General Contractor, Defective Decking, and a Welding Subcontractor

Is there an occurrence? The policy defines occurrence as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Faulty workmanship standing alone is generally not an occurrence because it is not damage caused by an accident. The analysis changes when the defective work causes damage to other property - the collapse is the accident, and the resulting physical damage to the owner's fixtures is property damage neither expected nor intended. Jurisdictions differ sharply on this, so the answer rests on the exclusions rather than on a bare occurrence argument.

The $80,000 to redo the decking - excluded.

• 'Damage to your work' excludes property damage to that part of real property on which the insured or a subcontractor is performing operations, if the property damage arises out of those operations, and includes the cost of repairing or replacing the insured's own defective work.
• The decking is Kestrel's own work product; the cost to remove and reinstall it, including the access and re-roofing needed to get to it, is not covered. No CGL policy is a performance bond.

The $300,000 of the owner's stored fixtures - covered.

• The fixtures are tangible property other than the insured's work. Physical damage to them is direct property damage.
• The 'impaired property' exclusion does not defeat this. That exclusion is aimed at loss of use of property that has not been physically damaged and can be restored by repairing or replacing the insured's work - for example, a building that cannot be occupied until the decking is fixed. Physically destroyed fixtures are not 'impaired property.'
• The 'your product' exclusion does not apply; the fixtures are not Kestrel's product.

Which aggregate applies. Because the collapse occurred eight months after completion, the claim falls in the products-completed operations hazard and erodes the $2,000,000 products-completed operations aggregate, not the general aggregate. Each occurrence limit is $1,000,000, so $300,000 fits.

Defense. The carrier defends the whole suit - the covered fixture claim and the uncovered decking claim are in the same lawsuit, and the duty to defend is broader than the duty to indemnify. Expect a reservation-of-rights letter and allocation of defense costs between covered and uncovered claims.

Start with the exclusion. 'Damage to your work' excludes property damage to 'your work,' and 'your work' is defined to include work performed by or on behalf of the insured - so a subcontractor's installed work counts as the general contractor's work for purposes of the exclusion. That is the trap; read literally, the whole $150,000 looks excluded.

Then apply the subcontractor exception. The standard occurrence form restores coverage for damage to property other than the subcontractor's own work, when the damage arises out of work a subcontractor performed on the insured's behalf. So:

• Building damage (structural, finishes, insulation beyond the sub's scope) caused by the welding sub's sparks: property other than the subcontractor's work → covered, subject to the $1,000,000 occurrence limit and the general aggregate (this is an ongoing-operations loss, so the general aggregate applies).
• The ductwork the same subcontractor had just installed: that is the subcontractor's own work, and the exception expressly does not restore damage to it. Excluded.

The practical judgment. The $150,000 must be broken into its two components on the adjuster's worksheet, and the split drives the payment. Expect the insured to argue the ductwork is 'other property' because it was fabricated off-site and delivered - but once installed by the subcontractor in performance of its scope, it is that subcontractor's work.

Common misconception to avoid: the exception does not require the subcontractor to carry its own insurance in the standard form; that condition appears only in some manuscript or carrier-specific endorsements. Check the form before denying on the ground that the sub was uninsured.

Also check: if the same welding sub's work also damaged its own other materials, and if there is a $5,000 or $10,000 'damage to your work' sublimit for such repair costs in the endorsement schedule, apply that rather than simply paying zero.

No. A certificate of insurance is evidence, not coverage. It is issued for informational purposes, typically says so on its face, and confers no rights on the certificate holder. Additional insured status exists only if an endorsement attached to the policy grants it.

What the endorsement would have done.

• The ISO additional insured endorsements are scoped: the ongoing-operations version covers liability arising out of the named insured's operations and the insured's acts or omissions in connection with its general supervision of those operations; the completed-operations version is a separate endorsement and must be attached separately.
• If the loss here is a completed-operations claim, the ongoing-operations endorsement alone would not help the owner. This is the single most common additional insured dispute.
• Endorsements are also limited by their own exclusions (usually the same 'your work' problems) and by the contract's insurance requirements, which frequently demand primary and non-contributory wording - another separate endorsement.

What responds to Kestrel's failure:

1. Kestrel's contractual liability coverage. If the lease is an 'insured contract' - Kestrel assumed the tort liability of the owner in a business contract - the CGL can respond to Kestrel's own liability for that assumed obligation. That does not make the owner an insured and does not give the owner a direct right against Kestrel's carrier; it defends and indemnifies Kestrel.
2. Kestrel's own funds. Breach of the lease's insurance requirement is a contract claim by the owner, potentially outside the CGL's definition of damages because it looks like a cost to cure a contractual failure rather than damages because of property damage.
3. The owner's own property/liability insurer, which will pay and then subrogate against Kestrel, which is the outcome the lease's insurance clause existed to prevent.

Prevention for the agent and contractor: do not issue a certificate showing additional insured status unless the endorsement is issued and identified by form number; keep the endorsement in the file; and confirm that completed-operations status is granted when the contract requires it.