The South Carolina Supreme Court determined there was no coverage for construction defect claims based upon the policy's exlcusions. Bennett & Bennett Constr., Inc. v. Auto Owners Ins. Co., 2013 S.C. LEXIS 170 (S.C. July 17, 2013).
The general contractor was hired by a homeowner to remove synthetic stucco cladding and replace it with a decorative brick face. M&M Construction was hired to install the brick. M&M was warned not to use pressure washing or acid to clean the brick.
After M&M completed the work and left the job site, dried mortar and slurry was discovered on the face of the brick. M&M hired a subcontractor to clean the brick. The subcontractor used a pressure washer and acid solution that discolored some of the bricks and removed the decorative finish. M&M refused to correct the problem. The general contractor eventually replaced the brick face at its own expense.
The general contractor then sued M&M. M&M's insurer was given notice of the suit, but M&M did not answer or appear at the damages hearing. Default judgment was entered against M&M.
The general contractor then file suit against the insurer and M&M seeking a declaratory judgment that the policy provided coverage for the property damage. The trial court found there was no occurrence. Further, exclusions j (5) and n barred coverage.
Exclusion j (5) removed coverage for "property damage" to, "that particular party of real property on which you . . . . . . working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations." The exclusion therefore barred coverage whenever the insured or a person acting on its behalf caused damages in the course of working on the property, regardless of whether the insured's work had been completed. Consequently, Exclusion j (5) precluded coverage here for the damages caused by M&M's subcontractor while improperly cleaning the brick face.
Exclusion n also barred coverage. The exclusion stated,
Damages claimed for any loss, cost or expense . . . incured . . . for the . . . repair, replacememnt, adjustment, removal or disposal of . . . "Your work" . . . if such . . . work . . . is withdrawn . . . from use . . . because of a known or suspected defect, deficiency, inadequacy, or dangerous condition in it.
Here, the brick face was replaced because of a deficiency in its aesthetic characteristics. Accordingly, Exclusion n applied.
