own work. Therefore, an occurrence did not require damage to the property or work of someone other than an insured.
In another recent case, the Second Circuit Court of Appeals vacated a district court’s judgment that held there was no coverage for a pool contractor when property damage was caused by the subcontractors’ work. The Second Circuit determined that the policy under consideration unmistakably included defects in the insured’s own work to be within the category of an “occurrence.” The exclusion for the insured’s work was another hurdle to overcome, but it was subject to an exception when the work was performed by a subcontractor.
Similarly, the Georgia court of appeals determined that a subcontractor hired to install pipes had coverage for property damage caused when one of the pipes burst. Although the insurer argued that the claim did not constitute property damage caused by an occurrence, the court disagreed. A subcontractor’s faulty workmanship that caused unforeseen or unexpected damage to other property was an “occurrence.” There was no evidence that the insured’s plumbing mistakes were expected or intended. Therefore, the insured’s acts constituted an occurrence involving “property damage.”
Coverage for Construction Defects in Hawaii
In Hawaii, coverage disputes for construction defects have increased since the Intermediate Court of Appeals decided in 2010 that where property damage arises from faulty workmanship, there is no occurrence.
Historically, Hawaii suggests that property damage caused by faulty workmanship is covered under a CGL policy. Three cases issued by the Hawaii supreme court in the 1980s and 1990s laid the groundwork for determining that property damage caused by faulty workmanship is covered by a general liability policy. In fact, one of the cases confirmed coverage for construction defect claims. The three cases are briefly summarized below.
In Sturla, Inc. v. Fireman’s Fund Insurance Co., the Hawaii supreme court analyzed “whether a comprehensive general liability policy issued to a carpet manufacturer . . . covered damages resulting from the rapid fading of carpet after its delivery and installation in a condominium [.]” Sturla, Inc., the distributor and seller of the carpet, was the insured. The policy’s insuring clause promised the insurer would “pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of . . . property damage . . . caused by an occurrence.”
The Hawaii supreme court ultimately affirmed the denial of coverage, but its reasoning was instructive. The court explained: “[W]e believe the risks insured by the standard form policy are ‘injury caused by a faulty product or workmanship.’” The supreme court went on to highlight the difference between faulty workmanship that does not cause any damage to property other than the work itself, for which there is no coverage, and faulty workmanship that causes harm to persons or other property, for which there is coverage. The court illustrated this point with the following example:
An illustration of this fundamental point may serve to mark the boundaries between “business risks” and occurrences giving rise to insurable liability. When a craftsman applies stucco to an exterior wall of a home in a faulty manner and discoloration, peeling and chipping result, the poorly-performed work will perforce have to be replaced or repaired by the tradesman or by a surety. On the other hand, should the stucco peel and fall from the wall, and thereby cause injury to the homeowner or his neighbor standing below or to a passing automobile, an occurrence of harm arises which is the proper subject of risk-sharing as provided by the type of policy before us in this case. The happenstance and extent of the latter liability is entirely unpredictable—the neighbor could suffer a scratched arm or a fatal blow to the skull from the peeling stonework. Whether the liability of the businessman is predicated upon warranty theory or, preferably and moreaccurately, upon tort concepts, injury to persons and damage to other property constitute the risks intended to be covered under the CGL.
The Sturla court denied coverage, not because property damage arising from faulty workmanship could not be an occurrence, but because of an exclusion to what was otherwise a covered event. The court stated, “[i]n the situation confronting us, we think Exclusions (m), (n), (o), and (p) were clearly meant to negate coverage for the contractual liability of the insured ‘as a source of goods or services . . . to make good on products or work which is defective or otherwise unsuitable because it is lacking in some capacity.’” In short, the court treated as a given fact that defective work could be a covered event, but for the application of an exclusion negating that coverage.
In Hurtig v. Terminex Wood Treating & Contracting Co., the insured contractor, Terminex, “entered into a contract for the inspection and treatment for termites of the home owned by plaintiffs, Bernard and Helen Hurtig.”“Some time after Terminex finished treatment, the Hurtigs sued Terminex claiming that it failed to correctly perform the contract which had led to termite damage to the house.”
If the coverage was barred under a CGL policy because the property damage arose out of a failure by a contractor “to correctly perform the contract” and was therefore not “caused by an occurrence,” it would have been unnecessary for the supreme court to proceed past the insuring agreement to examine the scope of “Exclusion (o)” because there would not have been coverage in the first place. Moreover, the court would never have affirmed coverage for the failure “to correctly perform the contract,” as it clearly did once it determined that “Exclusion (o)” was not applicable to bar coverage.
