Massachusetts Appeals Court holds that "your work" exclusion does not exclude damage to two layers of floor where insured contractor installed third layer

Dacon Corporation was the general contractor on the construction of Beverly Hospital, owned by Northeast Hospital Corporation (NHC). 

The first floor of the hospital consisted of three layers: a bottom vapor barrier, a concrete slab, and a top layer of tile or carpet.  Subcontractor Lampasona Concrete Corporation installed the concrete slab.  Other subcontractors installed the other two layers. 

NHC sued Dacon, alleging property damage to the finished first floor.  Dacon filed a third-party complaint against Lampasona. It alleged that Lampasona made multiple errors in installing the concrete slab, including puncturing the vapor barrier, which allowed moisture to pass through into the concrete slab,  and improperly mixing fiber reinforcement into the concrete, which contributed to moisture wicking to the surface. 

Lampasona sought coverage from its general liability insurer, All America Insurance Company.  All America asserted that five builder's risk exclusions excluded coverage. 

In All America Ins. Co. v. Lampasona Concrete Corp., 95 Mass. App. Ct. 79 (2019), the Massachusetts Appeals Court held that the trial court judge had erred in granting summary judgment to All America. It focused its analysis on exclusion j(6), which excludes damages to "that particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it."  The court held that exclusion did not apply because the damage was to the vapor barrier and top layer of the floor, not to the concrete slab installed by Lampasona. 

Massachusetts Appeals Court holds that your work exclusion does not apply to trespass damages unrelated to a contractual relationship

In a recent post I discussed Porter v. Clarendon Nat'l Ins. Co., 76 Mass. App. Ct. 655 (2010), in which insurers argued that there was no coverage for a claim that its insured had built a retaining wall and two parking lots on an abutter's property, resulting in continuing trespass.

The insurers argued that the claim was excluded by the "your work" exclusion, because it was the insured who erected the retaining wall and paved the parking spaces. The Massachusetts Appeals Court disagreed.

The exclusion excludes work for "[w]ork or operations performed by you or on your behalf." The court noted that the exclusion "operates to exclude repair or replacement costs for faulty workmanship by the insured that it has been contracted or otherwise hired to perform." The reason for the exclusion is that the general liability policies in which it is found provide coverage "for tort liability for physical damages to others and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained."

The court held:

The complaint here was not brought by someone involved in a contract or project with the insured, seeking repair or replacement costs for faulty work on the damaged property. Rather, an abutter to the insured, with no contractual or other business relationship with the insured, sought trespass damages. Consequently, the exclusion does not apply.