In a ruling that clarifies how statutory definitions influence insurance coverage in construction disputes, the Arkansas Court of Appeals on April 9, 2025, affirmed a lower court decision holding that Nationwide Mutual Insurance Co. must defend and indemnify NWA Restore-It, Inc. in a case involving property damage allegedly caused by faulty workmanship during flooring installation.
The case arose after 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. The flooring was installed that same month. Approximately six months later, the floor began showing signs of damage, including rippling and cracking. L&A attempted repairs in September 2020, which were unsuccessful.
In March 2021, Hattabaugh and Amy Woods filed a lawsuit against NWA, asserting that the damage was caused by improper installation. NWA then filed a third-party complaint against several parties, including Nationwide, seeking a declaratory judgment that it was entitled to defense and indemnity under a commercial general liability policy issued to L&A. NWA was named as an additional insured under the policy.
Nationwide denied coverage based on exclusions in the policy’s additional insured endorsement. The Benton County Circuit Court, however, granted NWA’s motion for judgment on the pleadings, holding that Nationwide owed a duty to defend and indemnify. Nationwide appealed.
At issue were exclusions in the endorsement that limited coverage for additional insureds. Specifically, the policy stated that insurance would not apply to property damage occurring after all work had been completed, or after the work had been put to its intended use by someone other than another contractor on the same project.
Nationwide argued that because the flooring had been completed and was in use at the time the damage was discovered, the exclusions applied and coverage was precluded. The insurer also maintained that the damage resulted from faulty workmanship—a known issue in construction coverage litigation—and pointed to policy language requiring coverage only for ongoing operations.
The Arkansas Court of Appeals disagreed. Citing Arkansas Code Annotated § 23-79-155, the court emphasized that under state law, the definition of “occurrence” in CGL policies includes “property damage or bodily injury resulting from faulty workmanship.” The court found that the underlying complaint alleged damage that occurred during installation—not afterward—and therefore did not fall within the cited exclusions.
The appellate court also distinguished the 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 Nationwide v. NWA, the damage stemmed from alleged improper installation by a subcontractor, not from the product itself.
Because 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. NWA Restore-It, Inc. was represented by M. Evan Stallings, Adam D. Franks, and Lauren A. Spencer of Barber Law Firm, PLLC.
