December 17, 2013
CGL Policies Do Not Provide Coverage For Damage To Your Work
At one time or another every contractor has encountered the scenario in which an accident has occurred on the project causing damage to work that already has been completed. The damage could be the result of an event such as a fire, water intrusion, human error, defective workmanship or some other cause. Generally, whatever the cause is, the Commercial General Liability or CGL policy excludes coverage for damage to work performed by the insured party.
For example, a roofing subcontractor defectively performs its work and the result is water intrusion causing damage to previously installed drywall and other finished carpentry work. The roofer’s CGL carrier will likely provide coverage for all of the damage except the defectively performed roofing work. CGL policies are not intended to insure against business risks such as defectively performed work, but are intended to cover damage caused by defectively performed work.
Often times the dispute over coverage focuses on whether the damage occurred to “that particular part of property” that the insured was performing work on. Sometimes that line can become blurred. For instance, a contractor was hired to clean the inside of a large petroleum tank and in the process of doing so caused an explosion that damaged the entire tank. The court held that all of the damage occurred to the particular part of the work that the contractor was working on and, therefore, concluded that the entire loss was not insured. See Jet Line Services, Inc. v. American Employers Ins. Co., 404 Mass. 706 (1989).
In another case, a kitchen cabinet subcontractor accidentally started a fire while cleaning his equipment and that fire destroyed the entire house. The court in that case held that coverage for the work performed by the subcontractor (i.e., the cabinet work) was excluded, but the damage to the remainder of the house was covered. See Columbia Mutual Ins. Co. v. Schauf, 967 S.W.2d 74 (Mo. 1998). As you can see, there will be instances when an insurer will deny coverage for some or all of the alleged damage on the ground that it was “that particular part of the property” that the insured was working on. In each such instance the exact facts surrounding each loss must be closely examined to properly assess each claim for coverage.
If you have any questions about this bulletin, please contact us: Andrew G. Wailgum at awailgum@murthalaw.com or 617.457.4006.
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