AREAS OF INTEREST: New Hampshire Supreme Court Decision: Commercial liability insurance – “your work” exclusion; “occurrence.”
LEGAL IMPACT: The “your work” exclusion in a commercial general liability policy applies separately, on a job-by-job basis, to work performed by an insured. When an insured performs work that causes damage to work the insured had previously completed, the damage does not fall within the “your work” exclusion.
CASE CAPTION: Brown v. Concord Group Insurance Company, No. 2011-385 (4/20/12)
In 2005 the plaintiffs purchased a home that was built by Concord Group’s insured, Eugene Spencer, two years earlier in 2003.
In 2007 the plaintiffs discovered water leaking into the house near a sliding glass door and they contacted Spencer to repair the problem. Spencer discovered black mold when he removed the exterior siding. He fixed what he believed to be the source of the leak, installed flashing and reinstalled the siding.
Two years later, in 2009, the plaintiffs again observed evidence of water leaking into the house near the same sliding door. They contacted a different contractor who discovered substantial water damage that was caused by additional leaks that Spencer did not discover during his 2007 repair. The plaintiffs paid $16,205 for the 2009 repairs.
The plaintiffs filed a declaratory judgment petition against Concord Group, arguing that it was obligated to provide coverage for the damage resulting from its insured’s defective repairs under a commercial general liability policy issued to Spencer. That policy provided coverage for “property damage” caused by an “occurrence,” which was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policy also contained an exclusion for “‘property damage to ‘your work’ arising out of [‘your work’] or any part of [‘your work’] and included in the ‘products-completed operations hazard’.”
Concord Group argued that coverage was excluded under the “your work” exclusion because: 1) regardless of whether the damage was to its insured’s 2003 original construction or his 2007 repairs, the defective work did not cause damage to anything other than the insured’s own work product; and 2) any damage caused by the insured’s 2007 repair work was excluded since it was damage to his own work – the original 2003 construction work.
The plaintiffs argued that: 1) the damage in 2009 was caused by the insured’s negligent repair work in 2007; and 2) although the damage was to the insured’s 2003 work, it was not excluded because it was caused by the subsequent 2007 repair work, which was a separate act from the original construction in 2003.
The trial court granted summary judgment in favor of Concord Group, ruling that there was no evidence that the 2007 repair work resulted in the damage in 2009 and, furthermore, that the policy did not place a time limit on when the work must occur so that both the 2003 and 2007 work were excluded as “your work.” The plaintiffs appealed.
HOLDING: Reversed and remanded.
The primary issue before the Court was whether the “your work” exclusion encompassed both the 2003 and 2007 work for purposes of determining whether the damage was to the insured’s “work.”
The Court examined the policy definitions of “your work” and determined that the exclusion was triggered only if the damage at issue: 1) was to work performed by the insured; and 2) was included in the “products-completed operations hazard.” Damage falls within the “products-completed operations hazard” only if the damage is to work that has been completed. This means that “your work” has a limitation since it contemplates “discrete jobs that have an endpoint.” The exclusion applies on a job-by-job basis, rather than to all work ever performed by an insured. If the previous work was completed, it is not part of the work at issue. If the insurer intended to apply the exclusion to all work ever performed by the insured it could have included language such as “work performed at any time.”
Thus, the Court ruled that the 2007 repair work was separate from the 2003 construction for purposes of applying the “your work” exclusion. If the damage was caused by the 2003 construction, it was to the insured’s work and would be excluded. If, however, the damage was caused by the 2007 repair work, coverage would not be excluded for damage to the 2003 construction work.
The Court also addressed whether the damage was caused by an “occurrence.” To constitute an “occurrence” the damage must be to work other than the insured’s work product. The Court ruled that “work product” also means “discrete jobs demarcated by their completion” and, therefore, the 2003 work and 2007 work are separate work products.
The Court concluded that whether the damage was caused by the 2003 work or the 2007 work was determinative of the coverage issue and presented a genuine issue of material fact to be decided by the trier of fact, therefore, the case was remanded for resolution of this fact issue.