“Your Work” and “Your Product” Exclusions

This question concerns ISO form CG 00 01 10 01; exclusions for Property Damage arising out of “your work” or operations. The policyholder was hired to replace a heat exchanger on an HVAC system. The procedure required the insured to disconnect some hoses in which caustic materials flowed. Also, to access the heat exchanger the policyholder's employee had to move the AC coil though he did not have to remove it in full. The employee completed the installation of the heat exchanger. He reconnected the hoses, but did so improperly, causing the caustic material in the hose to leak onto the A/C coil. The corrosion required replacement of the A/C coil.

Is either exclusion J (5) or exclusion K triggered for the damage to the A/C coil?

Georgia Subscriber

Exclusion k. would not be triggered because exclusion k. excludes “property damage” to “your product” arising out of it or any part of it. “Your product” is defined, in part, as “a. Any goods or products, other than real property, manufactured, sold, handled, distributed, or disposed of by . . .” (emphasis added).

In your scenario, the HVAC system had already been installed when the damage occurred. Once the HVAC system is installed, it becomes real property. Therefore, exclusion k. does not void coverage for the a/c coil.

As for exclusion j. (5), it excludes “that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations” (emphasis added). Because the installation of the heat exchanger had already been completed when the damage to the a/c coil occurred, the insured was not “performing operations” at the time of the loss and j. (5) would not apply.

However, there is another exclusion to consider. For the same reason j. (5) was not applicable, exclusion l. would be. That is, because the insured had already completed the installation of the heat exchanger when the damage occurred, i.e. it is a completed operations claim. Thus, the only exclusion that would apply is exclusion l., which eliminates coverage for: “property damage” to “your work” arising out of any part of it and included in the “products-completed operations hazard.” 

The policy defines “your work” as “a. Work or operations performed by you or on your behalf; and b. Materials, parts or equipment furnished in connection with such work or operation. 'Your work' includes: a. Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of 'your work'; and b. The providing of or failure to provide warnings or instructions.”

Therefore, for CGL purposes, the a/c coil is part of the insured's work because he had to move it in order to replace the heat exchanger. And, because it was the insured's improper reconnection of the hoses that caused the damage to the coil (his work), the damage to that work would be excluded. Therefore, the damage to the a/c coil would be excluded by exclusion l.