Policy Language Excludes Coverage For Damage To Homes Caused By Insured's Subcontractor
WESTFIELD INSURANCE COMPANY V. SHEEHAN CONSTRUCTION COMPANY (APRIL 29, 2009)
Several home owners in the same subdivision began to notice water damage in their new homes. Litigation ensued against the general contractor, Sheehan Construction Co. Although the problem was traced to one of Sheehan's subcontractors, Sheehan settled the litigation for nearly $3 million. Sheehan is ensured by Westfield Insurance Co. under a general liability policy. Sheehan brought an action against Westfield for indemnity. The district court granted judgment to Westfield. Sheehan appeals.
In their opinion, Chief Judge Easterbrook and Judges Wood and Williams affirmed. Westfield's policy excluded damage to "your work” if it was included in the "products-completed operations hazard." "Your work" is defined in the policy to include work performed by Sheehan or on its behalf. Although the Court recognized that the standard form policy was changed in 1986 to exclude a subcontractor’s work from the "your work" exclusion, it noted that Sheehan's policy did not contain the newer language. With respect to the "products-completed operations hazard" requirement, the Court also looked to the policy definition and concluded that the term was designed so that it covered accidents that occurred during construction but did not cover poor workmanship in a completed house. The Court concluded that the "your work" exclusion directly addressed the homeowners’ harm at issue and resulted in non-coverage.
