The court rejected the insurer's arguments that the business risk exclusions barred coverage for a contractor. Gen. Cas. Co. of Wisconsin v. Five Star Bldg. Corp., 2013 U.S. Dist. LEXIS 134122 (D. Mass. Sept. 19, 2013).
Five Star was hired by the University of Massachusetts to upgrade the ventilation (HVAC) system on a portion of a building. The large majority of the work involved work in the interior of the building, but a small portion required installation of duct work and supports on top of the roof of the complex. Five Star also penetrated the roof at numerous locations to install supports for duct work and other rooftop structures for the ventilation system. Other subcontractors then secured supports to the concrete roof deck and installed permanent patches where Five Star had penetrated the roofing system.
On same days, Five Star could not accomplish the process in a single day after penetrating the roof. It would install temporary patches until the next day. This was the only work on the roof performed by Five Star.
A heavy rain one evening caused Five Star's temporary patches to fail. Rainwater penetrated the roof membrane and caused the insulation to become saturated. Rainwater also caused damage to the interior of the building and its contents. The insurer provided coverage for the damage to the interior and contents of the building, but denied coverage for damage to the roofing system.
The insurer first contended there was no "occurrence." Some Massachusetts courts had held that faulty workmanship could not constitute an occurrence. The court agreed with Five Star, however, that the occurrence was the torrential rainstorm which led to leaking.
The insurer then argued that exclusion (2) (j) (5) precluded coverage. The provision excluded coverage for "'property damage' . . . to that particular part of real property on which you . . . are performing operations, if the 'property damage' arises out of those operations." The insurer argued that the entire roof was the "particular part" on which Five Star was working. The court disagreed. Five Star was not hired to replace or repair the roof. It was required to puncture holes in the roof, but this work was incidental to the replacement of the HVAC system. Therefore, the exclusion was not applicable.
Next, the insurer relied upon exclusion (2) (j) (6), which excluded from coverage "'property damage' to . . . that particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it." Five Star introduced evidence demonstrating that penetration of building surfaces was common practice when installing HVAC systems. The insurer failed to show how Five Star's workmanship fell below a reasonable standard of care.
Therefore, the insurer's motion for summary judgment was denied. The court granted Five Star's motion for summary judgment based upon the insurer's breach of contract.