In Sentinel Insurance Co. v. First Insurance Company of Hawai’i, Ltd., the Hawaiisupreme court analyzed coverage of claims asserted in an underlying action by the Association of Apartment Owners (AOAO) against the insureds. The AOAO “alleged breach of contract, breach of warranty, and negligence claims against the developers and contractors of the apartment complex.” “The AOAO’s claims were based on alleged defects in design, construction, and/or materials which caused, inter alia, water infiltration into the structure.” The construction project was completed in April 1981, and the insurance companies that had provided coverage at different points of time disagreed when the post-completion damages had occurred—each claiming that the damage occurred outside its respective policy period.
The court noted that the policies were “‘occurrence’ policies that provide coverage if the event insured against (the ‘occurrence’) takes place during the policy period, irrespective of when a claim is presented.”
The court considered when the occurrence or property damage took place, noting that the AOAO and individual owners “ascertained defects and inadequacies in the design and/or construction and/or materials of said [c]ondominium building” that included water infiltration at various areas, corrosion, inadequate or defective concrete work, deviations from plans and/or specifications, and “[o]ther construction and/or design defects.” Notably, consistent with Sturla and Hurtig,Sentinel found coverage under the insuring agreement for damages sustained from alleged construction defects, declining to rule that such coverage was excluded because the damage arose from a breach of contract or breach of warranty.
Had it intended to adopt the view that construction defect claims are contract-based and do not arise from an occurrence, the court would have necessarily decided that even the negligence claims could not be considered occurrences. In short, Hawaii law, as established by the Hawaii supreme court, does not support the “occurrence” bar to construction defect coverage espoused by some courts, including the Hawaii Intermediate Court of Appeals in its subsequent Group Buildersdecision.
Burlington concludes that the Hawaii supreme court will decide faulty workmanship causing property damage does not arise from an occurrence. In 2004, the Ninth Circuit predicted in Burlington Insurance Co. v. Oceanic Design & Constr. Inc. that the Hawaii appellate courts would treat construction defect claims—resulting from an allegation that a contractor acted negligently—as being uniformly and fatally ancillary to a breach of contract claim. UnderBurlington’s rationale, because construction defect claims arise out of contracts for construction, the claim cannot “state a separate and independent cause of action for negligence” and is therefore not a covered “occurrence.” This prediction of Hawaii law is, of course, not controlling on the state court.
Since Burlington, there have been a host of decisions from the federal district court supporting the principle that contract-based claims do not constitute an occurrence within the meaning of a general liability policy. These federal district court decisions consistently ignore the most relevant line of cases issued by the supreme court of Hawaii: Sturla, Hurtig, and Sentinel. As a result, their reasoning is faulty.
Group Builders follows Burlington and ignores pertinent Hawaii case law. Although a state appellate court typically dictates what constitutes state law, in Group Builders, the Hawaii Intermediate Court of Appeals merely adopted the Ninth Circuit’s Burlington decision. The Intermediate Court of Appeals concluded that the hotel’s construction defect claims were not “occurrences” because “breach of contract claims based on allegations of shoddy performance . . . are not covered under CGL policies.”
Instead of looking to precedent from the Hawaii supreme court, Group Builders relied not only on Burlington but also on a Colorado court of appeals case, General Security Indemnity Co. v. Mountain States Mutual Insurance Co., which stated a majority of jurisdictions find that claims of poor workmanship are not occurrences that trigger coverage under a CGL policy. Reliance upon the Colorado court of appeals case may have been ill advised, however.
First, another division of the Colorado court of appeals disagreed with Mountain States and found that property damage caused by faulty workmanship to work other than that performed by the insured was covered under a liability policy.Second, the Tenth Circuit subsequently predicted that the Colorado supreme court would not follow Mountain States, but would construe the term “occurrence” to encompass unforeseeable damage to non-defective property arising from faulty workmanship. Third, the Tenth Circuit expressly debunked the claim relied on by the Hawaii court, that “a majority of . . . jurisdictions” hold that claims of poor workmanship are not occurrences. “[I]f anything, most federal circuit and state supreme court cases line up in favor of finding an occurrence in the circumstances we consider here. In fact, a strong recent trend in the case law interprets the term ‘occurrence’ to encompass unanticipated damage to non-defective property resulting from poor workmanship.” Fourth, much like the Hawaii legislature’s response to Group Buildersby enacting Act 83, the Colorado legislature passed Colorado Revised Statute 13-20-808. This statute provides that courts “shall presume that the work of a construction professional that results in property damage, including damage to the work itself or other work, is an accident unless the property damage is intended and expected by the insured.”Therefore, the case on which Group Builders so heavily relied arguably offers no reliable guidance to a court in Hawaii.
