NJ Court Reaffirms Rule Against Coverage for Faulty Workmanship Claims and Finds Fraud Claims Inherently Intentional

Awarding summary judgment to an insurer under both liability and directors & officers (D&O) coverage parts, a New Jersey trial court reaffirmed the principle that claims of defective workmanship without resulting ‘property damage’ are not covered under a general liability policy, and further dismissed claims for fraud and breach of fiduciary duty, finding that such claims were inherently intentional and do not state a covered ‘occurrence.’

In Velez v. AR Management Company, et al., 2021 N.J. Super. Unpub. LEXIS 1675 (Law Div. Bergen Co. Aug. 10, 2021), owners of a condominium unit rebuilt after a fire sued the condominium association, several association board members, the association’s property management company and the general contractor for the reconstruction work.

The owners’ suit alleged faulty workmanship and incomplete repairs.

In addition, the owners asserted fraud and breach of fiduciary duty claims against the management company, alleging conflicts of interest and self-dealing between the management company and the general contractor, which had common ownership.

In a third-party complaint, the management company sought coverage from the condo association’s liability and D&O insurer.