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New Hampshire Holds “Your Work” Exclusion Does Not Bar Coverage for Resulting Damage to Non-Defective Work on Condominium Units

Blogs, Insurance Coverage

On June 17, 2014, the New Hampshire Supreme Court held that the “Your Work” exclusion in a commercial general liability (“CGL”) insurance policy barred coverage for property damage to defectively constructed portions of condominium units, yet did not bar coverage for damage to the portions of those units that were not defectively constructed but were damaged as a result of the builder’s defective work. Cogswell Farm Condominium Association v. Tower Group, Inc., No. 2013-568 (N.H. Jan. 13, 2015).

Cogswell Farm Condominium Association (“Cogswell”) sued Lemery Building Company, Inc. (“Lemery”) alleging negligence, breach of contract, and negligent supervision in the construction of condominium units. Essentially, Cogswell asserted that the “weather barrier” components of the units, including the water/ice shield, flashing, siding, and vapor barrier, were defectively constructed by Lemery and resulted in damage to the units due to water leaks. Cogswell also filed a declaratory judgment action against Lemery’s two successive CGL insurers, Tower Group, Inc. and Acadia Insurance Company (collectively “the Insurers”) seeking a declaration that its claims against Lemery were covered under the policies.

Following a complicated procedural history, the trial court ultimately held that the policies excluded coverage for Cogswell’s negligence claim against Lemery, and, specifically, that Exclusion J(6), commonly referred to as the “Your Work” exclusion, barred coverage for property damage to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘[Lemery’s] work’ was incorrectly performed on it.” 

On appeal, Cogswell argued, among other things, that the trial court erred in determining 
that the “Your Work” exclusion barred coverage for the resulting damage to the units because the exclusion does not apply to property damage included in the products-completed operation hazard, which provides coverage for property damage that occurs when all of the work called for in the builders’ contract has been completed or when that part of the work done at a job site has been put to its intended use. The Insurers countered that the exclusion can be reasonably read broadly to exclude coverage for all damage to the builder’s work product caused by the builder’s defective work. Under this reading, the Insurers asserted, coverage would be precluded for all damage resulting from Lemery’s defective work.

The New Hampshire Supreme Court, after recognizing a split in authority amongst jurisdictions interpreting the “Your Work” exclusion, held that the exclusion is subject to more than one reasonable interpretation, one of which provides coverage, and thus, must be construed against the Insurers. Consequently, the court held that Exclusion J(6) barred coverage for the defectively constructed weather barriers themselves, but did not bar coverage for damage to those portions of the units that were not defective but only damaged as a result of the defective weather barriers.