I love quotations. I’ve collected them for almost 50 years. Over 20 years ago, I published my first book which was a collection of 1,500 of my favorite quotations, all indexed and cross-referenced, with an introduction that explained how they can be used in speaking and writing, as I’m doing right now. That book is out of print but I provide a free PDF download in a book I published last year on Amazon called “52 of the Greatest Things Anyone Ever Said…and Why.”
One of my favorite quotations found in both of those books is from French novelist Alexandre Dumas who said, “All generalizations are dangerous, even this one.” I explain that quotation in my “52 Greatest” book in the context of stereotyping and bigotry, but for this article, let’s examine the insurance implications of that assertion.
Although I retired from the Big “I” at the end of 2016, I continue to serve as a faculty member of the Big “I” Virtual University where member agencies can pose coverage and claim questions to some of the top insurance experts in the country. The pet peeve of almost every faculty member is the question that begins something like, “Does ‘a’ homeowners policy cover…” or “Does ‘a’ CGL policy cover….”
You cannot generalize about the coverage provided by insurance policies when answering specific coverage questions. Insurance is not a commodity. The language used in similar insurance contracts is often different and, even where identical, the interpretation of what that language means may vary by insurer or individual adjuster. Let’s take a look at a common generalization in the context of an actual claim to illustrate why generalization is futile in the absence of specific contract language.
First of all, here’s the generalization: CGL policies do not cover an insured’s damage to his or her own work.
That’s a business risk expressed in at least three “workmanship” exclusions in ‘a’ CGL policy:
j. Damage To Property:
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
l. Damage To Your Work
“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”.
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
For the purpose of this article, “your work,” as used in the exclusions above, means “Work or operations performed by you or on your behalf…” and the “products-completed operations hazard” says, in part, “Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.”
The aforementioned exclusions are from the current ISO CG 00 01 policy, though the generalization refers only to ‘a’ CGL policy. CGL policies are different and the policies are often modified by endorsements or the meaning of a policy provision has been established by case law that varies by jurisdiction. You can’t opine about ‘a’ CGL policy, only about specific forms that apply to specific insureds under specific circumstances.
Here’s the actual claim. A contractor was building a detached garage in the backyard of a home and was almost finished. He planned to return the following morning for some minor touch-up work but, for all practical purposes, the garage was finished. He admired his work as he smoked a cigarette, put it out in an ashtray, then discarded the butt in a bucket and departed. Unbeknownst to him, the cigarette butt was not fully extinguished and, to make a long story short, the garage burned to the ground.
When the contractor turned the claim in to his CGL carrier, the adjuster denied the damage on the basis that the ISO CGL policy used by the insurer did not cover damage caused by him to his own work, citing the three exclusions listed above.
So, do these exclusions actually apply to this loss given the specific facts of the claim?
‘You cannot generalize about the coverage provided by insurance policies when answering specific coverage questions. Insurance is not a commodity.’
To answer that question, we must actually READ the contract language. If you look at the “products-completed operations hazard” definition excerpt above, this is probably a completed, not an ongoing, operations claim, but let’s examine the (in)applicability of each exclusion, if anything, as an educational exercise.
Exclusion j.(5) applies to damage to property “on which” the insured is “performing operations” only “IF the ‘property damage’ arises out of those operations.” This is a workmanship exclusion. However, in this case, the damage did not arise out of the work product. The insured was smoking a cigarette and the loss did not arise out of any work or operation actually being performed.
Exclusion j.(6) is a pure workmanship exclusion that applies only if “your work” was “incorrectly performed” on the property. The damage did not arise from any actual work or operation, but rather from the negligent discarding of a cigarette.
This brings us to Exclusion l. which applies only to damage to “your work” that actually arises out of the work or operations performed by the insured. Again, the loss arose from the negligent discarding of a cigarette, not the actual work performance of the insured.
Examining the contract language within the context of exactly what occurred means that none of these “workmanship” exclusions apply to this loss. Working with the agent, when this argument was presented to the adjuster, to his credit, he acknowledged this interpretation, within the unique facts and circumstances of the loss, and reversed the initial denial. Claim paid and generalization dispelled.
Generalizing about policy form coverage or lack thereof is a pointless exercise when it comes to determining whether or not a real-life claim is covered. You have to READ the contract language carefully and within the context of the unique facts and circumstances of each claim.
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