Damage to Previous Work

Source: iiat.org Published: May 02, 2003

A member asked IIAT's technical experts recently to review an insurer's denial of a general liability claim involving damage to an insured's prior work. The agent's policyholder, a general contractor, completed a new building for a manufacturing firm more than three years ago. When the firm needed to expand, it contacted the contractor again and they entered into a contract to construct an addition to the existing building. A fire caused by the contractor's negligence occurred during the construction of the addition. The work that had been completed on the addition was destroyed and the existing building suffered heavy fire, smoke and water damage.

The agent reported the claim for damage to the addition to the builders' risk carrier, and the claim was paid promptly. The agent reported the damage to the existing building to the CGL carrier and the claim was denied. The company cited the "Your Work" exclusion, which applies to "property damage to ‘your work' arising out of it or any part of it and included in the ‘products-completed operations hazard.'" In our opinion, this exclusion does not apply, because the work out of which the damage arose was ongoing work, not a completed operation.

The purpose of the exclusion is to preclude coverage for damage to an insured's work arising out of the work itself. If the fire had started in the existing building because of faulty wiring performed by the insured during the construction of the existing building, then the damage to the contractor's work would be excluded.