What Is(n’t) “Your Work” in the CGL?

A carpenter built a garage building and, upon leaving, it burned down due to the improper extinguishing of a cigarette. Will the carpenter’s CGL cover the loss? Not according to the adjuster. Keep reading to find out why we didn’t think the reasoning on this claim denial was too hot….

Question 1

“If a carpenter is building someone a garage which is near completion and the garage burns down due to improper extinguishing of a cigarette, will the carpenter’s CGL cover the loss? Does the care, custody or control exclusion apply? Does the “that particular part of real property” refer to the entire garage? It seems the CCC exclusion only refers to personal property, not buildings. Is there coverage for this loss caused by the carpenter’s negligence under fire damage legal liability coverage? I thought this coverage only referred to the part of premises rented by the insured.”

Response 1

This is an interesting claim. At issue is what acts constitute normal negligence for which the CGL was designed and when might such acts be considered “your work” and excluded? Or could other exclusions apply. Below are some thoughts from our faculty (and you can see we don’t entirely agree).

Response 2

The exclusion that is applicable is j(5) that says:

j. Damage To Property

“Property damage” to:

(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

BUT look at the “give back” that says:

Exclusions c. through n. do not apply to damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner. A separate limit of insurance applies to this coverage as described in Section III – Limits Of Insurance. [emphasis added]

This should give back coverage for “fire,” up to “Fire Damage” limit.

Response 3

The fire damage legal liability cited is for damage by fire to premises the contractor rents or occupies by permission from the owner. I don’t believe that it is meant to cover this type of loss. If you could get it covered under that as “temporarily occupied by you with permission of the owner,” that would avoid the exclusion for property damage to that particular part of real property on which you are performing operations. Failing to do that, I think exclusion j.(5) would exclude the damage. When you are a carpenter building a structure, I think the entire structure is your operation. But maybe someone else knows of court cases that give a more narrow interpretation. I think the thought on the fire damage coverage under the exception at the end of the exclusion for coverage “A,” just might convince a court.

Response 4

My gut reaction is that we need more information. For example, was the insured on break or were they working when the fire started? It does not seem that the “operations” of the insured caused the loss while they were working on “that particular part” of the property. For what it is worth, it does not seem to me that exclusion j.(4), CCC to personal property, would apply unless there was a builders’ risk on the property at the time of loss. If there was, then the construction looks a lot like personal property and j.(4) could apply.

Response 5

The exclusion that applies depends on whether or not it’s a completed operation. The applicable exclusions would most likely be:

j. Damage To Property

“Property damage” to:

(1) Property you own, rent, or occupy;
(2) Premises you sell, give away or abandon, if the “property damage” arises out of any part of those premises;
(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 [emphasis added]

 

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. [emphasis added]

The most likely culprits would be j.(5) for ongoing operations and l. for completed operations. With regard to j.(5), if the contractor is building the entire garage, then the entire garage would constitute “that particular part.” However, I think the key phrase is “if the ‘property damage’ arises out of those operations.” This is essentially a workmanship exclusion, so I don’t think the loss arose out of the work itself. To me, smoking a cigarette is not part of “your work” or operations.

Likewise, with regard to exclusion l., I don’t think “your work” involves smoking as part of your operations. This was just an incidental, negligent occurrence that happened to take place while the insured was on the premises. On the other hand, the definition of “your work” encompasses more than your operations:

“Your work”:
a. Means:
(1) Work or operations performed by you or on your behalf; and
(2) Materials, parts or equipment furnished in connection with such work or operations.

 

“Your work” includes the building materials. Therefore, there’s an argument that there was property damage “TO” your work…the building materials. HOWEVER, even that must involve property damage “arising out of it or any part of it” (referring to arising out of “your work”). Again, while the PD was “TO” “your work,” without question, did it arise out of “your work”? I don’t think so.

Also, keep in mind that there is an important exception to both exclusions:

Exclusions c. through n. do not apply to damage by fire to premises while rented to you or temporarily occupied by you with permission of the owner. A separate limit of insurance applies to this coverage as described in Section III – Limits Of Insurance.

Under earlier forms, fire damage legal liability applied to rented premises. Under the current CGL form, this includes premises that are “temporarily occupied by you.” That’s certainly the case here.

So, at best, I’d argue that there is coverage for this loss up to the CGL limit. At worst, there’s coverage up to the FDLL limit.

For another look at the “your work” exclusion, check out the article, “The CGL ‘Your Work’ Exclusion.”