Tred Eyerly | Insurance Law Hawaii | February 18, 2015
The New Hampshire Supreme Court found some of the property damage evolving from the insured’s portion of the work was covered under its liability policy. Cogswell Farm Condo. Ass’n v. Tower Group, Inc., 2015 N.H. LEXIS 3 (N.H. Jan. 13, 2015).
Lemery Building Company, Inc. constructed and developed 24 residential condominium units. After units were sold, the Cogswell Farm Condominium Association sued Lemery, asserting that the “weather barrier” components of the units were defectively constructed and resulted in damage to the units due to water leaks. Cogswell then sued its insurer, Tower Group, Inc., seeking a declaratory judgment that its claims against Lemery were covered.
The trial court eventually determined that exclusions J (1) and J (6) both applied to exclude coverage. Exclusion J (1) excluded coverage for “property damage” to property that Lemery “owns, rents, or occupies.” Exclusion J (6) excluded coverage for property damage to “[t] hat particular part of any property that must be restored, repaired or replaced because [Lemery’s] work was incorrectly performed on it.”
On appeal, Cogswell conceded that exclusion J (1) excluded coverage for property damage that occurred while Lemery owned the condominium units, i.e., prior to the sale of the units. However, coverage was not excluded under exclusion J (1) for damages sustained by the units after they had been sold by Lemery. The court agreed. On remand the trial court was instructed to determine which units had been sold by Lemery but continued to be covered under the policies.
Cogswell also argued exclusion J(6) did not apply to damage to the non-defective work that was caused by the defectively constructed weather barriers. The court determined that exclusion J(6) could be interpreted two ways. The exclusion could be construed broadly to exclude coverage for all damage to the insured’s work product caused by the insured’s defective work. This would preclude coverage for all damage resulting from Lemery’s defective work, including damage to the non-defectively constructed parts of the condominium units.
On the other hand, the exclusion could be reasonably read to exclude coverage only for those parts of the property on which the allegedly defective work was done. This interpretation would create a distinction between the components of the condominium units that were allegedly defective and those components that were not defective.
Therefore, exclusion J (6) was ambiguous and had to be construed in the insured’s favor. Exclusion J (6) barred coverage for property damage to defectively constructed portions of the condominium units, which were alleged to be the weather barriers. However, the exclusion did not bar coverage for damage to those portions of the units that were not defectively constructed by Lemery but were damaged as a result of the defective work. Accordingly, the trial court erred in determining that exclusion J (6) operated as a complete bar for coverage of the claims asserted by Cogswell.
via Insurance Law Hawaii: Property Damage to Non-Defective Work Is Covered.