Damage to "Your work" exclusion on CGL policy

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Insismypassion
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Re: Damage to "Your work" exclusion on CGL policy

Post by Insismypassion »

I'm still looking for a good answer on what happens when the CG 22 94 is attached (exclusion for work performed by a subcontractor). Then there is no coverage for the GC's or the subs work (NOTHING is covered, again).

I'm not convinced that this exclusion has not been misapplied for too long. As I said previously, I agree this is how the exclusion is being and has been applied - my argument is that there is enough ambiguity in the policy to push this further to find coverage.

Court cases or something from ISO would be great.
Rob
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Re: Damage to "Your work" exclusion on CGL policy

Post by Rob »

mnicks wrote:I think everyone is focusing on the structure built by the GC. Don't forget there is more to completed operations than that. Should the structure burn down as a result of the GC's faulty work and there are people inside the structure who are injured or killed then the GC has BI coverage. If the burning building damages adjacent properties then the GC has PD coverage for those structures.

Coverage A has two sections 1) Premises/Ops and 2) Products/Comp Ops each has it's own exclusions. What may be covered during course of construction (1) may not be covered after completion (2). Course of construction can be addressed with installation floaters or broad builders risk policies. Majority of GC's perform little of the actual work and sub the majority to artisan or specialty contractors. Thus the question on the Acord app "How much work is subcontracted". Based on the amount of work sub-ed the more or less likely you are to get admitted carrier coverage due to the completed operations issue of coverage for the subs work.

For those of you working with contractors, take a professional stand. Spend some time and money to educate yourself on contractor issues. I've posted my last comments.
Speaking for myself, I do take a professional stand. Which is why I spent some money and took the course (which is a course on construction risks). This is how the post got started.
P&C agent
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Re: Damage to "Your work" exclusion on CGL policy

Post by P&C agent »

Real life example:
We had a plumber that installed a water filter for one of his clients.
Water tasted great!
8 Hours after the install and while the homeowners was away from home, you guessed it, the connection at the filter broke and flooded the house. $87,101 damage total. Wood floors, 1 month old custom cabinets, base boards, you get the picture.

The claimant contacts us before calling her homeowners carrier and places the claim against our insured. No big deal.
Adjustor goes out, determines that there was a lot of water and damage. He does not really investigate the cause just the damage. The in house adjustor gets the file and denies the claim based on "your work". Claimant gets this news directly from the adjustor verbally, before the adjustor even talked with our insured to get "our" side of the story. Claimant is obviously freaking out since the field adjustor said, "Oh, your OK this is covered"

I called the in house adjustor to get the scoop, he proceeds to tell me that the loss is not covered because of "your work". I thought to myself, this guy is pulling my leg and trying to spark a reaction from me. I suggested that "your work is not a peril, and that we were not filing the claim to recover the cost of "your work" we were filing the claim for damages caused by a leak. In the mean time my insured is now bald from stress and he has decided that there is no way he can afford to cover this loss and I agree, but I also informed him that there is no basis for this denial at this point, since we do not know WHAT CAUSED THE LEAK!!! He said it was very clear that the the connection failed at the pipe and filter point. yes they did use glue in the proper fittings, but the connection just failed, and split.

I called the inhouse adjustor again (this is a large national carrier) and asked the status of the claim, he advised that they were waiting to talk with the insured but that they would likely deny the claim as stated. I suggested that the adjustor contact his supervisor before sending a denial, since they would likely have a problem if it goes out, in fact since we were 4 weeks into this at this point, they could be looking at bad faith anyway since they have only verbally said it was not going to be covered and the claimant is still waiting around in a pile of debris to get on with her life.

A week later I have to call the adjustor again to follow up, he said there was no need t go to a supervisor, he was a team leader. I asked to speak to his supervisor and he was offended, but it sucks to be stupid. The supervisor listened to what the adjustor had said why he was denying the claim, I suggested that the claim is covered in full for the damages done as a result of the leak. We were not looking for the recovery of the $269 filter or the $79 installation fee, but we did intend to be covered for the $87,101 in damage. I had to step up another level and go to the claims manager who, after listening for 2 minutes asked the following question " We were going to deny this???" with great disgust the manager said the check is in the mail. I asked what could the original adjustor have been thinking, and the manager responded that 50% of the people he has seen over the years, misunderstands this "Your work" exclusion, and does not realize that it does not have anything to do with damage being covered or not, it only has to do with recovery of the cost of the labor or work that was done, that resulted in the claim. In this case they think they may have a product defect claim against the manufacturer of the pipe fitting. Long and short of it is that the"your work" exclusion does not limit the claimants recovery for damages. Think about it, what the heck would the policy cover, if it did not cover damage caused by the insureds work. This would be a great way for carrier to never pay a claim. I realze that in this case there was no sub contractor, but that does not change anything. CGL policies are intended to cover property damage, not exclude damage that is a result of what our insureds do. The wording that this adjustor used was that our insured was "negligent" I fail to see how he can jump to that conclusion, but that still does not deny the claim, that covers the claim other than the cost to replace and install the filter.

By the way that adjustor is no longer working for this carrier, so beware he is out there somewhere.

If a mechanic replaces brake pads on a car and the car is involved in an accident because the brakes fail, the garage policy will still trigger and pay damages, it just will not pay to replace the pads again, (the car will obviously need more than pads)
We had this claim also, except it was on a dump truck and the wheel came off at 60 MPH.

