Damage to Property Exclusion Applies to Undamaged Flooring?

Our insured is a flooring subcontractor who installs hardwood floors. While in the process of nailing down a hardwood floor recently, the insured punctured radiant heat pipes and this caused extensive water damage to the premises. The hardwood floor itself was not damaged, but it has to be removed in order to repair the water damage and damage done to the pipe. Is the cost of removing and replacing the undamaged wood flooring covered under the insured's CGL form?

Ohio Subscriber

This is an interesting question. On the one hand, the property damage liability would seem to include the cost of tearing up and replacing the wood flooring since the damaged property cannot be fixed without tearing up the flooring. And yet, on the other hand, exclusion j(5) on the CGL form says that there is no coverage for property damage (this includes loss of use of tangible property that is not physically injured) to that particular part of real property on which the insured is performing operations if the property damage arises out of those operations.

The insured's work damaged someone else's property (the pipe and other property damaged by the water), and that is covered under the CGL form. But, the property damage to the flooring arose out of the insured's operations while he was working on the flooring; there definitely was property damage to the part of real property on which the insured was working and it arose out of the insured's operations. So, the cost of tearing up the flooring and replacing it should not be covered by the insured's CGL form because of exclusion j(5). This cost may be a part of the total amount necessary to repair the covered loss to the pipe and other items damaged by water, a loss for which the insured is liable. But, this cost is clearly excluded by the CGL form.

It should be relatively easy to separate this cost from the total cost of repair. That way, the insured's CGL coverage will pay the property damage for which the insured is liable, and the exclusion will be properly applied.

 

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