Seeking some guidance on a claim. Named insured is a garage. They were hired to replace the adapter for an oil filter (it is what the filter screws into) The oil filter is located under the intake manifold, so the intake must be removed to get to the adapter. When the intake was removed, it's possible that it got debris in it. When the engine was put back together, it started and then promptly the engine failed. The insured advised that the #3 exhaust valve had no pressure likely due to something that got into the intake manifold. The exhaust valve was never touched in the process of their work and was not part of their repair. The vehicle never left the shop so was in their CCC, so this is not a completed operation.
The insurer is denying the claim, saying that the CCC exclusion applies on the garage policy and that there is no coverage on the GKLL because the entire engine was their work.
I believe this should be covered under comp coverage on the GK policy. The carrier's position that the entire engine was their work doesn't fit with the definition of "work you performed". I disagree as they never touched that part of the engine. Please advise of your thoughts.
North Carolina Subscriber
The policy is designed to provide third party liability coverages for the insured's garage operations in pretty much the same way it would apply on a standard CGL policy. The coverage provided is for all sums the "insured" legally must pay as damages for "loss" to a covered "auto" or "auto" equipment left in the "insured's" care while the "insured" is attending, servicing, repairing, parking or storing it in your "garage operations".
Part of the definition of "garage operations" in the policy includes any operations done that are either necessary or incidental to a garage business. The entirety of the insured's garage operations are subject to the coverages and exclusions of the policy.
The applicable exclusion is for work you performed which reads as follows:
m. WORK YOU PERFORMED "Property damage" to "work you performed" if the "property damage" results from any part of the work itself or from the parts, materials or equipment used in connection with the work.
14. "Work you performed" includes:
a. Work that someone performed on your behalf; and
b. The providing of or failure to provide warnings or instructions.
Note that this exclusion and definition only applies to the actual work itself, and it does not identify all the actions that might be included within your work, such as picking up or dropping a tool, removing a part by hand or mechanically, adjusting a timer belt, moving the vehicle from one part of the garage to the other, putting the vehicle on a lift, etc., etc. Because your work is defined loosely, it is all encompassing of anything the insured does in the "garage operations".
Since the insured had to remove the intake, that was part of the work the insured performed even though it only encompassed taking it out, placing it out of the way, and then re-installing it. So, if debris potentially entered because the intake was removed, then that is part of the insured's work and that work itself, if it has to be re-done will not be reimbursed by the policy. If the engine has to be repaired or replaced, the work in connection with this engine will not be covered, but the damage to the customer's engine will be covered and if needed, a new or replaced engine or part are damages that would be covered by the policy.