Cannonball! CGL Policy Does Not Cover Pool Contractor for Subcontractor’s Negligence

By Jeffrey Dillon, Sedgwick New York

In Standard Contractors, Inc. v. National Trust Ins. Co., Civil Action No.:7:14-cv-66-HL, the U.S. District Court for the Middle District of Georgia recently granted a commercial general liability insurer’s motion to dismiss a contractor’s coverage action on the ground that the policy’s “Contractors Errors and Omissions” coverage applied only to property damage to the contractors’ work arising from the contractor’s own negligence, not that of its subcontractor.

The contractor sought coverage for the costs it incurred to repair damage to a pool facility it was hired to renovate. The contractor alleged that the damage to the pool and surrounding areas arose from the faulty workmanship of its subcontractor, which allegedly deviated from the design plan by failing to include essential parts and installing an improperly sized component.

In relevant part, the subject policy’s Contractors Errors and Omissions coverage applied to “property damage” to the contractor’s work “due to faulty workmanship, material or design….” However, in order for coverage to apply, the damages must have resulted from the contractor’s negligent act, error or omission while acting in its “business capacity as a contractor or subcontractor.” The policy specifically exempted from this coverage “[a]ny liability for ‘property damage’ to ‘your work’ if the damaged work or the work of which the damages arises was performed on your behalf by a subcontractor.”

The court ruled that the exemption prohibited the contractor’s claim for coverage, which the court found to arise solely from the negligent work of its subcontractor. The court rejected the contractor’s argument that an exception to a policy exclusion, which appeared to extend coverage to damages arising out of work performed on the contractor’s behalf by a subcontractor, demonstrated that coverage attached. The court found that the more specific and limited language of the coverage grant prevailed over the more broadly inclusive language of the exception to the policy exclusion.