The Ninth Circuit, applying California law, affirmed the district court's decision finding there was no coverage for construction defects. Archer W. Contractors v. Nat'l Union Fire Ins. Co., 2017 U.S. App. LEXIS 3796 (9th Cir. March 2, 2017).
Archer Western Contractors (AWC) was the general contractor for the San Diego County Water Authority's emergency water storage project. The pump house and turbine generators suffered property damage. The damage flowed from AWC's allegedly defective work on the property.
After settling a construction defect lawsuit brought against it by the Water Authority, AWC filed this case against National Union for failing to indemnity portions of the settlement agreement.
The district court granted summary judgment to National Union based upon two exclusions. Exclusion e (5) precluded coverage for property damage to "that particular part of real property on which [the contractor] . . . [is] performing operations, if the Property Damage arises out of those operation." Exclusion e (6) barred coverage for property damage to "that particular part of any property that must be restored, repaired or replaced because [the contractor's] Work was incorrectly performed on it."
California courts had consistently adopted broad interpretations of the phrases "that particular part" and "arises out of" when applied to the general contractor. California courts had construed "that particular part" to encompass the entire project on which a general contractor was performing operations. Therefore, the district court properly determined that the two exclusions precluded coverage and appropriately granted summary judgment to National Union.