Your Work Exclusion, Initial Construction, and Subsequent Construction
The homeowners filed a lawsuit against the builder and the builder's commercial general liability insurer based on allegedly defective repair work. The repair work was done at two separate times by the insured. This case is Brown v. Concord Group Insurance Company, 2012 WL 1370834.
Spencer, the insured, built a house in 2003 and the plaintiffs (the Browns) purchased it in 2005. In 2007, the Browns discovered water leaking into the house near a sliding glass door. They contacted Spencer to repair the problem. Spencer removed the exterior siding, installed flashing on the windows near the leak and reinstalled the siding. He charged the Browns $1,000 for the work.
In the summer of 2009, the Browns again observed evidence of water leaking into the house near the same sliding door. They contacted Lewis to investigate the problem and he observed substantial water damage to the wood behind the siding, including damage to structural components. The Browns said that the damage was caused by additional leaks that Spencer did not discover during his 2007 repair work and that Spencer probably would have discovered those leaks if he had removed all of the siding on the wall. The repair work this time cost the Browns $16,205.
The Browns then filed a petition for declaratory judgment, alleging that Spencer defectively repaired their house and that his insurer, Concord Group, is required to insure against the resulting damage. The Superior Court, Rockingham County, entered summary judgment for the insurer and the Browns appealed.
The Browns argued that Spencer's policy provides coverage because Spencer negligently repaired their house in 2007 and the damage in 2007 would not have occurred but for his negligence. Concord argued that the property damage at issue was not caused by an occurrence because, regardless of whether the damage was to Spencer's 2003 original construction of the home or his 2007 repairs, the defective work has not caused damage to property other than his own work product. The insurer said that the “your work” exclusion bars recovery because any damage caused by the 2007 repair work was damage to the insured's work, that is, the original 2003 work on the construction of the house.
The Supreme Court of New Hampshire noted that if “your work” includes both the 2003 and 2007 work, then there is no material dispute of fact with regard to the exclusion. Under such a construction, even if it was assumed that the Browns are correct that the damage in 2009 was caused by the 2007 repair work, the claim would still be barred because the damage in 2009 was done to Spencer's 2003 original construction work. The Court said it must thus interpret the exclusion to determine whether Spencer's work encompasses both the 2003 and 2007 work.
The Court said that the exclusion is triggered only if the damage at issue is to work performed by the named insured and is included in the products-completed operations hazard as defined. The definition of products-completed operations hazard requires the work to be completed and this leads to the conclusion that “your work” does have a limitation, in that it contemplates discrete jobs that have an endpoint. Therefore, the Court held that the exclusion does not uniformly apply to all work ever performed by the named insured, but rather excludes coverage on a job-by-job basis, with individual jobs being demarcated by their completion. Accordingly, the exclusion does not necessarily exclude coverage in a situation where an insured's work causes damage to something the insured had previously constructed. If the previous work has been completed, then it is not part of the work at issue—the current work that caused damage to the previous work—and thus, the damage is not excluded under the “your work” exclusion.
The Court ruled that, for the purpose of Spencer's 2007 repairs under the exclusion, his work only includes the 2007 repairs, not his original construction work in 2003. The 2003 work was a separate act, distinct from the 2007 repair work. As such, if the damage at issue was caused by Spencer's 2007 repair, the “your work” exclusion would exclude coverage for damage resulting from that repair, but would not exclude coverage for damage to Spencer's 2003 work. On the other hand, if the damage at issue was caused by the 2003 original construction, the exclusion would exclude coverage for any damage to that construction. The question of whether the damage in 2009 was caused by the 2003 original construction or the 2007 repair is a material question of fact and so, it was error for the trial court to grant summary judgment to Concord Group.
The ruling of the trial court was reversed and remanded.
Editor's Note: This case is presented to address the issue of whether the “your work” exclusion applies to all work the insured ever did as opposed to his recent work that is the basis for a claim of defective construction. The insurer argued that the exclusion applied to all of the insured's work, both the original construction work and the subsequent repair work. The plaintiffs argued that the acts of the insured were separate and the exclusion could not be applied on a blanket basis. The Court agreed with the plaintiffs.
The New Hampshire Supreme Court held that “your work” does have a limitation in that it contemplates discrete jobs that do have an endpoint. And so, once a repair job is completed, that is considered a separate act from any subsequent repair work, even if the work is done on the same location.