“That Particular Part” – Yet More

David Smith | Policyholder Perspective | April 30, 2019

Massachusetts Appeals Court Gets It Right – Mostly

Hot on the heels of the Federal Tenth Circuit Court of Appeals’ decision in MTI, Inc. v. Employers Insurance Company of Wausau, __ F.3d __, 2019 WL 321423 (10th Cir. 2019) (about which I wrote earlier this month), the Appeals Court of Massachusetts also found that the phrase “that particular part” as used in exclusions j(5) and j(6) in the CGL policy must be applied narrowly. In All America Ins. Co. v. Lampasona Concrete Corp., 95 Mass. App. Ct. 79 (2019), the court held that damage caused to an underlying vapor barrier and a tile and carpet finish applied on top of the concrete floor slab poured by Lampasona was not excluded from coverage by the j(6) exclusion in the Lampasona’s policy. The court found that Lampasona did not install the vapor barrier or the tile/carpet, so they were not “that particular part” on which Lampasona was working.

The underlying trial court had held that the three elements of the floor (the vapor barrier, the concrete and the tile/carpet finish) were integral and inseparable parts of the flooring system. Thus, the court held that damage caused by Lampasona’s pouring of the concrete slab (which pierced the vapor barrier which consequently let moisture pass through the concrete and damage the finish) was all to the same work product.

The appellate court did not disagree that the flooring could be described as a single system. It did, however, rule that such a description was irrelevant to coverage. Lampasona did not install the vapor barrier or the tiles or carpet, and thus those elements were not the “particular part” of the property that Lampasona worked on. Therefore, the exclusion did not apply to the costs of repairing the damage to those elements of the floor.

In some ways, this is a better reasoned opinion than that of MTI, Inc. The MTI court found the exclusion to be ambiguous, and thus construed it against the insurer. In Lampasona, the court found that, although the contractor’s work was closely connected with other parts of the overall project, the exclusion by its own terms did not apply to work not performed by the insured. The vapor barrier and the floor tiles and carpet were not “that particular part” of the property on which the insured performed work.

The one point the Massachusetts court got wrong was dicta in which it distinguished certain cases cited by the insurer on the ground that they dealt with coverage for general contractors, not subcontractors. This comment gives the impression that CGL coverage for subcontractors is somehow different than it is for general contractors. However, insurance industry materials have been clear for a very longtime that, in these circumstances, general contractors and subcontractors were to be provided the same coverage – the exclusion only applies to the property upon which the general contractor or subcontractor were actually working.

We have noticed an unfortunate trend in these cases. Many attorneys don’t seem to offer evidence of the insurance industry’s intent regarding the scope of this coverage. At least in California, industry materials regarding the meaning of insurance policy terms is admissible under California Civil Code §1645. As I have described in earlier posts [1] [2] [3], there is ample evidence of the insurance industry’s intent to provide broad coverage in this area by using the phrase “that particular part” to narrow exclusions j(5) and j(6).

The 10th Circuit Correctly Construes “That Particular Part” Narrowly

David Smith | Farella Braun & Martel | April 12, 2019

We do not often write about coverage opinions from jurisdictions as far away as Oklahoma; however, a recent case from the Federal Tenth Circuit looked at one of our favorite topics and came out with a much better reasoned opinion than recent decisions from the Ninth Circuit.

I’ve written before on the topic of the meaning of “that particular part” as the phrase is used in exclusions j (5) and j(6) of the Commercial General Liability (“CGL”) policy.  The “j” exclusions exclude coverage for damage to certain property.  Specifically, the j (5) and (6) exclusions state that the insurance does not apply to:

(5)    That particular part of real property on which you or any contractors or subcontractors working directly 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.

The part of these exclusions that some courts consistently get wrong is the meaning of the phrase “that particular part.”  In particular, in June 2017 I wrote about the way the Ninth Circuit (supposedly applying California law) has on several occasions ignored the insurance industry’s own explanation of the meaning of the phrase “that particular part” and applied the exclusion to the entire project a contractor was working on.

