By: Kenney & Sams, P.C.
In All America Insurance Company vs. Lampasona Concrete Corporation, the Massachusetts Appeals Court recently held that while the ‘your work’ exclusion to comprehensive general liability (CGL) insurance coverage precluded coverage for repairing the insured’s defective work performed on one flooring layer during a construction project, the exclusion did not preclude coverage for damages that the insured’s defective work caused to other layers within the integrated flooring system after the project was completed.
The All America Insurance case arose because, after a general contractor, Dacon Corporation, had completed constructing Beverly Hospital, the hospital’s flooring developed defects including buckling tile and water intrusion. The hospital sued Dacon for the repair costs. The subject floors included three layers: a vapor barrier, concrete slab, and a finished layer of either tile or carpet. The remediation involved removing the finished layer, burning off fiber from the concrete layer, and rolling on a moisture mitigation system before replacing the finished layer.
Dacon sought indemnification from its subcontractor, Lampasona Concrete Corporation, alleging that Lampasona improperly installed the concrete slab under the floor. More specifically, Dacon alleged that Lampasona punctured the vapor barrier, which allowed moisture to pass into the concreate slab; and that it improperly mixed fiber reinforcement into the concrete, which contributed to moisture wicking to the surface. The resulting moisture problems damaged the tiles and carpet. Different subcontractors installed the vapor barrier and the finished layer and were not involved in the lawsuit.
Lampasona sought indemnification and defense from its CGL carrier, All America, which, in turn, sought a judgment declaring that it had no duty to defend or indemnify Lampasona. In denying coverage, All America relied on the standard ‘your work’ coverage exclusion. The exclusion states that insurance does not apply to “[t]hat particular part of any property that must be restored, repaired or replaced because of ‘your work’ was incorrectly performed on it.”
The lower court incorrectly ruled that the ‘your work’ exclusion precluded coverage in its entirety, reasoning that the concrete slab work was inseparable from the vapor barrier and finishes. The Appeals Court vacated the lower court’s decision reasoning that the ‘your work’ exclusion does not extend to damages that an insured, contractor’s faulty work caused to property other than the insured’s work product. Consequently, the alleged damage that Lampasona’s defective work caused to the vapor barrier and finishing work (which Lampasona had not installed) did not fall under the ‘your work’ exclusion. The Appeals Court held that, where Lampasona was hired to install one flooring layer within an integrated flooring system and caused discreet damage to the other layers, the damage to the other layers fell outside the ‘your work’ exclusion.
The Appeals Court also noted that the ‘your work’ exclusion did not apply by its terms to damage that occurred after Lampasona completed its work because the policy language expressly excepted work that was completed or abandoned.