| Q&A of the Week |
Television Damaged during Testing
A Georgia subscriber recently asked the following question:
I have an insured (subcontractor) who has set up a number of electronics to test the system as part of his work. He is supposed to set it up and test it prior to the contractor taking it and installing it at its final location. The insured sets everything up and allows it to run for approximately two hours. A large 55 inch display was set up using the box's styrofoam base as a base for the display. The box was taken off, and the TV was left in the bottom of the styrofoam as the tests were run. The display fell over during the testing period. The insured was in the room with the display and saw it fall over. The insured was not handling the display at the time it fell over. Does this qualify as being in the insured's care, custody, or control?
ANSWER: Exclusion J.(4) precludes coverage for property damage to personal property in the care, custody, or control of the insured.
A TV is personal property (as opposed to real property). Here, the insured was performing operations on the TV via the electronic test systems when the TV fell from its stand during the testing period. Even though the insured was not physically handling the TV when it was damaged, the insured was performing operations on it.
From the facts you've given, we assume the tests were being conducted at insured's premises and that the TV was in the insured's possession until it would be installed at its final location. Thus, the care, custody, or control exclusion is going to apply to the damage to the TV. |
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| Litigation Watch |
No "Occurrence" When Damage to "Work"
Poor workmanship that causes damage to itself is invariably uninsurable. Liability insurance is intended only to provide coverage for damage to persons or property caused by the insured to others or the property of others. In Nautilus Ins. Co. v. Board of Directors of Regal Lofts Condominium Ass'n, No. 12–1821, 2014 WL 4100701 (C.A.7 [Ill.]Aug. 21, 2014) a condominium board, Regal Lofts Condominium Association, appealed the grant of summary judgment in a declaratory judgment action filed by Nautilus Insurance Company. The condominium board argued that water damage to individual units, the product of poor construction by the developer, should be covered by policies issued to the developer by the Nautilus.
In 1998, a group of individuals and corporations formed a limited liability company, 1735 W. Diversey, LLC (the Developer), to renovate a vacant building in Chicago. (Among those who formed the Developer were individuals Ronald Shipka, Sr., Ronald Shipka, Jr., and John Shipka, who were also named as insureds in the Developer's various insurance policies (collectively referred to as the Developer.)
The Developer intended to convert a vacant building into a condominium called the Regal Lofts. It did so, completely gutting the five-story building and refitting it with residential units. In connection with this renovation, the Developer purchased two commercial lines policies from Nautilus Insurance Company. The first policy covered the period from June 1998 through June 1999, and the second, June 1999 to June 2000. The two insurance policies in question, identical for all purposes of this litigation, cover bodily injury and property damage liability.
The policies contain three exclusions that are relevant to this matter. First, the policies exclude property damage to "that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations." Another exclusion takes out of the scope of 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." Lastly, both policies contain an endorsement entitled "Exclusion–Products–Completed Operations Hazard." As the name may suggest, this endorsement provides that "[t]his insurance does not apply to 'bodily injury' or 'property damage' included within the 'products-completed operations hazard,' "a term that is structured slightly differently in the two policies, despite reflecting identical content." Both policies define that the exclusion encompasses "all 'bodily injury' and 'property damage' occurring away from premises you own or rent and arising out of your product' or 'your work' except: (1) Products that are still in your physical possession; or (2) Work that has not yet been completed or abandoned." |
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