New Jersey Subscriber

A

It seems doubtful that coverage applies in this situation for a couple of reasons.

Before we discuss those, however, we must review several issues.

·Is the carpet real or personal property?

·Based on the type of property, which exclusions would apply?

·How much of the property qualifies as the “particular part of any property” that was actually being worked on at the time of the loss?

In regard to the first item, we look to the commercial property form for guidance. The CP 00 10 10 00 form includes as business personal property a tenant's use interest in improvements and betterments that are made a part of the building or structure the tenant occupies but does not own, which the tenant installed at his own expense but cannot legally remove. Wall-to-wall carpeting may fit this description if the owner of the carpet is a tenant and had it installed at his own expense.

However, if the building owner installed the carpeting, it is considered real property. The items listed as real property on the commercial property form are “personal property installed by the insured . . . including floor coverings.”

Since the damage was discovered during the process of cleaning, and not after the cleaning was finished, we need to review exclusion j., damage to property, on the insured cleaning company's CGL policy.

Personal Property Exclusion

If the carpeting is personal property, exclusion j. (4), personal property in the care, custody, or control of the insured, would apply. Since the carpeting was under the control of the employee actually doing the cleaning, coverage would be voided for that employee. However, since the exclusion applies to “the insured” having control of the personal property, coverage should be in place for the named insured cleaning company—as long as the employee and say, a sole proprietor owner of the company, were not one and the same party.

Real Property Exclusion

However, if the carpet is real property, coverage would be excluded by virtue of exclusion j. (5), which states there is no coverage for the “particular part” of real property that is damaged by work being done by the named insured or his subcontractors. The named insured (“you” in the CGL exclusion) would be excluded from coverage if the cleaning contract were with that entity. The “particular part” of the carpet that was damaged thus would be excluded, but it would be difficult to separate the entire carpet from just one spot that was damaged, especially since the entire carpet was being cleaned. Therefore, it appears that, if the carpet is real property, there is no coverage.

Any Property Exclusion

Exclusion j. (6), which applies to both real and personal property, causes a similar problem as that of j. (5). It excludes coverage for the “particular part” of any property that must be restored or replaced because the insured incorrectly performed work on it. This is considered faulty workmanship and is not insurable. Since the carpet is all one piece, it would be difficult to carve out the portion that was actually damaged and consider it separately from the rest of the carpet.

Therefore, the question becomes what is the “particular part” of the property that must be restored, repaired, or replaced because of faulty workmanship and thus is not covered?

Based on these factors, the best that could be expected—regardless of whether the carpet is real or personal property—would be that the cost to repair the actual damaged section would be excluded but the rest of the carpet would be covered. Even this is very tenuous, however, if the cleaning company was contracted to clean the entire carpet and not just the one section that was damaged. It would be very difficult to separate the “particular part” that was damaged from the entire carpet cleaning job.