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NY Court Enforces Exclusion for Damage to 'Particular Part' of Property on Which Insured Worked
Insurance Law Update
New York Appellate Division
In J. Lucarelli & Sons, Inc. v. Mountain Valley Indem. Co., 881 N.Y.S.2d 708 (N.Y. App. Div. July 2, 2009), the New York Appellate Division, Third Department, applied a commercial general liability policy exclusion barring coverage for property damage arising from the insured’s “work” where the claims against the insured excavation contractor were based on allegations that homes were built at an insufficient elevation.
Specifically, the homeowners alleged that their homes were built below the seasonal high groundwater elevation, and accused the excavation contractor of breach of contract and breach of New York's statutory housing merchant warranty. The court ruled that the homeowners’ claims fell within the work-product exclusion, which included damages to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” The court noted that the definition of “your work” under the policy also included “warranties and representations” regarding the work.
The court concluded that the exclusion applied because the homeowners’ claims arose out of the excavation work performed by the insured and sought damages for faulty workmanship. Furthermore, the court held that enforcement of the exclusion was consistent with the purpose of commercial general liability policies, which provide coverage for tort liability for physical damage to third parties, but not for contractual liability for economic loss caused by the insured’s product being less than what was bargained for.
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