Rule 23 Order filed
August 9, 2002;
Motion to publish granted
September 18, 2002.

Plaintiff State Farm Fire and Casualty Company (State Farm) appeals the trial court'sentry of a judgment on the pleadings for defendant James J. Tillerson, doing business as J.J.Tillerson Construction Company (Tillerson), in State Farm's action for a declaration that ithad no duty to defend Tillerson in an action by Jeffrey and Debra Gause. The sole issue forreview is whether the trial court erred in finding that State Farm had a duty to defend itsinsured based on the underlying complaint. We reverse.

Tillerson was the holder of a contractor's liability policy issued by State Farmeffective March 14, 1992, through March 14, 1993. A second contractor's liability policywas issued effective March 14, 1993, through March 14, 1994.

On February 18, 1993, the Gauses and Tillerson executed a "Proposed Estimate,"whereby Tillerson, for a fee of $37,602.23, agreed to construct a new room addition andconvert the Gauses' existing carport into a garage. Sometime after the completion of theproject, the Gauses filed suit against Tillerson arising out of the aforementioned agreement. Specifically, the complaint alleged that the Gauses were injured as a result of Tillerson'sbreach of an express warranty of workmanship, breach of the implied warranty ofhabitability, and breach of the implied warranty of fitness for ordinary and particular purposeand that the breaches proximately caused the Gauses' damage. The crux of the Gauses'underlying complaint is that Tillerson breached his warranties to the Gauses by building overa cistern and failing to take the necessary precautions to prevent uneven settling of the soilbeneath the room addition, resulting in the damage identified in the complaint.

Tillerson tendered his defense to State Farm. On November 14, 1996, State Farmfiled a complaint seeking a declaration that it had no duty to defend Tillerson in theunderlying suit. On March 18, 1997, State Farm filed a motion for a judgment on thepleadings. On April 19, 1997, the Gauses filed a motion for a judgment on the pleadings,seeking a summary judgment. On December 5, 1997, the court denied both motions for ajudgment on the pleadings. On June 19, 1998, to clarify its prior ruling, the trial courtgranted the motion for a summary judgment filed by the Gauses and denied State Farm'smotion to reconsider.

The certified question is whether State Farm has a duty to defend Tillerson under itscontractor's liability policy against the allegations of the underlying first-amended complaintfiled by the Gauses. This question includes the following set of issues: (1) whether or notthe claims of the breach of an express warranty of workmanship, the breach of the impliedwarranty of habitability, and the breach of the implied warranty of fitness for ordinary andparticular purpose, as specifically described in the underlying complaint against Tillerson,allege an "occurrence" as defined under the liability policy, (2) whether or not the claimsspecifically described in the underlying complaint against Tillerson allege "propertydamage" as defined under the liability policy, (3) whether or not exclusionary languagecontained within the liability policy excludes liability assumed by the insured in a contractor agreement, and (4) whether or not allegations in the underlying complaint triggerexclusions described in the liability policy for damage to the insured's own work.

On appeal, we review a judgment on the pleadings on a de novo basis. EmployersInsurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 138, 708 N.E.2d 1122,1129 (1999). A judgment on the pleadings should be entered if the admissions containedwithin the pleadings reveal no genuine issues of material fact such that the movant wouldbe entitled to a judgment as a matter of law. Ehlco Liquidating Trust, 186 Ill. 2d at 138, 708N.E.2d at 1129. We must consider that all well-pleaded facts by the nonmoving party areadmitted. Ehlco Liquidating Trust, 186 Ill. 2d at 138, 708 N.E.2d at 1129. We must alsoexamine the pleadings to determine whether a genuine issue of material fact exists, and ifwe find no such issue, then we determine if the matter at issue can be resolved solely as amatter of law. Ehlco Liquidating Trust, 186 Ill. 2d at 138, 708 N.E.2d at 1129.

To determine an insurer's duty to defend its insured, the court must look to theallegations of the underlying complaint and compare those allegations to the relevantcoverage provisions of the insurance policy. Monticello Insurance Co. v. Wil-FredsConstruction, Inc., 277 Ill. App. 3d 697, 701, 661 N.E.2d 451, 454 (1996). Additionally,we may consider " 'true but unpleaded facts, which, when taken together with thecomplaint's allegations, indicate that the claim is within or potentially within the policy'scoverage.' " Monticello Insurance Co., 277 Ill. App. 3d at 701-02, 661 N.E.2d at 454(quoting Associated Indemnity Co. v. Insurance Co. of North America, 68 Ill. App. 3d 807,816, 386 N.E.2d 529, 536 (1979)). If the underlying complaint alleges facts within orpotentially within the policy's coverage provisions, the insurer has an obligation to defendeven if the allegations are groundless, false, or fraudulent. United States Fidelity &Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 73, 578 N.E.2d 926, 930 (1991).