Under Act 83, relevant Hawaii supreme court cases must be considered in determining whether there is an occurrence. In response to the disruption and chaos caused to the construction industry by the issuance of Group Builders, the Hawaii state legislature enacted Act 83 in 2011. The act provides that “the term ‘occurrence’ shall be construed in accordance with the law as it existed at the time that the insurance policy was issued.”
Nevertheless, since the enactment of Act 83, decisions from the federal district court for the District of Hawaii refuse to give credence to relevant decisions from the Hawaii supreme court despite the state legislative directive. For instance, in one case, the insureds made no effort to demonstrate the meaning of the term “occurrence” under the law at the time the policy was issued. In the absence of any advocacy by the insureds, the court made no mention of the relevant Hawaii supreme court cases, Sturla, Hurtig, and Sentinel. Instead, the federal district court concluded that the law as it existed in 2006, the year in which State Farm issued its policy, was as stated in cases relied on in Group Builders.
In another case decided by the federal court, the insured argued that Hawaii law regarding coverage for construction defects was more properly addressed by the Hawaii supreme court in Sturla, Hurtig,and Sentinel. Nevertheless, the court surmised, “it is fair for this court to assume that the Ninth Circuit and the [Intermediate Court of Appeals in Group Builders] took those Hawaii supreme court cases into account.” Neither Burlington nor Group Builders contain any discussion of Sturla, Hurtig, or Sentinel. It seems unlikely that these relevant, precedential cases were considered and discarded by either Burlington or Group Builders, both of which fail to mention the Hawaii supreme court cases.
A third federal district court case addressing the impact of Act 83 on construction defect claims also declined to followSturla, Hurtig,and Sentinel to the extent they were inconsistent with Group Builders and Burlington. Instead, the court reasoned that Group Builders and Burlington were accurate descriptions of the law in Hawaii at the time the policy under consideration was issued. In other words, the courtadopted the Ninth Circuit’s prediction in Burlingtonregarding coverage under Hawaii insurance law instead of paying credence to the most relevant decisions issued by the Hawaii supreme court.
A different tack was taken in a fourth case, where the federal district court rejected the insurer’s argument “that Group Builders changed nothing about Hawaii insurance law.” Instead, the court noted,
[t]hat position is incompatible with the Legislature’s extreme concern about the effect of that case. See H.B. 924§ 1 (“Group Builders . . . creates uncertainty in the construction industry and invalidates insurance coverage that was understood to exist that was already paid for by construction professions.”).
The court further noted that “the Hawaii legislature has specifically denounced Group Builders in very strong terms and has sought to eliminate the uncertainty caused by that decision. . . . The bill’s excoriation of Group Builder’s goes on for several pages.”
Accordingly, the federal district court cases provide an incomplete and contradictory analysis regarding Act 83’s role in deciding coverage cases alleging construction defects.
State trial court judges hold that Act 83 controls over Group Builders. Not bound by the Ninth Circuit’s prediction in Burlington, at least three state trial court judges determined that Act 83 renders Group Builders nonbinding.
As a result, the argument that Act 83 does not undermine the holding in Group Builders has been rejected by the federal district court in Simpson Manufacturing Co. and three state court judges. Indeed, unlike the federal district court judges, the state circuit court judges that have actually considered the pertinent Hawaii supreme court decisions addressing coverage for property damage caused by faulty workmanship (Sturla, Hurtig, and Sentinel) have followed the dictates of Act 83 by honoring the intention of the parties at the time of issuance of the policy, and have reached a conclusion that directly contradicts Burlington and Group Builders.
The final word on coverage for construction defects, however, awaits the arrival of another relevant case before the Hawaii supreme court. In the meantime, each side will continue to adhere to its position: The insurers will argue thatBurlington and Group Builders correctly held that construction defect claims do not arise from an occurrence and are not covered, while the insureds will contend that the Hawaii supreme court laid the groundwork in Sturla, Hurtig, andSentinel for finding that construction defects are in fact covered under Hawaii law.
