Two more courts have weighed in on the “your work” exclusion in commercial general liability (CGL) policies, finding that contractors did not have coverage for work performed improperly. These cases highlight that whether you have coverage for poor workmanship will depend on the state’s law applied. It now appears that if you are in South Carolina or Massachusetts, you will not have coverage.
The South Carolina case, Precision Walls, Inc. v. Liberty Mutual Fire Insurance Company, involved a subcontractor hired to tape insulation. After taping the insulation, a brick veneer was installed on the exterior. During the brick installation, the mason reported that the tape was losing its adhesion and the subcontractor was instructed to repair the problem. In order to access the tape, portions of the brick veneer had to be removed and re-installed. The subcontractor then sought coverage for the costs associated with repairing the tape.
The insurer denied coverage and the subcontractor sued its insurer. The court ruled in favor of the insurer, finding that the defective tape was “your work” because it was “material furnished in connection” with the subcontractor’s work. The policy specifically excluded from coverage damage to property caused by “your work”. Thus, there was no coverage for the subcontractor.
The Massachusetts case, Pacific Indemnity Company v. Lampro, also found there was no coverage. There, the landscape subcontractor failed to abide by the environmental restrictions required by the permits and clear cut trees and brush. The homeowner’s property insurer paid $100,000 to fix the damage and the insurer then sued the contractor and its general liability insurer to recoup the money it paid to restore the property.
The court found that the general contractor’s CGL policy did not provide coverage, again, because of the “your work” exclusion. This policy excluded coverage for real property that must be repaired or restored because “your work” was incorrectly performed. The court also found that there was no occurrence under the policy because the subcontractor’s failure to abide by the permit restrictions was not an accident, but rather a risk of doing business.
Take Away: Getting an insurer to pay for damage to the work under a CGL policy is becoming increasingly difficult. You would be well advised to review your state’s laws to determine whether you have coverage.