Insurance – CGL – Exclusions – ‘Your Work’ & Products Completed Operations Hazard – Zoning – Incorrect Permits – Loss of Use

Walde v. Association Insurance Co. (Lawyers Weekly No. 011-170-12, 14 pp.) (Paula H. Thomas, J.) Appealed from Aiken County Circuit Court (Edgar W. Dickson, J.) S.C. App.

Holding: The plaintiff-homeowners alleged that their contractor failed to obtain the correct permits and that, as a consequence, their barn had to be partially torn down, resulting in a loss of use. The contractor’s insurer was not required to defend or indemnify the contractor against the homeowners’ claims because their claims fall within the “your work” exclusion in the contractor’s commercial general liability policy.

We reverse summary judgment for the homeowners.

The homeowners claim loss of use of their property arising out of the contractor’s incorrectly performed obligations to advise them and obtain the necessary approval from the Aiken Board of Zoning Appeals to build the desired barn on their property. The loss of use is deemed to have happened at the time of those incorrect performances. Therefore, the alleged loss of use happened before the contractor’s work was complete.

Because the homeowners have alleged “property damage” not included in the policy’s products-completed operations hazard, the policy indicates the homeowners’ claims would be excluded from coverage under the “your work” exclusion (provision A.2(j)(6)) if they claimed “property damage” to “that particular part of property that must be … replaced because ‘your work’ was incorrectly performed on it.”

In this case, A.2(j)(6) precludes coverage. The homeowners have alleged that they lost use of their newly constructed barn while they were required to tear down and place a new roof on its structure to comply with the town’s height regulations because of the contractor’s defective work. In other words, the homeowners have alleged property damage to that particular part of property that must be replaced because the contractor’s permitting work was incorrectly performed on it.

Reversed.