An insurer may not refuse to defend an action against its insured unless it is clearfrom the face of the underlying complaint that the allegations fail to state facts which bringthe case potentially within the policy's coverage. Dixon Distributing Co. v. HanoverInsurance Co., 161 Ill. 2d 433, 439, 641 N.E.2d 395, 398 (1994). If the underlyingcomplaint alleges several theories of recovery against the insured, the insurer must defendthe insured even if only one such theory is potentially within the coverage of the policy. Wilkin Insulation Co., 144 Ill. 2d at 73, 578 N.E.2d at 930 (citing Maryland Casualty Co.v. Peppers, 64 Ill. 2d 187, 194, 355 N.E.2d 24, 28 (1976)).

The threshold that the complaint must satisfy in order to present a potential coverageclaim is low. La Rotunda v. Royal Globe Insurance Co., 87 Ill. App. 3d 446, 451, 408N.E.2d 928, 933 (1980). The underlying complaint and the insurance policy should beliberally construed in favor of the insured. Wilkin Insulation Co., 144 Ill. 2d at 74, 578N.E.2d at 930. Policy language must be interpreted in its " 'plain, ordinary[,] and popularsense,' " and where a provision is clear and unambiguous, it will be applied as written. Wilkin Insulation Co., 144 Ill. 2d at 74, 578 N.E.2d at 930 (quoting Hartford Accident &Indemnity Co. v. Case Foundation Co., 10 Ill. App. 3d 115, 121, 294 N.E.2d 7, 12 (1973)). A determination concerning the applicability of an exclusionary clause is governed by thesame liberal duty-to-defend standard. Wilkin Insulation Co., 144 Ill. 2d at 78, 578 N.E.2dat 933.

With these principles in minds, we review the allegations of the underlying complaintand the relevant insurance policy. We must determine whether the underlying complaintalleged potentially covered "property damage" caused by an "occurrence" that is notexcluded by the various exclusionary clauses in the insurance policy.

To determine whether State Farm has a duty to defend Tillerson in the underlyinglawsuit, we must determine whether the alleged damage resulted from an "occurrence." Forpurposes of this discussion only, we assume property damage.

Tillerson's contractor's liability policy states, "This insurance applies only to bodilyinjury or property damage caused by an occurrence ***." The policy defines "occurrence"as "an accident, including continuous or repeated exposure to substantially the same generalharmful conditions which result in bodily injury or property damage." The use of the word"occurrence" in insurance policies broadens coverage and eliminates the need to find anexact cause of damages, as long as they are neither intended nor expected by the insured. Bituminous Casualty Corp. v. Gust K. Newburg Construction Co., 218 Ill. App. 3d 956, 965,578 N.E.2d 1003, 1009 (1991). Nevertheless, the occurrence must still be accidental. Bituminous Casualty Corp., 218 Ill. App. 3d at 965, 578 N.E.2d at 1009.

State Farm argues that given the plain and ordinary meaning of "accident," the factualallegations of the Gauses' complaint do not describe an accident and thereby fail to triggerState Farm's duty to defend Tillerson under the policy State Farm issued to Tillerson. TheGauses alleged that Tillerson built the room addition over an existing cistern and failed toproperly compact the soil before constructing the room addition. State Farm correctly statesthat this court has held that an " 'accident' " is " 'an unforeseen occurrence, usually of anuntoward or disastrous character or an undesigned sudden or unexpected event of aninflictive or unfortunate character.' " State Farm Fire & Casualty Co. v. Watters, 268 Ill.App. 3d 501, 506, 644 N.E.2d 492, 495-96 (1994) (quoting Aetna Casualty & Surety Co.v. Freyer, 89 Ill. App. 3d 617, 619, 411 N.E.2d 1157, 1159 (1980)). Furthermore, the "'natural and ordinary consequences of an act do not constitute an accident.' " Watters, 268Ill. App. 3d at 506, 644 N.E.2d at 496 (quoting Freyer, 89 Ill. App. 3d at 619, 411 N.E.2dat 1159). Carrying its argument forward, State Farm contends that Tillerson's alleged act offaulty workmanship could not be the typical fortuitous action constituting an accident.