For example, the insurance industry’s own text books give the example of a general contractor dropping a steel roofing beam during the construction of a steel-frame building. The dropped beam fell while being hoisted and “struck and damaged other steel components that had already been erected.” Because at the time the accident occurred the contractor was working on the beam that dropped, and not the other damaged building components, the damage to those building components was intended to be covered because it was not the “particular part” being worked on. Donald S. Malecki, et al., Commercial Liability Insurance and Risk Management, 95-96 (3d ed. 1995) (“No coverage applies to ‘that particular part’ of real property damaged while work is being performed on it. But, by inference, coverage does apply for damage to any other part of the property besides ‘that particular part’….”) (emphasis in original). A number of other industry writings support this analysis, including materials published by the drafters of the actual policy wording, the Insurance Services Office.

California law specifically allows the use of industry materials and resources to interpret insurance policies. See, e.g., Maryland Cas. Co. v. Reeder, 221 Cal. App. 3d 961, 973, n.2 (1990) (relying on industry publications to interpret the scope of exclusions in the 1973 CGL policy). Furthermore, California Courts of Appeal have already applied the exclusions narrowly. See, e.g., Pulte Home Corp. v. American Safety Indemn. Co., 14 Cal. App. 5th 1086 (2017); Global Modular, Inc. v. Kadena Pacific, Inc., 15 Cal. App. 5th 127 (2017).

Additionally, when a policy clause is ambiguous and capable of at least two reasonable interpretations, the court is supposed to construe the clause against the drafter – which in insurance contexts, is invariably in favor of coverage. This is true nationwide. See, e.g., Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co., 18 Cal. 4th 857, 869 (1998); Haworth v. Jantzen, 172 P.3d 193, 197 (Okla. 2006).

A recent case out of the Tenth Federal Circuit looked at the “that particular part” issue in a published opinion, MTI, Inc. v. Employers Insurance Company of Wausau, __ F.3d __, 2019 WL 321423 (10th Cir. 2019), applying Oklahoma law. MTI, a contractor, was hired to replace corroded anchor bolts and castings in a wooden cooling tower. The contractor removed the old bolts but was delayed in installing the new ones. High winds blew the cooling tower down while it was left unsupported.

MTI’s insurer, Wausau, denied MTI’s claim for the damage caused to the cooling tower and equipment inside, citing exclusions j (5) and j (6). MTI sued Wausau. Noting that the Oklahoma Supreme Court had not explicitly addressed the issue, the court looked at the way other jurisdictions had interpreted the clauses, finding that courts had ruled both ways (i.e., some courts held that the language restricted the exclusion’s application to only the part of a project being worked on; others applied it to the entire project).

Holding that both interpretations were reasonable, the MTI court held that the exclusions were ambiguous and thus must be construed against the insurer. The court also opined that the insured’s reasonable expectations would be for coverage for the cost of replacing the entire tower. While from a purist’s point of view it’s unfortunate that the MTI court did not look at the insurance industry resources, it nevertheless reached the right conclusion, adding to the majority of jurisdictions that interpret these exclusions narrowly. We can only hope that eventually the weight of opinion (together with California law) will sway the Ninth Circuit on this issue.

As an aside, the court also dismissed Wausau’s argument that providing coverage of the tower converted the CGL policy into a performance bond. This is a red herring argument often used by insurers. The court noted that a performance bond guarantees completion of a contract upon the contractor’s default, while a CGL policy spreads the contractor’s risk. The monetary values at issue underlined this point: the value of the contract was $46,000; the value of the damage was $1.4 million. A performance bond for such a project would not result in liability of this amount.

Ninth Circuit Finds Policy’s Definition of “Policy Period” Fatal to Insurer’s “Related Claims” Argument

Jason M. Taylor | Insurance Law Blog | March 27, 2019

Professional liability policies often include some form of a “related claims” or “related acts” provision stating that if more than one claim results from a single wrongful act, or a series of related wrongful acts, such claims will be treated as a single claim and deemed first made during the policy period in which the earliest claim was made.  These provisions can have significant implications on the applicable policy and policy limits, retroactive date issues, and whether such claims were first made and reported during a particular policy period.  Recently, the Ninth Circuit issued a stern reminder of how the particular policy language can effect, and in this case thwart, the intended scope of the carrier’s “related claims” provision.

In Attorneys Ins. Mut. Risk Retention Grp., Inc. v. Liberty Surplus Ins. Corp., 2019 WL 643442 (9th Cir. Feb. 15, 2019), the Ninth Circuit construed a “related claims” provision included in two consecutive lawyers professional liability policies. During both the 2009–2010 and 2010–2011 insurance policy periods, attorney J. Wayne Allen (“Allen”) was insured through his employer by Liberty Surplus Insurance Corporation’s (“Liberty”) professional liability insurance.  Third parties filed suit against Allen during the 2009–2010 policy period in a probate case, and a second, related civil suit during the 2010–2011 policy period.  

