Archive for September 2011

Exception to “Your Work” Exclusion Upheld Where Supplier Qualified As A Subcontractor

September 28, 2011

The United States Court of Appeals for the Sixth Circuit found that where a subcontractor provided structural backfill for a waste-water treatment facility, the “your work” exclusion in the general contractor’s insurance policy did not exclude coverage because the supplier manufactured material at their own facility and supplied materials specifically for the project, which the court held satisfied the “subcontractor exception” to the “your work” exclusion.

In Mosser Constr., Inc. v. Travelers Indemnity Co., No. 09-4449, (6th Cir. Jul. 14, 2011), Mosser Construction (Mosser) entered into a contract with the City of Port Clinton, Ohio (Port Clinton) to make improvements to their waste-water treatment facility.  Mosser served as the general contractor for the project and was required to place structural backfill beneath and around the foundation of a new odor-control building.  Mosser contracted with Gerken Materials, Inc. (Gerken) for the purchase of the specified structural backfill. 

After construction was complete, the walls of the new odor-control building began to crack.  Port Clinton alleged that the cracking was due to failure of the structural backfill beneath and around the foundation of the building.  In December 2007, Port Clinton filed suit against Mosser for property damage.

The Travelers Indemnity Company (Travelers) issued Mosser a commercial general liability (CGL) insurance policy before the start of the project.  The insurance policy established a general obligation of Travelers to defend Mosser against suits seeking damages for property damage.  The policy contained an exclusion known as the “your work” exclusion which barred coverage for damage to Mosser’s constructed work after it has been “completed or abandoned.”  The policy provided an exception to the exclusion known as the “subcontractor exception,” which provided that Travelers would provide coverage for damage to “your work” if the work was performed by a subcontractor.

Mosser sought a defense from Travelers but was denied coverage because Travelers argued that Gerken was not a subcontractor.  The court determined the definition of “subcontractor” as used in the “your work” exclusion ambiguous.  Therefore, the court had to construe the term strictly against Travelers and in favor of Mosser.  The court determined that to qualify as a subcontractor, for a material supplier who does not perform work at the site, the supplier must manufacture the material according to specifications supplied by the general contractor, and, its materials contract with the general contractor must explicitly incorporate terms from the master contract or otherwise explicitly indicate that the materials at issue are manufactured or supplied specifically for the master contract’s project.

Under the above definition Gerken qualified as a subcontractor and the “subcontractor exception” was applicable.  Gerken manufactured the materials at its own facility using its own equipment.  Gerken’s purchase order also explicitly identified Mosser’s Port Clinton project as the “job” for which Gerken supplied the aggregate.  The court therefore reversed the judgment of the district court and held that Travelers had a duty to defend against the underlying Port Clinton suit.

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