No Coverage for Construction Defect After Work Completed

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On an underlying claim for negligent construction of a condominium project in south Mississippi, the Fifth Circuit overturned the Southern District of Mississippi’s decision to grant coverage to an additional insured.  The Fifth Circuit overturned on the grounds that the additional insured was temporally barred, by the policy’s limitation and exclusion, from doing so.

When initially declining to provide coverage to the additional insured, the insurer cited to language in the policy that limited its coverage “to liability arising out of your ongoing operations performed for that insured” and excluded coverage for any damages occurring after “all work … at the site of the covered operations has been completed.”  Although this was an occurrence based policy, the Fifth Circuit looked to state opinions on the matter and found that the limitation and exclusion were temporal rather than causal in nature.

Armed with state treatment on the matter, the Fifth Circuit then looked to the allegations of the underlying complaint.  The court did not see enough in terms of allegations to trigger a duty to defend.  The court specifically rejected the additional insured’s argument that since any non-conforming construction would have occurred during its ongoing operations, the temporal limitation was not detrimental to its claim.  In this regard, the court noted that it was “quite logical” that liability for the construction defects alleged in this matter to have arisen out of the subcontractor’s completed operations.  Since the damage alleged arose from completed operations, it was expressly excluded under the completed operations exclusion.