Keywords: litigation, construction defects, faulty workmanship, occurrence, Hawaii
Tred R. Eyerly is of counsel to Damon Key Leong Kupchak Hastert in Honolulu.
 Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 673 N.W. 2d 65, 74 (Wis. 2004).
 One author recently explained, “The courts that find coverage for property damage caused by defective construction find it in the express language of the CGL policy. The courts that refuse to find coverage do so by ignoring the express language of the policy.” James Duffy O’Connor, “What Every Court Should Know About Insurance Coverage for Defective Construction,” 5 J. Am. C. Constr. L. 1, 2 (Winter 2011).
 Grp. Builders, Inc. v. Admiral Ins. Co., Ltd., 123 Haw. 142, 148, 231 P.3d 67, 73 (Haw. Ct. App. 2010).
 Group Builders, 123 Haw. at 148–49, 231 P.3d at 73–74.
 Act 83, codified at Haw. Rev. Stat. § 431:1-217 (a).
 Burlington Ins. Co. v. Oceanic Design & Constr. Inc., 383 F.3d 940 (9th Cir. 2004).
 673 N.W. 2d 65 (Wis. 2004).
 American Girl, 673 N.W. 2d at 72.
 American Girl, 673 N.W.2d at 76; see also Greystone Constr., Inc. v. Nat’l Fire & Marine Ins. Co., 661 F. 3d 1272 (10th Cir. 2011) (noting that property damage caused by faulty workmanship is generally neither expected nor intended); Am. Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., Inc., 707 S.E.2d 369, 372 (Ga. 2011) (“[A]n occurrence can arise where faulty workmanship causes unforeseen or unexpected damage to other property.”).
 American Girl, 673 N.W.2d at 77; see also United States Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 884(Fla. 2007) (insurer’s “argument that a breach of contract can never result in an ‘accident’ is not supported by the plain language of the policies”); Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W. 3d 1, 13 (Tex. 2007) (“The insuring agreement does not mention torts, contracts, or economic losses; nor do these terms appear in the definitions of ‘property damage’ or ‘occurrence.’ The CGL’s insuring agreement simply asks whether ‘property damage’ has been caused by an ‘occurrence.’ Therefore, any preconceived notion that a CGL policy is only for tort liability must yield to the policy’s actual language.”) .
 American Girl, 673 N.W. 2d. at 76; see also Sheehan Constr. Co. v. Cont’l Cas. Co., 935 N.E. 2d 160, 167(Ind. 2010) (agreeing with American Girl); United States Fire Insurance Co., 979 So. 2d at 885 (same).
 American Girl, 673 N.W. 2dat 78; see also Greystone Construction, Inc., 661 F. 3d at 1289 (“If damage to ‘your work arising out of it or any part of it’ can never be covered in the first instance, there would be no justification for the ‘your work’ exclusion and the subcontractor exception. And this cannot be.”).
 405 A.2d 788 (N.J. 1979).
 Weedo v. Stone-E-Brick, Inc., 405 A.2d at 791.
 Zurich Am. Ins. Co. v. R.M. Shoemaker Co., 2013 U.S. App. LEXIS 6093 (3d Cir. March 27, 2013).
 R.M. Shoemaker Co., 2013 U.S. App. LEXIS 6093, at *10 (relying on Kvaerner Metals Div. of Kvaemer U.S., Inc. v. Commercial Union Ins. Co., 908 A. 2d 888, 897 (Pa. 2006) and Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., 941 A.2d 706 (Pa. Super. Ct. 2007)).
 Westfield Ins. Co. v. Custom Agri. Sys., Inc., 979 N.E. 2d 269 (Ohio 2012).
 Westfield Insurance Co., 979 N.E. 2d at 273.
 Town & Country Prop., L.L.C. v. Amerisure Ins. Co., 2011 Ala. LEXIS 183 (Ala. Oct. 21, 2011).
 Town & Country Property, L.L.C., 2011 Ala. LEXIS 183, at *17.
 K&L Homes, Inc. v. Am. Family Mut. Ins. Co., 2013 N.D. LEXIS 61 (N.D. Apr. 5, 2013).
 ACUITY v. Burd & Smith Constr., 721 N.W. 2d 33 (N.D. 2006).
 K&L Homes, Inc., 2013 N.D. LEXIS 61, at * 30.
 Taylor Morrison Servs. v. HDI-Gerling Am. Ins. Co., 2013 Ga. LEXIS 618, at *2 (Ga. July 12, 2013).
