Completed Operations, the 'Your Work' Exclusions, and a Late-Notice Defense Under Indiana Law
Ridgeline Roofing of Greenwood carries an occurrence-basis CGL with $1,000,000 each occurrence, $2,000,000 general aggregate, $2,000,000 products-completed operations aggregate, and a $10,000 per-occurrence deductible. In April, Ridgeline's own crew finished a TPO membrane roof on a strip mall. In September a tenant reported $85,000 of ruined inventory after a seam failed; redoing the seam will cost $22,000. Separately, in March, a Ridgeline crew dropped a bundle through a skylight and destroyed a $30,000 rooftop HVAC unit belonging to the mall owner. Ridgeline did not report the September inventory claim until February of the following year, after the tenant threatened suit. The carrier has completed its investigation and can identify no lost evidence, but wants to deny the claim outright for late notice.
1. Analyze coverage separately for the $85,000 inventory loss and the $22,000 seam repair.
Read the worked answer
The $85,000 inventory loss - potentially covered. The damage is to property of a third party, not to Ridgeline's own work. Indiana courts have generally treated property damage to other property resulting from defective workmanship as an 'occurrence' for CGL purposes (the Supreme Court's Sheehan decision allowed coverage where a subcontractor's defective work damaged other property), even though the cost of fixing the defective work itself is not an occurrence. The tenant's ruined inventory is classic third-party property damage: sudden, unintended from the insured's standpoint, and outside the work.
The $22,000 seam repair - excluded. Two exclusions operate:
- The 'particular part of property that must be restored, repaired, or replaced because your work was incorrectly performed on it' exclusion; and
- The 'damage to your work' exclusion, which removes the cost of repairing or replacing the insured's own faulty workmanship.
Critically, the 'damage to your work' exclusion contains a subcontractor exception - it does not apply if the damaged work was performed on the insured's behalf by a subcontractor. Ridgeline's own crew installed this roof, so the exception is unavailable. Repairing your own defective work is a business risk to be priced into the job, not an insured accident.
One more consequence: the roof was completed in April and failed in September, so the loss sits in the products-completed operations hazard.
2. Assuming the inventory loss is covered, show how the two occurrences affect the aggregates and state the maximum the carrier pays in total.
Read the worked answer
March occurrence (dropped bundle, premises/operations). $30,000 HVAC unit - $10,000 deductible = $20,000 paid. The general aggregate drops from $2,000,000 to $1,980,000.
September occurrence (seam failure, products-completed operations). $85,000 inventory - $10,000 deductible = $75,000 paid. The products-completed operations aggregate drops from $2,000,000 to $1,925,000. The general aggregate is untouched by this one; the two aggregates are separate buckets.
Total paid: $95,000. The $22,000 seam repair adds nothing.
Points an adjuster should flag:
- Each occurrence carries its own deductible, so two small losses cost the insured $20,000 in retained loss - more than 20% of the total paid out. That is worth discussing at renewal.
- Neither the $1,000,000 per-occurrence limit nor either aggregate is close to exhaustion, so the limits are not the issue; coverage is.
- A single occurrence with multiple claimants would be analyzed differently, but here the two events share no common cause.
3. The carrier wants to deny the September claim outright for late notice. Evaluate that position under Indiana law and describe how the file should be handled.
Read the worked answer
Indiana follows a notice-prejudice rule. An insurer may not deny a first-party or liability claim solely because notice was late unless the delay caused actual, material prejudice - typically lost evidence, vanished witnesses, an opportunity to investigate that is gone, or a default judgment entered before the carrier could act. Prejudice is the carrier's burden to establish.
Application. On these facts the carrier has already completed its investigation and cannot identify lost evidence. The tenant's inventory loss can still be evaluated, the failed seam can still be inspected (or was, before repair), and the amount is modest. An outright denial would not survive a challenge, and a bad-faith exposure would be created where none needs to exist.
How to handle the file:
- Issue a reservation of rights referencing late notice and the cooperation condition while the investigation continues.
- Document the prejudice analysis in writing - what was lost, if anything.
- Pay the covered portion (the inventory) and explain the denial of the seam repair on the workmanship exclusions, which is a secure basis for denial.
- Remind the insured of the notice condition going forward; a second late-reported claim with real prejudice could change the outcome.
Late notice is a defense to preserve, not a shortcut to a denial.