The Gauses' damages were not the result of an accident. The Gauses' complaintalleged that the work Tillerson performed on the room addition and carport conversion was"defective in design, material[,] and workmanship because [Tillerson] built the addition overa cistern without taking necessary precautions[] and failed to take precautions to prevent thedamage caused by the settling of ground underneath the room addition." The complaintfurther alleged that the room addition and carport conversion are not fit for their intendedpurpose "as a direct result of [Tillerson's] failure to properly compact the soil supporting thenew addition." These allegations do not fall within the meaning of an accident or anoccurrence.

Where the defect is no more than the natural and ordinary consequences of faultyworkmanship, it is not caused by an accident. See Bituminous Casualty Corp., 218 Ill. App.3d 956, 578 N.E.2d 1003. The factual allegations of the Gauses' complaint against Tillersondo not allege an accident. They allege no unforeseen or undesigned, sudden, or unexpectedevent. The construction defects set forth in the Gauses' complaint are the natural andordinary consequences of Tillerson's alleged improper construction techniques in failing toproperly compact the soil and in failing to fill or remove a cistern under the ground, priorto construction. Thus, the allegations of the underlying complaint do not potentially fallwithin the policy coverage. State Farm has no duty to defend Tillerson in theGauses' suit.

We must further determine whether or not the Gauses' complaint alleged "propertydamage," as defined by the relevant policy. The contractor's liability policy defines"property damage" as "physical injury to or destruction of tangible property, including allresulting loss of that property," or "loss of use of tangible property that is not physicallyinjured or destroyed, provided such loss of use is caused by physical injury to or destructionof tangible property."

The supreme court in Traveler's Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill.2d 278, 757 N.E.2d 481 (2001), concluded: "[T]o the average, ordinary person, tangibleproperty suffers a 'physical' injury when the property is altered in appearance, shape, color[,]or in other material dimension. Conversely, to the average mind, tangible property does notexperience 'physical' injury if that property suffers intangible damage, such as diminutionin value ***." Eljer Manufacturing, Inc., 197 Ill. 2d at 301-02, 757 N.E.2d at 496. " '[C]omprehensive general liability policies *** are intended to protect the insured fromliability for injury or damage to the persons or property of others; they are not intended topay the costs associated with repairing or replacing the insured's defective work andproducts, which are purely economic losses. [Citations.] Finding coverage for the cost ofreplacing or repairing defective work would transform the policy into something akin to aperformance bond.' " Eljer Manufacturing, Inc., 197 Ill. 2d at 314, 757 N.E.2d at 503(quoting Qualls v. Country Mutual Insurance Co., 123 Ill. App. 3d 831, 833-34, 462 N.E.2d1288, 1291 (1984)).

In their complaint, the Gauses merely seek either the repair or the replacement ofdefective work or the diminishing value of the home. The Gauses seek a recovery foreconomic loss, not physical injury to tangible property. There is no allegation that Tillersontortiously injured the Gauses' home. No property damage is alleged and coverage is notafforded. The trial court erred in finding that State Farm had a duty to defendTillerson.

State Farm further contends that any potential coverage alleged in the underlyingcomplaint is precluded by various exclusionary clauses in the insurance policy. The policyexcludes coverage for "property damage for which the insured is obligated to pay damagesby reason of the assumption of liability in a contract or agreement." This exclusion does notapply to liability for damages (a) assumed in a contract or agreement that is an insuredcontract or (b) that the insured would have in the absence of a contract or agreement. Illinois courts have refused to permit insured parties to receive insurance coverage fordamages that result from a breach of contract. Indiana Insurance Co. v. Hydra Corp., 245Ill. App. 3d 926, 615 N.E.2d 70 (1993).

Coverage under contractor general liability policies is for tort liability for damage toother property, not for the insured's contractual liability for economic loss. Home IndemnityCo. v. Wil-Freds, Inc., 235 Ill. App. 3d 971, 977, 601 N.E.2d 281, 285 (1992). As we havediscussed above, the Gauses do not allege any sudden or calamitous event that causeddamage to other property. They only pursue a claim for a breach of contract to recover theiralleged economic loss. This breach-of-contract claim is excluded under the above-citedexclusion.

The contractor's liability policy between State Farm and Tillerson also contains thefollowing relevant exclusions:

"11. to property damage to:

e. that particular part of real property on which you or any contractor orsubcontractor working directly or indirectly on your behalf isperforming operations, if the property damage arises out of thoseoperations; or

f. that particular part of any property that must be restored, repaired[,] orreplaced because your work was incorrectly performed on it. This partof the exclusion does not apply to property damage included in theproducts-completed operations hazard.

13. to property damage to your work arising out of it or any part of it and includedin the products-completed operations hazard.

14. to property damage to impaired property or property that has not beenphysically injured, arising out of:

a. a defect, deficiency, inadequacy[,] or dangerous condition in yourproduct or your work; or

b. a delay or failure by you or anyone acting on your behalf to perform acontract or agreement in accordance with its terms.