 Taylor Morrison Services, 2013 Ga. LEXIS 618, at *11.
 Scottsdale Ins. Co. v. R.I. Pools Inc., 710 F.3d 488 (2d Cir. 2013).
 Scottsdale Insurance Co., 710 F.3d at 492.
 Maxum Indem. Co. v. Jimenez, 734 S.E.2d 499 (Ga. Ct. App. 2012).
 Maxum Indemnity Co., 734 S.E.2d at 503.
 Group Builders, Inc. v. Admiral Ins. Co., Ltd., 123 Haw. 142, 148, 231 P.3d 67, 73 (Haw. Ct. App. 2010).
 67 Haw. 203 , 684 P.2d 960 (1984).
 Sturla, 67 Haw. at 204 , 684 P.2d at 961.
 Sturla, 67 Haw. at 207, 684 P.2d at 962.
 Sturla, 67 Haw. at 210, 684 P.2d at 964 (quoting Weedo v. Stone-E-Brick, Inc., 405 A.2d 788, 791 (N.J. 1979)) (italic emphasis in original, brackets omitted).
 Sturla, 67 Haw. at 210 n.6, 684 P.2d at 965 n.6 (quoting Weedo, 405 A.2d at 791–92) (emphasis added).
 Sturla, 67 Haw.at 208–9, 684 P.2d at 964.
 67 Haw. 480, 692 P.2d 1153 (1984).
 Hurtig, 67 Haw. at 480, 692 P.2d at 1154.
 Hurtig, 67 Haw. at 480–81, 692 P.2d at 1154.
 Hurtig, 67 Haw. at 481, 692 P.2d at 1154 (holding that “coverage exists under the policy unless the exclusions clearly provide otherwise”).
 76 Haw. 277 , 875 P.2d 894 (1994).
 Sentinel, 76Haw. at 284, 875 P.2d at 901.
 Sentinel, 76Haw. at 284, 875 P.2d at 901.
 Sentinel, 76Haw. at 284, 875 P.2d at 901.
 Sentinel, 76 Haw. at 287–88, 875 P.2d at 904–5.
 Sentinel, 76 Haw. at 288, 875 P.2d at 905.
 383 F.3d 940, 948 (9th Cir. 2004).
 Burlington, 383 F.3d at 948.
 As noted above, the Hawaii supreme court had previously determined that faulty workmanship causing property damage does arise from an occurrence even where the work to be performed was the subject of a contract. See, e.g.,Sentinel, 76 Haw. at 284 Shepardize , 875 P.2d at 901; Sturla, 67 Haw. at 210 n.6 Shepardize , 684 P.2d at 965 n.6 (quoting Weedo, 405 A.2d at 791–92); Hurtig, 67 Haw. at 480–81, 692 P.2d at 1154. These decisions were not mentioned by the Ninth Circuit in Burlington.
 See, e.g., Allstate Ins. Co. v. Riihimaki, 2012 U.S. Dist. LEXIS 74518, at *6 (D. Haw. May 30, 2012) (the insured’s alleged breach of Agreement of Sale of home does not allege an occurrence); Evanston Ins. Co. v. Nagano,891 F. Supp. 2d 1179 (D. Haw. Aug. 31, 2012) (underlying allegations allege numerous breaches of contract but do not allege any claims sounding in negligence); State Farm Fire & Cas. Co. v. Willison, 833 F. Supp. 2d 1200, 1219–20 (D. Haw. 2011) (allegations against contractor are pled as breach of contract claims; negligence actions based on contractual obligations are not occurrences); Burlington Ins. Co. v. Pacariem, 2011 U.S. Dist. LEXIS 81838 (D. Haw. July 8, 2011) (in granting default judgment to the insurer, the court refers to Group Builders and Burlington, stating that under Hawaii law, claims for breach of contract resulting in defective construction do not constitute an “occurrence”);State Farm Fire & Cas. Co. v. Lau, 2007 U.S. Dist. LEXIS 31761, at *13 (D. Haw. Apr. 30, 2007) (denying coverage where underlying claims are not the direct result of the construction defects, but stem from an alleged personal assurance of the insured to fix the defects caused by the contractor); 3139 Prop., LLC v. First Specialty Ins. Corp.,2007 U.S. Dist. LEXIS 41912 (D. Haw. June 8, 2007) (allegations in underlying complaint for specific performance of agreement to build home not covered because they do not allege property damage arising out of an occurrence).
