Limitations of Exclusion j.

A standard Commercial General Liability Policy will contain the following, or a somewhat similar exclusion

 

2. Exclusions

This insurance does not apply to:

 

1. “Property damage” to

…

(5) that particular part of real property on which you or any contractor or subcontractors working directly or indirectly on your behalf are performing operations if he property damage arises out of those operations; or

 

(6) that particular part of any property that must be restored, repaired or replaced because your work was incorrectly performed on it.

 

This exclusion would appear to exclude coverage for damage to property the Insured is working on. However, case law interpreting this exclusion has limited its application. See See Nova Cas. Co. v. Willis, 39 So.3d 434, 436–37 (Fla. 3d DCA 2010); Am. Equity Ins. Co. v. Van Ginhoven, 788 So. 2d 388 (Fla. 5th DCA 2001).

 

In Nova, the insured landscaper was hired by a private property owner to trim mangrove trees on private property. Mangroves are protected trees and the work at issue required a special permit from the Florida Department of Environmental Protection. The owner of the private property had a permit, but it contained two restrictions: 1) the mangroves could not be trimmed to a height less than 10 feet, and 2) only mangroves on the landward side of the mean high-water mark could be trimmed. The mangroves on the seaward side were owned by the State of Florida, were not owned by the private property owner, and were not authorized to be cut.

 

The landscaper trimmed the trees on the private property to the wrong height and also cut trees on neighboring State property. The Florida Department of Environmental protection brought criminal charges against the private property owner, but dropped them when the owner paid for a remediation plan to mitigate the damages to the mangroves. The owner then sued the landscaper for damages.

 

The landscaper made a claim under its CGL policy for the damage sought against it. The CGL carrier for the landscaper filed a coverage lawsuit, seeking a declaration that the damages were excluded from coverage under the policy’s j(5) and j(6) exclusions. 

 

The trial court held that the j(5) and j(6) exclusions of the CGL policy applied to bar coverage for the trees trimmed to the wrong height on the private property, because the damages were the result of faulty workmanship. However, the court held that damages due trees that were cut on the State property were covered under the policy, because cutting those trees were not part of the insured’s operations. 

 

The Third DCA agreed stating:

 

“The plain meaning of “work” and “operations” in the pertinent

 provisions has been considered by appellate courts here and in 

other states. Those terms refer to the insured contractor’s scope of work with the owner (upon whose real property the contract work is being done).” 

Id. at 436.

 

The Third DCA held that the trial court correctly differentiated between the areas which were incorrectly trimmed on the correct property (faulty workmanship, but on mangroves owned by the owner and intended to be cut as part of the “operations”) and those incorrectly trimmed on the property of a non-party to the landscaping contract. The court found that the damages to the property of the non-party to the contract were covered under the policy.

 

In  Am. Equity Ins. Co. v. Van Ginhoven, 788 So. 2d 388 (Fla. 5th DCA 2001), a contractor was hired to make repairs to certain tiles in a pool. In order to make the repairs he had to drain the pool. When he drained the pool, the pool popped causing damage to the pool and other property around the pool. The Fifth DCA held that damage to the pool itself was excluded under j.(5)-(6), because the insured was performing work on the pool when the damages occurred. However, the court held that “damage to any property that [the contractor] was not performing operations on, or incorrectly performing work on,” such as the “plumbing, electrical, deck work, patio, screen enclosure or the residence,” did not fall within the exclusion. 

 

Compare Wilshire Ins. Co. v. Birch Crest Apartments, Inc., 69 So. 3d 975 (Fla. 4th DCA 2011), where the court upheld exclusion j. In Wilshire, the insured was hired to paint an apartment complex. During the painting operations the insured splattered paint on glass doors and windows. The insured attempted to remove the paint from the windows, and during the removal efforts the insured damaged the windows. The insured’s carrier denied coverage asserting that the damages fell within exclusions j. (5)-(6).

 

The court in Wilshire agreed with the carrier. The court held that the “scope of the insured’s operations were intended to include the apartments which were being painted and would, if required, involve cleaning up surfaces which were spattered with paint. Id. at 976. Thus, the court held that the exclusions applied to bar coverage for the damage to the windows.

 

In sum, carriers and coverage counsel should be careful in analyzing the potential application of exclusion j, under the specific facts at issue.