A contractor performed a bathroom remodel for a customer. A rubber membrane was installed underneath the shower pan. Somehow, a small puncture was made in the membrane. Over time, water leaked and caused damage to the sub-floor. Months later, the insured returned to the job site and had to remove a large part of their work to find the source of the leak. The contractor then made a claim under their commercial general liability policy for the property damage to the items they had to tear out and replace.

Q: The insurer denied coverage, stating that coverage is excluded under the Damage To Your Work exclusion. Are they right to deny coverage?

Response 1: Looking at the policy, I noticed that the contractor is classified as an exterior painting contractor. I am surprised that he is remodeling a bathroom. You don't state whether the named insured hired a subcontractor.

The exclusion below applies under completed operations for all work done by the contractor:

m. Damage To Your Work

"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard".

This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

“Your work" is defined by the policy as:

22. "Your work":

a. Means:

(1) Work or operations performed by you or on your behalf; and

(2) Materials, parts or equipment furnished in connection with such work or operations.

b. Includes:

(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work"; and

(2) The providing of or failure to provide warnings or instructions.

While many contractors have an exception to the Damage To Your Work exclusion, the policy issued to this contractor has deleted that exception.

Response 2: Unless the insured can prove the puncture was not made by him during the installation, the denial is correct.

Response 3: The repair expense was incurred as a result of faulty workmanship. The damage to the sub-floor is likely covered, but not the cost to remove and replace the work performed. Such workmanship would have to be corrected whether there was property damage or not.

Response 4: The CGL does not pay for the contractor's work. If he had to remove the work he did and then reinstall, that is not covered. However, the ensuing damage his work caused to the subfloor should have been covered if he did not install the subfloor as part of his work.

Response 5: Assuming that the puncture to the membrane arose from the installation process and that it was an integral part of the bathroom remodeling project, I would agree that the claim denial is supportable.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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