Coverage Found for Faulty Workmanship Damaging Other Property

Tred R. Eyerly | Insurance Law Hawaii | January 4, 2016

The district court found that under Illinois law, the damage caused by the insured’s faulty workmanship to portions of building beyond the scope of its own work was covered under a CGL policy.¬†Westfield Ins. Co. v. Nat’l Decorating Serv., 2015 U.S. Dist. LEXS 159140 (N.D. Ill. Nov. 25, 2015).

200 North Jefferson, LLC was the owner and developer of a 24- story condominium building. 200 North Jefferson retained as the general contractor McHugh Construction Co. McHugh Construction retained National Decorating Service, Inc. as the subcontractor to perform all painting work on the project.

The Condominium Association sued 200 North Jefferson, McHugh Construction, MCZ/Jameson Development Group, LLC, National Decorating for faulty workmanship. The alleged damages included:(1) cracking of the exterior concrete walls, interior walls and ceilings; (2) significant leakage through the exterior concrete walls, balconies, and windows; (3) defects to the common elements of the building; and (4) damage to the interior ceilings, floors, interior painting, drywall and furniture in the units.

Westfield insured National Decorating, the named insured. 200 North Jefferson, McHugh Construction and MCZ/Jameson were additional insureds.The Additional Insured Endorsement included as an additional insured named entities, “but only with respect to liability arising out of your ongoing operations performed for [the named insured].”

Westfield refused to defend and a coverage suit was filed. Cross motions for summary judgment were filed.

There was no question that the costs to repair and replace National Decorating’s faulty painting work was not covered. Instead, the dispute centered on whether the damage that National Decorating caused to parts of the building beyond the scope of work triggered a duty to defend.

Looking to Illinois case law, the court determined that damage beyond the scope of named insured’s work at a building was “property damage” resulting from an “occurrence.” Therefore, summary judgment for National Decorating and the additional insureds was warranted. The damages claimed in the underlying complaint included the building’s ceilings, drywall and floors, which were all beyond the scope of National Decorating’s work and thus were covered damages.

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