EAPD attorneys recently obtained dismissal of a declaratory judgment action seeking coverage under a commercial general liability (“CGL”) policy for the cost of repairing poorly finished concrete. KBE Building Corp. v. American Home Assurance Co., No. 10-C-0012 (N.H. Super. Ct. May 25, 2010).

According to the Complaint, the insured contracted with Wal-Mart to build a new store in Gorham, NH. The insured subcontracted the cement flatwork to a subcontractor. The subcontractor failed to properly finish the concrete slab, “resulting in a soft, easily abraded surface.” As the general contractor, the insured was responsible for the alleged $200,000 cost of repairing the slab. The insured then sought indemnification for these costs under a CGL policy issued by the defendant insurer.

The insurer, represented by EAPD attorneys, moved to dismiss. The insurer argued that faulty work, such as the poorly finished slab, cannot be a covered “occurrence,” does not constitute “property damage,” and is excluded from coverage. The insured responded that because the concrete slab “broke,” there was “property damage,” which can be covered regardless of whether the “damage” consisted of faulty work.

The court granted the insurer’s motion to dismiss, finding that no “property damage” caused by an “occurrence” was alleged. The court noted that the insured was “not actually seeking damages for injury to property; instead, it is seeking damages for the cost of repairing work of inferior quality.” The court further found that, even if the repair of the slab constituted “property damage” caused by an “occurrence,” coverage would be unambiguously excluded. Specifically, the “damage to property” exclusion would apply to exclude damage to “that particular part of real property on which you or any contractors or subcontracts working directly or indirectly on your behalf are performing operations,” as well as “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”

The court observed that its holding of no coverage was consistent with the established principle that CGL policies do not insure against faulty workmanship.