Work-Product Exclusion Discussion
Before this court are cross-motions for summary judgment regarding the obligation of the insurer to indemnify the plaintiffs for a judgment awarded to the plaintiffs against the insured. This case is Uvino v. Harleysville Worcester Insurance Company, 2015 WL 925940.
The Uvinos hired JBI to help with the construction of their home. They entered into a construction management agreement wherein JBI would act as construction manager and the Uvinos would be the general contractor, hiring all the subcontractors themselves.
After some time, the Uvinos fired JBI, claiming that he did material damage to their home by attempting to alter the work of the subcontractors. JBI sued the Uvinos to recover outstanding money allegedly owed to him, and the Uvinos countersued for breach of contract and other damages. Harleysville insured JBI and agreed to defend JBI under a reservation of rights.
In a jury trial, the Uvinos found JBI liable for damage to the Uvinos' home and awarded them over $350,000 in damages. The jury made no determination as to whether those damages were covered under the Harleysville policy and the insurer then formally disclaimed coverage. The Uvinos then started this lawsuit seeking a determination that Harleysville must indemnify JBI for the underlying and as yet unsatisfied judgment.
The United States District Court, S.D. New York, noted that it had to ascertain whether the policy issued by Harleysville to JBI applied to the damages claimed by the Uvinos. The court said that generally, damages to remedy a contractor's defective work will not be covered under a general liability policy like the one issued here; rather, coverage exists only where the contractor's defective work causes harm to others or others' work. The insurer argued that JBI acted as a general contractor during the construction of the home and so, the entire project is deemed to be his work product and the damages must be excluded from coverage due to the work-product exclusion. The Uvinos countered that JBI did not take on the role of general contractor according to the construction agreement and that his duties were purely advisory in nature.
Based on the facts of the situation, the court found that HBI did not act as general contractor and so, his work is limited to the performance of his duties under the construction agreement. Thus, if JBI acted outside the scope of his contract and in so doing caused damage to the work of the subcontractors, such damages would not constitute harm to JBI's own work and would not be barred from coverage simply by the policy's work-product exclusion. The court ruled that the claims submitted by the Uvinos may include claims covered under the policy.
The court then took on the issue of whether the Uvinos could prove what portion of the award against JBI is attributable to covered claims and what portion is attributable to noncovered claims. The court decided that the insurer was not entitled to summary judgment since the Uvinos could show what portion of the general verdict is attributable to covered claims. The Uvinos retained a heavy burden of adducing proof competent to establish in the mind of the factfinder a reasonable certainty that the damages awarded by the jury flow naturally from the cause of action established under the policy, but the court found that the Uvinos had a right to try.
The Uvinos' motion for partial summary judgment on the possibility of coverage is granted and Harleysville's motion for summary judgment is denied.
Editor's Note: The U.S. District Court found that the facts showed the insured was not acting in the mode of a general contractor and so, the entire project could not be seen as his work product. If the court had ruled otherwise, the policy would not have covered the claims against the insured due to the work-product exclusion.