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   , 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).