A subcontractor’s CGL policy  was held not to cover costs for removing  and replacing  a brick wall due to defective  installation  of joint  tape that had been used by the subcontractor  to seal the blue board insulation  before  constructing  the brick wall.  When the prime contractor  noticed  that the tape was coming  loose, he removed  a portion  of the wall and required  the subcontractor  to replace  the tape before  the wall could be reconstructed.    The question  for the court was whether  there was “property  damage”  and an “occurrence”   as defined  by the CGL policy.

The trial court found that the only loss by the subcontractor  was the liability  it incurred when the general  contractor  tore down and reconstructed  the otherwise  undamaged  brick veneer  wall for the remedial  purpose  of bringing  the subcontractor’s   own work into compliance  with its contract  with the prime  contractor.   The court found the loss was not “property  damage.”   It also found the loss resulted from the nonconforming work, and that the costs of faulty workmanship and repairing defective work were not an “occurrence” under the Policy. Finally, the court found “even if the losses … were found to be within” the Policy, they were excluded under the “your work” exclusion.   This was affirmed on appeal. Precision Walls, Inc. v. Liberty Mutual Fire Insurance Co., 763 S.E. 2d 598 (2014), with the court stating, “The exclusion applies to property that must be restored, repaired, or replaced.  The exclusion specifically includes materials furnished in connection with such work.  Here, the contract between the [general contractor] and [subcontractor] required the [subcontractor] to ‘correct the affected work and all costs incurred as the result of [a] breach of warranty …. ‘  We find the defective tape, and all costs associated with its replacement, fall squarely within the exclusion.”

 Comment:   It is important to note that the defective tape did not cause any damage to occur to the wall or any other property. The wall only had to be removed and replaced in order to correct the defective work of the subcontractor (i.e., replace the loose tape).


About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 17, No. 1 (January 2015).

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