The 2010–2011 Policy was a “claims-made and reported policy,” which required that any claim made during the 2010–2011 policy period against the insured be reported during the 2010–2011 policy period. One provision limited Liberty’s liability for multiple related claims and provided, in relevant part:

Claims alleging, based upon, arising out of or attributable to the same or related acts, errors or omissions shall be treated as a single Claim regardless of whether made against one or more than one Insured. All such Claims, whenever made, shall be considered first made during the Policy Period or any Extended Reporting Period in which the earliest Claim arising out of such acts, errors or omissions was first made, and all such Claims shall be subject to the same Limits of Liability.

The earlier probate suit was not reported to Liberty until the second policy period.  When the civil suit was reported to Liberty (within the 2010-2011 policy period in which the claim was made), Liberty declined coverage for Allen in the civil action. Liberty argued that the “related claims” provision in the 2010–2011 Policy limited coverage so that if multiple claims regarding the same set of facts are made against an insured in multiple policy periods, the claims are all considered initially made during the policy period in which the first claim is made.  Here, Liberty argued that by virtue of the “related claims” provision, both the probate case and related civil suit were deemed to have been first made during the 2009-2010 Policy period, when the original probate suit was first made.  Further, because claims must be reported during the policy period in which they are made, Liberty asserted that it had no obligation to defend Allen against the civil action because he failed to report the earlier, related probate claim during the 2009–2010 policy period.  

The District Court rejected Liberty’s argument, and the Ninth Circuit affirmed.  The court’s analysis involved interpretation of one of the 2010–2011 Policy’s defined terms, “Policy Period.” In particular, the 2010–2011 Policy defined “Policy Period” as “the period from the Inception Date of this Policy to the Policy Expiration Date as set forth in the Declarations or its earlier termination date, if any.” The “Declarations” identified the policy period as from July 31, 2010 until July 31, 2011. According to the court, the specific definition of “Policy Period” within the 2010-2011 Policy precluded Liberty’s interpretation of the “related claims” provision.

The District Court reasoned that “[a]dopting Liberty’s interpretation would require the court to give different meanings to the same term used in the same policy, which would run afoul of the rules of contract interpretation.” Rather, the court held that the definition of “Policy Period” necessitated that the “related claims” provision be read to mean any relevant claims will be “considered first made during the Policy Period,” i.e., during the period from July 31, 2010, until July 31, 2011.  In other words,the specific policy language in the 2010-2011 Policy only applied to “related claims” made within the 2010-2011 Policy period and that such claims will be deemed made when the earliest of claims was made during that policy period only, and not the prior policy period.  The Ninth Circuit held that Liberty’s chosen definition of “Policy Period” may create an ambiguity in the meaning of the multiple related claims provision as a whole, but it nevertheless sided against Liberty as any ambiguities in an insurance policy are resolved against the insurer.

CGL Provides No Coverage for Damage to the Insured’s Work

Barry Zalma | Zalma on Insurance | March 22, 2019

Construction contracts are risk transfer devices. The owner shifts the risk of loss to the general contractor who shifts the risk of loss to subcontractors and all shift the risks of loss to their insurers. Commercial General Liability (CGL) policies agree to accept the risk of loss faced by those insured by the CGL for an “occurrence” happening during the policy period. It does not, however, provide coverage for the general costs of doing business.

In Skanska USA Building Inc. v. M.A.P. Mechanical Contractors, Inc., and Amerisure Insurance Company and Amerisure Mutual Insurance Company, Skanska USA Building Inc. v. M.A.P. Mechanical Contractors, Inc., Amerisure Insurance Company, And Amerisure Mutual Insurance Company, No. 340871, No. 341589, State of Michigan Court of Appeals (March 19, 2019) the Michigan Court of Appeals was asked to resolve a dispute over whether there was an “occurrence” as defined by the policy that required defense and indemnity.

The dispute arose from the faulty installation of parts in the steam heat system of a hospital construction project resulted in an insurance coverage dispute. The resulting damage required extensive repairs, in excess of $1 million. The insurance carrier, Amerisure Insurance Company (“Amerisure”), appealed an order denying its motion for summary disposition.


