South Carolina Court Rules on ‘Your Work’ Exclusion

Recently, the South Carolina Court of Appeals in Precision Walls, Inc. v. Liberty Mutual Fire Ins. Co., 410 S.C. 175, 763 S.E.2d 598 (Ct. App. 2014), reh’g denied (Oct. 23, 2014), held that the cost to tear down and re-build a brick veneer to replace defective tape used to seal specified joints, was not covered by the subcontractor’s commercial general liability (CGL) policy.

In Precision Walls, the insured subcontractor, Precision, used seam and seal tape manufactured by Berry Plastics to tape and seal the joints of the building being constructed. Precision completed its installation of the insulation. After the installation by Precision, another subcontractor began constructing a brick veneer exterior wall over the insulation.

Prior to the completion of the brick wall, the general contractor observed that the tape Precision had used to seal the joints was losing adhesion and coming loose. As a result of this defective condition, the general contractor advised Precision that it was not in compliance with its subcontract to provide sealed joints.

Following notification to Precision of the noncompliance, the general contractor then required the masonry subcontractor to remove the portion of the brick wall then in place and to build a new wall once Precision removed the existing tape and sealed the joint with new tape in compliance with the subcontract. The general contractor then deducted the cost of tearing down and rebuilding the brick veneer wall from Precision’s contract.

Precision submitted the claim to its CGL insurer, Liberty Mutual. Liberty Mutual denied coverage asserting that no “occurrence” had taken place and that even if an occurrence had taken place, the policy’s “your work” exclusion was applicable.

In the ensuing declaratory judgment action, the trial court held that the only lost claim by Precision was the liability it incurred when the general contractor tore down and reconstructed the otherwise damaged veneer wall for the remedial purpose of bringing Precision’s own work into compliance with its contract with the general contractor.

The court found that the loss claim by Precision did not constitute property damage as defined by the policy, and was not caused by an occurrence.

Finally, the Court found that even if the loss was covered by the policy in the first instance, the policy’s “your work” exclusion was applicable.

The South Carolina Court of Appeals found the policy “your work” exclusion to be dispositive. Liberty Mutual’s “your work” exclusion applied to property that had to be restored, repaired or replaced. The exclusion specifically included within its purview the materials furnished in connection with that work.

Because the contract between the general contractor and Precision required Precision to “correct the affected work and all costs incurred as the result of [a] breach of warranty…”, the court found that the defective tape, and all costs associated with its replacement, fell squarely within the “your work” exclusion.

Because it found that the “your work” exclusion clearly applied, the Court of Appeals did not address the trial court’s findings regarding property damage and the presence of an occurrence.

The South Carolina Court of Appeals decision is consistent with the growing number of courts that have concluded that so-called “get to” damages are not covered because of the policy’s “your work” exclusion.