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New York Court of Appeals Holds that Construction Crane Falls within Contractor’s Tools Exclusion

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Lend Lease (US) Construction LMB Inc., et al. v. Zurich American Ins. Co., et al., 28 N.Y.3d 675 (2017). The New York Court of Appeals held a damaged crane fell within a Contractor’s Tools Exclusion, and that the breadth of that Exclusion did not render the coverage provided for temporary works illusory. The insured had a crane that rose 750 feet from its base installed on the 20th floor of their construction site. High winds from Superstorm Sandy weakened the metal, causing the boom to teeter and collapse. The insured sought a declaration that the crane was covered. The court concluded the crane might have been covered initially as a “temporary structure” that was “incidental to the project,” although there was a factual question about whether it was disclosed as part of the “total project value.” However, the court ultimately held there was no coverage because of the Contractor’s Tools Exclusion, which states “the Policy does not insure against loss or damage to … Contractor’s tools, machinery … and property of a similar nature not destined to become a permanent part of the INSURED PROJECT.” The court found that the crane fell squarely within the definition of “machinery.”

The insured argued the Contractor’s Tools Exclusion was overly broad and rendered the coverage for temporary works illusory. The court disagreed, finding that the Exclusion did not “swallow the policy.” It said the Exclusion “does not defeat all of the coverage afforded under the policy’s temporary works provision” (emphasis by the court), pointing to examples such as scaffolding, shoring and fences which are not “tools” within the meaning of the Exclusion.