This exclusion does not apply to the loss of use of other property arising outof sudden and accidental physical injury to your product or your work after ithas been put to its intended use."

These exclusions are premised on the theory that liability policies are not intended to provideprotection against the insured's own faulty workmanship or product, which are normal risksassociated with the conduct of the insured's business. See Home Indemnity Co., 235 Ill.App. 3d at 976, 601 N.E.2d at 284. The rationale frequently articulated is that liabilityinsurance should not become a warranty or be converted into a performance bond. Qualls,123 Ill. App. 3d at 834, 462 N.E.2d at 1291. " 'The risk intended to be insured is thepossibility that the goods, products[,] or work of the insured, once relinquished orcompleted, will cause bodily injury or damage to property other than to the product orcompleted work itself, and for which the insured may be found liable. *** The coverageis for tort liability for physical damages to others and not for contractual liability of theinsured for economic loss because the product or complete work is not that for which thedamaged person bargained.' " Home Indemnity Co., 235 Ill. App. 3d at 977, 601 N.E.2d at285 (quoting Henderson, Insurance Protection for Products Liability & CompletedOperations-What Every Lawyer Should Know, 50 Neb. L. Rev. 415, 441 (1971)).

Here, the Gauses' complaint alleged that Tillerson displayed improper workmanship,breaching both implied and express warranties under the contract. The only alleged damageis to the single structure upon which Tillerson worked. We conclude that State Farm owedTillerson no duty to defend in the underlying action because the allegations of the underlyingcomplaint sought damages for repair and replacement arising out of physical injury to onlythe addition and carport itself. The underlying complaint alleged that Tillerson failed toconstruct and perform in accordance with design specifications, good workmanship, andreasonable construction standards. There are no allegations of harm to other property orpersons.

Tillerson argues that the aforementioned policy conditions do not apply to himbecause he purchased "products-completed operations hazard"coverage. The definition inthe policy states that "products-completed operations hazard" includes "all bodily injury andproperty damage arising out of your product or your work except products that are still inyour physical possession or work that has not yet been completed or abandoned. The bodilyinjury or property damage must occur away from premises you own or rent under yourbusiness, including the selling, handling[,] or distribution of your product for consumptionon premises you own or rent."

Products-completed operations hazard coverage is not applicable here. Thisprovision of the policy specifically covers bodily injury and property damage arising out of"your product or your work." In this instance, the room addition and the carport conversionconstitute "your product or your work." In the underlying complaint, there are no allegationsof harm to other property or persons, only allegations arising from harm to the room additionand carport conversion itself. The alleged property damage did not arise out of "yourproduct or your work." The sole damage is to the product or work itself. Accordingly, theproducts-completed operations hazard provision provides no coverage to Tillerson. The trialcourt erred in concluding that State Farm has a duty to defend Tillerson.

Further, contrary to Tillerson's argument, we find that this case is not like Trovillionv. United States Fidelity & Guaranty Co., 130 Ill. App. 3d 694, 474 N.E.2d 953 (1985). InTrovillion, the plaintiffs built a house as general contractors for James and MelissaWilliamson. The Williamsons sued the plaintiffs for breach of contract because of theirfailure to erect the house in a good and workmanlike manner. The Williamsons' complaintalleged that the floor sagged because of inadequate support and that the floor in the bedroomarea buckled and became detached from the walls. The walls and vinyl kitchen floorcracked. The complaint also alleged that the roof leaked and that the mortar and bricks inthe exterior walls and the concrete footings cracked because of structural defects. Trovillion,130 Ill. App. 3d at 697, 474 N.E.2d at 955. The plaintiffs' insurance company initiallyundertook their defense under a reservation of rights but later withdrew its defense, citingcertain policy exclusions.

The reviewing court determined that the third party's damages were potentiallycovered by the policy. However, Trovillion is distinguishable from this case. In Trovillion,the appellate court noted that the insurer must have been uncertain of its potential liability,because it initially undertook the defense of the Williamsons' claim. The appellate courtconcluded that the duty to defend arose because the insurer failed to secure a declaratoryjudgment of its rights and obligations before or pending the trial of the original action andit failed to defend under a reservation of rights. Trovillion, 130 Ill. App. 3d at 700, 474N.E.2d at 958. Further, Trovillion did not address the argument that the third party'sdamages were not caused by an occurrence or the argument that property damage was notalleged.

For the foregoing reasons, we reverse the judgment of the circuit court of MadisonCounty.

Reversed.

MAAG, P.J., and RARICK, J., concur.