8.7.3 Exclusion j(6) - Property Damage for Incorrect Work Performed by the Insured

• Jurisdiction: Arizona

Exclusion j(6) does not apply to any property damage included in the product's completed operations hazard. Put another way, in order for the exclusion to apply, the insured's work had to be completed or abandoned prior to the damage. If the insured had not completed all its work when the damage occurred, then the completed operations hazard exception to the exclusion would not be applicable to prevent coverage.

It is the insured's burden of proof to demonstrate that the completed operations hazard exception to Exclusion j(6) applies. When a policy contains an exception within an exception, the insurer need not negate the internal exception; rather, the insured must now show that the exception from the exemption from liability applies.^[383] Thus, once the insurance company makes a prima facie showing that no coverage exists because Exclusion j(6) applies, the burden shifts to the insured to show that the exception to the exclusion applies, that is, the work was not abandoned or completed.

The second business risk exclusion is j(6), which provides that the policy does not cover property damage to "[t]hat particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it." "Your work" is defined by the policies as "[w]ork or operations performed by you or on your behalf" and "[m]aterials, parts or equipment furnished in connection with such work or operations" and includes "[w]arranties or representations made at any time with respect to the fitness, quality, durability, performance or use of 'your work.'"

This type of exclusion has been addressed by the arizona courts on one occasion. In Continental Insurance Company v. Asarco, Inc.,^[384] the insured construction company entered into a contract with asarco to assemble bents and trusses, which had been purchased by Asarco, for a conveyor belt at one of Asarco's mines.^[385] The bents and trusses making up the conveyor belt structure were negligently assembled by the insured, causing them to collapse and damaging the bents and trusses as well as a pre-existing structure to which the conveyor belt assembly had been attached. The construction company's insurer brought a declaratory judgment action to determine the application of an exclusion similar to j(6).^[386]

The Arizona Court of Appeals observed that the faulty workmanship related to the assembly of the conveyor belt structure. However, the court stated that there was no faulty workmanship on...