 Grp. Builders, Inc. v. Admiral Ins. Co., Ltd., 123 Haw. 142, 148, 231 P.3d 67, 70, 73 (Haw. Ct. App. 2010).
 205 P.3d 529 (Colo. App. 2009).
 Colo. Pool Sys. v. Scottsdale Ins. Co., 2012 Colo. App. LEXIS 1732 (Colo. App. Oct. 25, 2012).
 The court explained that “nondefective property” was property that had been damaged as a result of poor workmanship. Colorado Pool Systems, 2012 Colo. App. LEXIS 1732, at *17.
 Greystone Constr., Inc. v. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272, 1284 (10th Cir. 2011).
 Greystone, 661 F.3d at 1283.
 Colo. Rev. Stat. § 13-20-808 (3) (quoted in Greystone, 661 F.3d at 1279).
 Group Builders addressed the insurer’s duty to indemnify. In a second Group Builders decision (Group Builders II), the Intermediate Court of Appeals determined there was a duty to defend the claims arising from faulty workmanship.Group Builders, Inc. v. Admiral Ins. Co., 2013 Haw. App. LEXIS 207 (Haw. Ct. App. Apr. 15, 2013). Under Hawaii law, the insurer must defend unless it would be “impossible” for the underlying plaintiff to prevail against the insured on a claim covered by the policy. The underlying complaint in Group Builders II did not specify when the mold growth began, when any property damage occurred, or what caused the mold growth. There was also a possibility that the business risk exclusions in Admiral’s policy would not exclude coverage for all of the claims against Group Builders. Therefore, Admiral had a duty to defend. Group Builders II, 2013 Haw. App. LEXIS 207, at *33.
 Consequently, Hawaii is one of four states to recently enact legislation to combat court decisions that construction defects do not arise from an occurrence. In addition to Hawaii and Colorado, South Carolina and Arkansas have passed similar legislation.
 See Haw. Rev. Stat. § 431:1-217 (a).
 These cases include Evanston Insurance Co. v. Nagano, 891 F. Supp. 2d 1179 (D. Haw. 2012), Illinois National Insurance Co. v. Nordic PCL Construction, 870 F. Supp. 2d 1015 (D. Haw. 2012), and State Farm Fire & Casualty Co. v. Vogelgesang, 834 F. Supp. 2d 1026 (D. Haw. 2011).
 Vogelgesang, 834 F. Supp. 2d at 1037.
 Vogelgesang, 834 F. Supp. 2d at 1037.
 Nordic PCL Construction, 870 F. Supp. 2d at 1030.
 Nagano, 891 F. Supp. 2d at 1193–94.
 Nagano, 891 F. Supp. 2d at 1193–94.
 Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Simpson Mfg. Co., 829 F. Supp. 2d 914 (D. Haw. 2011).
 Simpson Manufacturing Co., 829 F. Supp. 2d at 922 6 n. 13; see also Nagano, 891 F. Supp. 2d at 1193 n.15(acknowledging the opposite conclusion reached in Simpson Manufacturing Co.).
 Simpson Manufacturing Co., 829 F. Supp. 2d at 928.
 See Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Sunset Heights Haw., LLC, No. 10-1-2184-10 (Haw. Cir. Ct. Oct. 24, 2012) (Order Granting in Part and Denying in Part Defendant Sunset Heights Hawaii, LLC’s Motion for Partial Summary Judgment at ¶¶ 2, 4) (“Act 83 renders the case of Group Builders . . . not binding on the Court; [i]n analyzing the law that existed at the time the policy was issued, the Court has relied primarily on Hawaii state appellate court decisions, not federal court decisions that are predicting what Hawaii state appellate courts are going to rule.”);Coastal Constr. Co. v. N. Am. Specialty, No. 11-1-0417-3 (Haw. Cir. Ct.) (Order Granting Plaintiff Haseko’s Motion for Partial Summary Judgment against Defendants North American Specialty and Clarendon Insurance Company); Transcript of Proceedings on Plaintiff The Pinnacle Honolulu, LLC’s Motion for Partial Summary Judgment at 26–27,Pinnacle Honolulu, LLC v. Am. Int’l Specialty Lines Ins. Co., No. 12-1-0526 (Haw. Cir. Ct. Dec. 4, 2012) (“the legislature instituted [Act 83] in 2011 because public policy favors the insurer’s coverage of property damage arising from construction defects in cases where construction professionals purchase general liability insurance”).