Starting in 2008, plaintiff was the construction manager on a renovation project for Mid-Michigan Medical Center in Midland (“Medical Center” or “MMMC”). Plaintiff subcontracted the heating and cooling portion of the project to defendant M.A.P. Mechanical Contractors (“MAP”). MAP obtained a commercial general liability insurance policy (“CGL policy”) from Amerisure. Plaintiff and the Medical Center are named as additional insureds on the CGL policy.

In 2009, MAP installed a steam boiler and related piping for the Medical Center’s heating system. MAP’s installation included several expansion joints, which are designed to accommodate the expansion of the piping caused by the flowing steam. Plaintiff determined that MAP had installed some of the expansion joints backward. Significant damage to concrete, steel, and the heating system had occurred.

According to plaintiff, the cost of the repair and replacement work was approximately $1.4 million. Plaintiff submitted a claim to Amerisure seeking coverage as an insured. Plaintiff’s claim was denied.

Amerisure asserted several grounds for summary disposition, including: (1) MAP’s defective construction was not a covered occurrence within the CGL policy; (2) plaintiff failed to provide proper notice of a claim; (3) plaintiff entered into a settlement without Amerisure’s consent; and (4) several exclusions barred coverage.

The trial court denied Amerisure’s motion.

The policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” However, the policy did not define the word “accident.”

Defective workmanship, standing alone, is not an occurrence within the meaning of a general liability insurance contract, an occurrence exists where the insured’s faulty work product damages the property of another.

There is no indication MAP purposefully installed the expansion joints backwards. The parties affected by MAP’s negligence did not anticipate, foresee, or expect backward expansion joints or property damage to the entire length of the underground steam and condensate lines.


The dispositive issue in this case is whether there was an “occurrence” triggering coverage. There was no genuine issue of material fact that plaintiff sought coverage for replacement of its own work product.

At issue was whether there was an “occurrence” triggering coverage. Because the policy did not define “accident,” the Court looked to a common definition of “accident,”  that anything that begins to be, that happens, or that is a result which is not anticipated and is unforeseen and unexpected by the person injured or affected thereby—that is, takes place without the insured’s foresight or expectation and without design or intentional causation on his part. In other words, an accident is an undesigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.

The fortuity required is not what is commonly meant by a failure of workmanship. The court was unable to find in the policy language a reasonable basis to expect coverage for defective workmanship.

In sum, the court concluded that defective workmanship of the insured, standing alone, was not the result of an occurrence within the meaning of the insurance contract. Summary disposition was properly granted on this issue.

A fundamental tenet of Michigan jurisprudence, like that of every state, is that unambiguous contracts are not open to judicial construction and must be enforced as written. Courts enforce contracts according to their unambiguous terms because doing so respects the freedom of individuals freely to arrange their affairs via contract. The general rule of contracts is that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the courts.

The Michigan Court of Appeal noted that it is an established principle of law that an “occurrence” cannot include damages for the insured’s own faulty workmanship. Amerisure was, therefore, entitled to judgment as a matter of law because coverage was not triggered due to lack of an “occurrence” and there is no genuine issue of material fact that the only damage was to plaintiff’s own work product (rather, that of its subcontractor).

Because there is no coverage, there was no need to address whether any of the exclusions apply or whether conditions precedent were met.


CGL policies provide extensive coverage to its policyholders. It does not, however, cover every potentiality. It will never provide coverage for a loss that is not fortuitous, contingent or an unknown event. It will not protect the policyholder from damage caused by the policyholder’s own negligence to its own product. For that reason judgment was entered in favor of the insurer.

Tenth Circuit: That “Particular Part” Deemed Ambiguous

Nadia A. Buraighis | Cozen O’Connor | February 25, 2019

On January 25, 2019, the U.S. Court of Appeals for the Tenth Circuit, applying Oklahoma law, held that the phrase “that particular part” is ambiguous and may refer to either the distinct component upon which an insured works or to all parts ultimately impacted by that work. MTI, Inc. v. Employers Ins. Co. of Wausau, No. 17-6206, 2019 WL 321423 (10th Cir. Jan. 25, 2019). Interpreting the phrase narrowly in favor of the insured, the Tenth Circuit held that the exclusion extends only to the distinct components upon which work was performed.

