CGL Policy Coverage for Rip and Tear Costs

General contractors are all too familiar with the limitations in a CGL policy relating to defective work. Those limitations exclude coverage for costs associated with damage caused by “your work.” There is a limited exception to the “your work” exclusion in some CGL policies that affords coverage for damage to other work caused by defective work performed by subcontractors (the “Subcontractor Exception”).  Regardless, there is no coverage for the costs of correcting the defective work itself – only for damage to other work caused by the defective work.

Water intrusion situations provide good examples of how this coverage works. A subcontractor’s defective installation of windows may result in water damage to carpet and drywall work performed by other subcontractors. A general contractor’s CGL policy may cover the cost of repairing the carpet and drywall under the Subcontractor Exception. However, the cost of correcting the defective window installation is normally not covered by the CGL policy.

One question that sometimes arises is whether a CGL policy covers the cost of tearing out and reinstalling undamaged work required to facilitate the repair of the defective work (“rip and tear costs”).  Few courts have expressly addressed this issue, and those that have are split on the coverage question.  Some courts consider the rip and tear costs as part of the cost of correcting the defective work itself and, therefore, recoverable under the policy. See, e.g., Desert Mountain Prop. Ltd. P’ship v. Liberty Mut. Fire Ins. Co., 236 P.3d 421 (Az. App. 2010) (finding the cost of removing and repairing non-defective flooring to correct defectively compacted soil is non-recoverable damage).  Other courts consider the ripping and tearing to be damage to other work that results from the defective work so that it is recoverable under the policy.  See, e.g., Dewitt Constr. Co. v. Charter Oak Fire Ins. Co., 307 F.3d 1127 (9th Cir. 2002) (finding the cost to demolish non-defective pile caps installed atop defective piles was recoverable property damage).

For more information on CGL Coverage, contact your Construction Law Counsel at Smith, Gambrell & Russell.

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