Thompsons Properties, Inc. v. Continental Cas. Co., 40 N.Y.2d 60 (1976)

The term “accident” in an insurance policy, when determining liability coverage, encompasses unintended damage resulting from intentional acts, interpreted from the perspective of the insured.

Summary

Thompsons Properties sued Continental Casualty, Colpan Realty’s insurer, to recover a judgment obtained against Colpan for property damage. Thompsons’ building suffered cracks and settling due to Colpan’s adjacent construction. Continental denied coverage, arguing the damage wasn’t an “accident” because it resulted from Colpan’s intentional construction activities, despite warnings from Thompsons. The New York Court of Appeals held that the damage could be considered an accident if the resulting harm was unintended from Colpan’s perspective, even if the actions leading to the damage were intentional. The court emphasized that the term “accident” in an insurance contract should be construed in favor of the insured, making the determination a question of fact for the jury.

Facts

Colpan Realty Corporation constructed an apartment building adjacent to Thompsons Properties’ parking garage. During construction, Colpan raised the grade of its land, causing pressure from stones, earth, and water against the garage wall. The weight of construction vehicles added to the pressure. Thompsons repeatedly warned Colpan of potential damage. The garage suffered severe cracking, settling, and water seepage.

Procedural History

Thompsons sued Colpan for trespass and nuisance. Colpan notified its insurer, Continental Casualty, which disclaimed coverage but offered a gratuitous defense, which Colpan refused. The complaint was amended at trial to include negligence. Judgment was rendered against Colpan based on negligence. Continental refused to pay the judgment. Thompsons then sued Continental under Section 167 of the Insurance Law. The trial court dismissed the complaint. The Appellate Division reversed, and Continental appealed to the New York Court of Appeals.

Issue(s)

Whether the damage to Thompsons’ building, resulting from Colpan’s construction activities, constituted an “accident” within the meaning of the insurance policy issued by Continental Casualty, thus triggering coverage for Colpan’s liability.

Holding

Yes, because the resulting damage could be viewed as unintended by Colpan, even though the original act or acts leading to the damage were intentional; thus, the total situation could be found to constitute an accident.

Court’s Reasoning

The court reasoned that the term “accident” should be broadly construed, particularly in the context of an insurance contract. It adopted the “transaction as a whole” test, focusing on the quality and purpose of the transaction rather than analyzing individual acts in isolation. Quoting Cardozo in Messersmith v. American Fidelity Co., the court stated, “Injuries are accidental or the opposite for the purpose of indemnity according to the quality of the results rather than the quality of the causes.” The court stated that Colpan took a calculated risk. While Colpan knew its actions might damage Thompsons’ building, there was no evidence Colpan intended the damage that occurred. The court emphasized the insurer’s duty to defend is broader than its duty to pay, and Continental should have used a declaratory judgment to determine its duties. Because Continental did not, it assumed the consequences of its decision to disclaim coverage. “[R]egardless of the initial intent or lack thereof as it relates to causation, or the period of time involved, if the resulting damage could be viewed as unintended by the fact finder the total situation could be found to constitute an accident.”