EIFS Application and Resulting Water Damage

Our insured is a subcontractor. He installed the stucco on a newly constructed home using the exterior insulation and finish system (EIFS). The homeowner now claims that the stucco was incorrectly installed and water damage has occurred to the house.

The insured has an exclusionary endorsement pertaining to EIFS on his general liability policy that is similar in wording to the ISO endorsement CG 21 86. Is there any coverage at all for the insured in this instance?

West Virginia Subscriber

After a review of your endorsement, we can say that it is very similar to the ISO endorsement and the exclusionary language is clear. There is no coverage for property damage arising out of the “… construction, installation, application … of any exterior insulation and finish system (EIFS), or any part thereof ….” In addition, your endorsement excludes property damage arising out of the named insured's work with respect to any exterior component, fixture, or feature of any structure if EIFS is used on any part of that structure. This means that the claim for property damage in this case is not going to be covered by the insured's liability policy.

The standard CGL form would not cover damage to the defective work itself, but this endorsement extends that exclusion to any property damage arising out of that work. In this instance, the damage arose out of the work, the installation or application of EIFS, and so, there is no coverage for the claim against the insured.