Western Farmers Electrical Cooperative (WFEC) owned cooling towers in Oklahoma, which were serviced by MTI, Inc. (MTI). After a 2011 inspection revealed that anchor bolts in MTI’s Cooling Tower 1 (Tower 1) were corroded, MTI and WFEC agreed to a repair contract for MTI to install new anchor castings. On May 23, 2011, MTI employees removed 64 corroded anchor bolts in Tower 1 but did not immediately install new anchor bolts. The next day, high winds caused structural damage to the tower, necessitating its removal and replacement. WFEC demanded that MTI pay the cost of removing and replacing the entire tower, which totaled more than $1.4 million.

MTI sought coverage under its commercial general liability policy with Employers Insurance Company of Wausau (Wausau). Wausau denied coverage under policy exclusions j(5) and j(6), which preclude coverage for property damage to:

  1. 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
  2. That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

MTI subsequently filed suit against Wausau in Oklahoma state court for breach of contract, which Wausau removed to the Western District of Oklahoma. On Wausau’s motion for summary judgment, the district court held that the alleged property damage fell within the scope of exclusions j(5) and j(6) and, consequently, entered judgment in favor of Wausau. MTI appealed.

The Tenth Circuit, relying on out-of-state authority, adopted the reasoning of those jurisdictions that interpret the exclusions narrowly to apply only to the distinct component upon which work was performed. Specifically, the Tenth Circuit noted that “the phrase ‘that particular part’ could be read to refer solely to the direct object on which the insured was operating. Alternatively, it could apply to those parts of the project directly impacted by the insured party’s work.” Id. at *3. Because the court deemed both readings permissible, the Tenth Circuit held that the exclusions were “facially ambiguous” and construed them strictly and narrowly in a manner favorable to MTI, the insured party. As a result, the court determined that the “particular part” on which MTI was “performing operations” and upon which work was “incorrectly performed” was the anchor bolts, which constitute “distinct component parts” of the tower. The Tenth Circuit reasoned that MTI performed work incorrectly by removing the anchor bolts without promptly replacing them or bracing the structure. Accordingly, the court concluded it was “objectively reasonable that MTI would expect coverage for the cost of replacing the entire tower, including all of its operational elements[.]” Id. at *4.

In reaching its holding, the Tenth Circuit rejected Wausau’s three arguments against coverage. First, the court dismissed Wausau’s argument that adopting this interpretation converted the policy into a performance bond. The court noted that MTI had not requested that Wausau cover the cost of replacing the anchor bolts, but rather sought coverage for damage to property other than MTI’s work. Second, the court declined to read an implied “business risk exclusion” into the policy, which it found would otherwise override the express language of the contract. Finally, the court rejected Wausau’s contention that the Tenth Circuit had previously decided this issue under Kansas law in Advantage Homebuilding, LLC v. Maryland Casualty Co., 470 F.3d 1003 (10th Cir. 2006), holding that, that case did not address the meaning of the phrase “that particular part.”

With this decision, the Tenth Circuit, interpreting Oklahoma law, joined those courts that interpret the damage to property exclusions j(5) and j(6) to extend only to the particular area of property on which the insured was working. See, e.g., Fortney & Weygandt, Inc. v. Am. Mfrs. Mut. Ins. Co., 595 F.3d 308, 311 (6th Cir. 2010) (holding that “that particular part” applies only to building parts on which the defective work was performed, and not to the building generally); Mid-Continent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 215 (5th Cir. 2009) (finding “that particular part” language is used to distinguish the damaged property that was itself the subject of the defective work from other damaged property that was either the subject of non-defective work by the insured or that was not worked on by the insured at all).

This holding conflicts with holdings from other jurisdictions, such as the Seventh and Eighth Circuits, which broadly interpret the exclusion to extend beyond the specific area of the property being worked on to other parts of the property damaged by the defective work. See, e.g., W. Side Salvage, Inc. v. RSUI Indem. Co., No. 16-3928, 2017 WL 6422107 (7th Cir. Dec. 18, 2017); Spirtas Co. v. Nautilus Ins. Co., 715 F. 3d 667, 673 (8th Cir. 2013); William Crawford, Inc. v. Travelers Ins. Co., 838 F. Supp. 157 (S.D. N.Y. 1993). Following the MTI decision, insurers should carefully consider jurisdiction and choice of law when determining how to apply the j(5) and j(6) property damage exclusions.