A Crimped Fitting, Two CGL Policies, and an Additional Insured Endorsement
Summit Builders is the general contractor on a Boulder retail build-out. Summit's CGL is an occurrence form, $1,000,000 per occurrence / $2,000,000 general aggregate, with the standard 2004-and-later "your work" exclusion and subcontractor exception. Summit subcontracted the plumbing to Copperline Mechanical and required Copperline to name Summit as an additional insured. Copperline's policy carries CG 20 10 (additional insured - ongoing operations), not CG 20 37. Three weeks after substantial completion, a crimped supply fitting fails in a wall, releasing water that destroys $180,000 of drywall, flooring, millwork, and a tenant's fixtures. Removing and replacing the defective fitting and the damaged section of copper pipe costs $12,000. The building owner sues both Summit and Copperline.
1. Analyze coverage for the plumbing subcontractor's own policy: the $180,000 of damage to other property and the $12,000 repair of the pipe itself.
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The two amounts land on opposite sides of the "your work" exclusion.
- $180,000 - covered. The exclusion bars damage to "your work" and to the particular part of the property on which the work was performed. It does not bar damage to other property arising out of that work. Drywall, flooring, millwork, and the tenant's fixtures are property other than Copperline's work product. Because the failure occurred after completion, the loss falls within the products-completed operations hazard, which is subject to its own aggregate limit on the declarations.
- $12,000 - not covered. The crimped fitting is Copperline's defective work, and the pipe section it damaged is the particular part of the property on which Copperline was working. The exclusion reaches both the cost of correcting the defect and the cost of repairing the component itself.
- Key distinction to articulate: defective workmanship is not an "occurrence" for the cost of making good the work, but the resulting damage to other property is treated as an occurrence-caused property damage claim.
2. Summit tenders the owner's lawsuit to Copperline as an additional insured. Evaluate that tender, and explain where Summit's own CGL fits.
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The tender to Copperline fails, and Summit must look to its own policy.
- CG 20 10 covers only ongoing operations. It grants additional insured status for liability arising out of Copperline's operations while those operations are in progress. The loss here occurred three weeks after substantial completion, so it falls in completed operations, which CG 20 10 does not reach. CG 20 37 is the endorsement that extends completed operations coverage.
- Summit's own CGL may respond. Under the standard form, the "your work" exclusion contains a subcontractor exception: if the damaged work or the work out of which the damage arises was performed on Summit's behalf by a subcontractor, the exclusion does not apply to the insured general contractor. Because the loss is damage to other property caused by a subcontractor's work, Summit's policy can respond to the owner's claim for the $180,000 of resulting damage.
- Consequence: Summit's insurer may pay and then pursue subrogation or contractual indemnity against Copperline. The practical lesson is that a certificate showing "additional insured" proves almost nothing unless the endorsement form number is on the contract.
3. The owner also sues for $300,000 in lost rental income because the tenant could not open on schedule. Is that covered under either CGL?
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Generally no, and the reasoning matters more than the conclusion.
- CGL covers bodily injury and property damage, plus personal and advertising injury. Pure economic loss such as lost rent is neither. The policy's coverage grant is not triggered unless the claim includes covered property damage or bodily injury.
- No "loss of use" end run. Loss of use of tangible property is treated as property damage, but it must flow from covered physical injury to property. Here the physical damage itself is covered, so an argument exists that the owner's loss of use of the building is derivative property damage. Where the claim is framed purely as a contractual delay or lost revenue theory, however, carriers routinely deny on the ground that no covered damage to the claimant's property is alleged.
- The intended risk transfer. Lost rent and delayed opening belong to a builders risk or business income/delay-in-startup form or a contractual liquidated damages clause, not to a CGL. This is a design problem, not a claims-handling problem, and the response should be to fix the program for future projects.