8.7.4 Exclusion (l) - Property Damage to Work Performed by Insured

• Jurisdiction: Arizona

Exclusion (l) excludes from coverage any property damage to work performed by the insured arising out of its work.^[389] This exclusion excludes coverage for damages incurred in connection with the repair or replacement of the insured's own defective work or work product.^[390] It does not, however, exclude from coverage damages for injury to persons or other property.^[391] This exclusionary language has been found to be unambiguous.^[392]

In the construction defect context, where damage is solely to the insured's work, the "your work" exclusion would apply to preclude coverage. Pursuant to the "your work" exclusion, the policy provides that there is no coverage for "'[P]roperty damage' to 'your work' arising out of it or any part of it and included in the 'products-completed operations hazard.'" Courts around the country have uniformly observed that the purpose of this exclusion is similar to the reasoning discussed above in relation to faulty workmanship not constituting property damage caused by an occurrence. It has been observed:

Generally speaking, the "your work" exclusions, . . . operate to prevent liability policies from insuring against an insured's own faulty workmanship, which is a normal risk associated with operating a business. . . . Essentially, the rationale behind the "your work" exclusions is that they discourage careless work by making contractors pay for losses caused by their own defective work, while preventing liability insurance from becoming a performance bond.^[393]

Accordingly, where all that is being claimed is damage to the work of the insured caused by the work of the insured, the "your work" exclusion will apply to preclude coverage under the policy.^[394]

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Notes:

[389]Southwest Forest Indus., Inc. v. Pole Bldgs., Inc., 478 F.2d 185 (9th Cir. 1973) (exclusion providing that insurance did not apply to property damage to work by or on behalf of named insured arising out of work or materials furnished in connection therewith, excluded coverage for damage to insured's work product resulting from inherent defect and, therefore, insurer was not liable for damages resulting from collapse of roof on completed building after heavy snowfall); Uhock v. Sleitweiler, 778 P.2d 359 (Kan. Ct. App. 1988) ("exterminator's general liability policy provides coverage only if insured's work or product actively malfunctioned, causing injury to an individual or damage to another's property. It is not a performance bond or guarantee of contract...