{"id":902446,"date":"2024-03-21T15:43:15","date_gmt":"2024-03-21T21:43:15","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=902446"},"modified":"2024-03-21T15:43:55","modified_gmt":"2024-03-21T21:43:55","slug":"liability-coverage-for-construction-claims-may-turn-on-narrow-factual-distinctions","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/liability-coverage-for-construction-claims-may-turn-on-narrow-factual-distinctions\/","title":{"rendered":"Liability Coverage For Construction Claims May Turn On Narrow Factual Distinctions"},"content":{"rendered":"\n<p>Scott Thomas | <a href=\"https:\/\/www.paynefears.com\/liability-coverage-for-construction-claims-may-turn-on-narrow-factual-distinctions\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Payne &amp; Fears<\/a><\/p>\n\n\n\n<p>In a recent trial court decision, a Montana federal court reminds us how fragile insurance coverage can be for <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-defect-claims-an-update-part-1\/\">construction-related insurance claims<\/a>. Specifically, this case illustrates how seemingly small factual nuances can make or break coverage. The case turned on the application of policy provisions familiar to all who deal with these kinds of cases. (<em>See Nautilus Ins. Co. v. Farrens,\u00a0<\/em>No. CV 22-193-M-DWM, 2024 WL 885109 (D. Mont. Mar. 1, 2024))<\/p>\n\n\n\n<p>First, the court rebuffed the insurer\u2019s argument that damage resulting from defective workmanship (in this case, the flawed design and installation of an elaborate floating-floor pool system) is not \u201ccaused by an occurrence.\u201d The court correctly applied the test followed by most states: if&nbsp;<em>either&nbsp;<\/em>act causing injury is unintentional&nbsp;<em>or&nbsp;<\/em>the resulting injury is unexpected or unintended, the \u201coccurrence\u201d requirement is met. Fortunately, the court distinguished sloppy language from earlier Montana federal court decisions suggesting otherwise.<\/p>\n\n\n\n<p>The court then turned to the application of three exclusions commonly asserted by liability insurers to deny coverage for construction claims:<\/p>\n\n\n\n<p>The first ((j)5) excludes coverage for \u201cproperty damage to . . . that particular part of real property on which you . . . are performing operations, if the property damage arises out of those operations.\u201d The parties\u2019 arguments and the court\u2019s reasoning focus on the two issues on which the application of this exclusion often turns: Does it apply&nbsp;<em>only&nbsp;<\/em>when the insured\u2019s work is ongoing (note the present tense \u201c<em>are performing operations\u201d<\/em>)? And does it apply only to the specific component causing harm or to all of the insured\u2019s work (note the limiting \u201c<em>that particular part\u201d<\/em>)? The insured was still working on the pool system when the damage occurred, so the first issue was easily resolved in the insurer\u2019s favor. And the court, while noting that other courts have reached conflicting conclusions on this issue, concluded that \u201cparticular part\u201d means&nbsp;<em>all&nbsp;<\/em>of the insured\u2019s work\u2014not &nbsp;just the defective component causing harm to other property.<\/p>\n\n\n\n<p>The second exclusion ((j)6) excludes coverage for property damage to \u201cthat particular part of any property that must be restored, repaired, or replaced because [the insured\u2019s] work was incorrectly performed on it.\u201d The issue here, similarly to (j)5, is whether the exclusion applies only to the cost of restoring, repairing, or replacing the specific component that causes harm, or also to the rest of the insured\u2019s work damaged by the defective component. The court concluded that, for various reasons, the entire pool system designed and installed by the insured was defective and, thus, (j)5 excludes coverage for all damage to the entire system.<\/p>\n\n\n\n<p>Finally, the court considers the application of the policy\u2019s professional liability exclusion, which excludes coverage for damage \u201carising out of . . . professional services by you,\u201d but only \u201cengineering, architectural or surveying services\u201d provided in the insured\u2019s \u201ccapacity as an engineer, architect or surveyor.\u201d The exclusion explicitly states that it does not apply to \u201coperations in connection with construction work performed by\u201d the insured. The obvious issue here is whether the insured\u2019s design of the pool system was done&nbsp;<em>\u201cin connection with\u201d<\/em>&nbsp;its construction of the pool; if so, the exclusion does not apply. Unfortunately (and, we believe, erroneously) the court chose to interpret the construction exception narrowly (even though universally-held rules of construction mandate it be construed broadly in favor of the insured) and held that because the insured did nothing wrong in its installation of the pool system (i.e., the problems stemmed solely from design flaws), the exception does not apply \u2013 the result being that the exclusion eliminates coverage.<\/p>\n\n\n\n<p>The takeaways? These coverage cases often turn on narrow, nuanced factual distinctions. For this reason, as well as the subjective perspectives individual judges bring to such cases, outcomes are not always consistent.\u00a0<em>Caveat emptor<\/em>.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Scott Thomas | Payne &amp; Fears In a recent trial court decision, a Montana federal court reminds us how fragile insurance coverage can be for construction-related insurance claims. Specifically, this case illustrates how seemingly small factual nuances can make or break coverage. The case turned on the application of policy provisions familiar to all who&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/liability-coverage-for-construction-claims-may-turn-on-narrow-factual-distinctions\/\">Continue reading <span class=\"screen-reader-text\">Liability Coverage For Construction Claims May Turn On Narrow Factual Distinctions<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14],"tags":[],"class_list":["post-902446","post","type-post","status-publish","format-standard","hentry","category-construction-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Liability Coverage For Construction Claims May Turn On Narrow Factual Distinctions - Advise &amp; 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