The West Virginia Supreme Court of Appeals found there was no coverage for the contractor's faulty workmanship in constructing a home. State of W. Virginia ex rel. Nationwide Mut. Ins. Co. v. The Honorable Ronald E. Wilson, 2015 W. Va. LEXIS 963 (W. Va. Oct. 7, 2015).
In July 2009, Fred Hlad contracted to build a home for the Nelsons and complete construction by November 2009. The Nelsons sued when the house was not timely completed. Nationwide defended under a reservation of rights, but then filed a declaratory judgment action.The circuit court denied Nationwide's request for declaratory relief, determining that the defective workmanship was an "occurrence." Nationwide petitioned the Supreme Court for a writ of prohibition.
On appeal, Nationwide argued that eight of the nine counts in the Nelsons' complaint were not caused by his defective workmanship. These allegations included breach of contract claims and intentional torts. Nationwide submitted it was not obligated to indemnify Hlad for damages that may be recovered on those counts. The court agreed that Nationwide's duty to indemnify was limited only to those claims that triggered coverage. Accordingly, Nationwide had no duty to indemnify for the eight counts alleging breach of contract and intentional torts.
The West Virginia court had previously held that defective workmanship causing property damage was an occurrence under a CGL policy. Here, the claim for defective workmanship included damages for have to replace various doors, windows, wall and lights, etc. The court agreed these damages were caused by an occurrence.
The court, however, considered the "your work" exclusion, which provided that coverage was excluded for "'property damage' to 'your work' arising out of it or any part of it . . . ." An exception provided that the exclusion did not apply if the damage work or the work out of which the damage arose was performed on the insured's behalf by a subcontractor.
Here, there was no indication that the faulty work had been performed by subcontractors. The complaint did not allege that a subcontractor performed any of the allegedly defective work. Therefore, the damages sought by the Nelsons were exclusively for Hlad's defective workmanship, not his subcontractors. Therefore, the "your work" exclusion applied to bar indemnity coverage.