Hope this brightens this cloudy issue
Rob
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Re: Damage to "Your work" exclusion on CGL policy

Post by Rob »

Excellent info and great post, P&C Agent!! That makes total sense.
ForumReader1
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Re: Damage to "Your work" exclusion on CGL policy

Post by ForumReader1 »

I think the easiest way to explain to insureds is that insurance isn't a warranty. It doesn't replace faulty work or products, but it does cover the BI and PD caused by the faulty work or product. In the example here, only the cost to replace the faulty electrical wiring is not covered.

It's unfortunate if there are any classes being taught that would illustrate this otherwise. I certainly wouldn't take another class from that instructor, and the provider should be notified about the "faulty work" of their instructor!!
Rob
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Re: Damage to "Your work" exclusion on CGL policy

Post by Rob »

ForumReader1 wrote:I think the easiest way to explain to insureds is that insurance isn't a warranty. It doesn't replace faulty work or products, but it does cover the BI and PD caused by the faulty work or product. In the example here, only the cost to replace the faulty electrical wiring is not covered.

It's unfortunate if there are any classes being taught that would illustrate this otherwise. I certainly wouldn't take another class from that instructor, and the provider should be notified about the "faulty work" of their instructor!!
I think If I told you who the provider was you would be very surprised. They are very respected and well known.
LadyBroker
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Re: Damage to "Your work" exclusion on CGL policy

Post by LadyBroker »

Who the provider is doesn't really matter. It's just like when you go to college, and they teach you theory of sales, or marketing, or rocket science. Then you get into the real world, and learn how it actually works. Insurance classes are the same thing. In general, they provide good information and teach the basics. But you can't hold up your textbook against a policy and demand that the policy respond as the textbook says it should. Take those classes with a grain of salt. But don't stop taking them, these are great posts, and you are awesome to make us all think a little bit more every day about what we do.
"It's a typical day, on the road to Utopia.."
Rob
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Re: Damage to "Your work" exclusion on CGL policy

Post by Rob »

LadyBroker wrote:Who the provider is doesn't really matter. It's just like when you go to college, and they teach you theory of sales, or marketing, or rocket science. Then you get into the real world, and learn how it actually works. Insurance classes are the same thing. In general, they provide good information and teach the basics. But you can't hold up your textbook against a policy and demand that the policy respond as the textbook says it should. Take those classes with a grain of salt. But don't stop taking them, these are great posts, and you are awesome to make us all think a little bit more every day about what we do.
Well as the posts here have shown the real world shows situations where people say "of course it should be covered" and the real world also shows situations where the claims were denied citing this exclusion even though most people don't think it should apply. And, if you read a few of the posts here, there still isn't agreement even among the community. As a result, the "real world" scenarios still don't tell me how to teach my customers what it means.
LadyBroker
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Re: Damage to "Your work" exclusion on CGL policy

Post by LadyBroker »

I am probably more confused at the end of this string that at the beginning. Do we have any underwriters or claims adjustors who can weigh in?
"It's a typical day, on the road to Utopia.."
midwest2
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Re: Damage to "Your work" exclusion on CGL policy

Post by midwest2 »

There has been a significant amount of information and opinions shared on this subject. In my opinion some have a good perspective on the coverage granted, others need some additional insight on the subject. If you take an approach that mixes the premises/operations limitations (344) with the products/completed operations limitations (336) you will not be able to develop a solid position on the coverage grant. There is good information on the IRMI and FC&S sites to help you understant this segment of coverage and the terms used in the policy.
Rob
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Re: Damage to "Your work" exclusion on CGL policy

Post by Rob »

midwest2 wrote:There has been a significant amount of information and opinions shared on this subject. In my opinion some have a good perspective on the coverage granted, others need some additional insight on the subject. If you take an approach that mixes the premises/operations limitations (344) with the products/completed operations limitations (336) you will not be able to develop a solid position on the coverage grant. There is good information on the IRMI and FC&S sites to help you understant this segment of coverage and the terms used in the policy.
So do you agree with the education provider that the building is not covered due to the "your work" exclusion?
midwest2
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Re: Damage to "Your work" exclusion on CGL policy

Post by midwest2 »

simiinsuranceguy did a good job of explaining how to apply exclusion l.
Rob
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Re: Damage to "Your work" exclusion on CGL policy

Post by Rob »

midwest2 wrote:simiinsuranceguy did a good job of explaining how to apply exclusion l.
He sure did and that explanation makes sense, however it is still in contrast to what the provider is stating.
midwest2
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Re: Damage to "Your work" exclusion on CGL policy

Post by midwest2 »

mnicks responses are not too far off those of simiinsuranceguy.
The standard ISO CGL contract is not designed to cover damage to your work (by you/your employees) that is considered a completed operation. Case law in several states has changed how adjusters work these claims and in many cases they pay losses that don't appear to be covered by the contract language. It is best to reveiw situations that have developed in your states of operation and the sites I referenced in my first post to gain perspective on this subject for your situation.
midwest2
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Re: Damage to "Your work" exclusion on CGL policy

Post by midwest2 »

If you want to see the result of action taken by a company to apply the damage to work exclusion to an actual loss, read the following:
Las Vegas Business Press 5-12-08 article - "Home Builders to carry more cost from defect lawsuits".
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