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Page 478 DEFENSE COUNSEL JOURNAL–October 2012“occurrence” or damages of anytype is alleged; this exclusionalso applies to any additionalinsureds under this policy.Furthermore, no obligation to defendwill arise or be provided by us for suchexcluded claims. 32In addition, I.S.O. has made availabletwo endorsements which have the effectof deleting the subcontractor exception tothe “your work” exclusion. Thatendorsement simply provides:Exclusion I. of Section I – Coverage A –Bodily Injury And Property DamageLiability is replaced by the following:2. ExclusionsThis insurance does not apply to:l. Damage To Your Work“Property Damage” to “yourwork” arising out of it or anypart of it and included in the“products-completed operationshazard”. 33Finally, I.S.O. has created a sitespecificendorsement for deleting thesubcontractor exception to the “yourwork” exclusion. That endorsementstates:32With respect to those sites oroperations designated in theInsurance Services Office, FormIC0238099. See also Insurance ServicesOffice, Form IC02381006.33 Insurance Services Office, Form CG 22 9410 01.Schedule of this endorsement,Exclusion I. of Section I –Coverage A – Bodily Injury AndProperty Damage Liability isreplaced by the following:2. ExclusionsThis insurance does not apply to:l. Damage To Your Work“Property Damage” to “yourwork” arising out of it or anypart of it and included in the“products-completed operationshazard”. 34Contractors will likely be offeredpolicies with one or more of the foregoingendorsements included automatically.Presumably, the endorsements could beremoved for an additional premium.While these endorsements appear toprovide a simple solution to a complexproblem, even these endorsements arelikely to engender further litigation ascourts grapple with their interpretation.V. ConclusionHave forty-two years of litigationreally changed anything? On thejudicially conservative end of thespectrum, things are as Dean Hendersondescribed them in 1971. Builders whobuild shoddy buildings will have to bearthe cost of replacement of their ownshoddy work. This is, of course, the way34 Insurance Services Office, Form CG 22 9510 01.
Raising the Roof Page 479it should be. Perhaps the real point ofdemarcation should be the distinctionbetween tort liability and contractliability. Without saying so, DeanHenderson’s example certainly drew theline there. For the person injured by thefalling stucco wall or the passing cardamaged by that same falling stucco, theonly remedy against the personresponsible is in tort. While it is true that,but for the contract between the builderand the stucco contractor, there would beno liability for the injured person or thepassing car. But that does not mean thatthe liability arises out of contract.The problem arises when the damagebecomes internal. When the insured’swork damages only itself, there is nocoverage even in Florida and Texas. Butwhen the insured’s faulty work damages“other property,” it is likely covered bythe builder’s general liability policy. Is ita coincidence that these principles seemto mirror those of the economic loss rulebefore it became whittled away byexceptions? Under that rule, a defectiveproduct which damages only itself givesrise to a cause of action in contract only.Only when the product damages “otherproperty” does the breach of contract (thedefect) become actionable in tort.Perhaps the erosion of the economicloss rule runs parallel to the erosion of theconcept that insurance is meant to coveraccidents, not business risks. Certainly inDean Henderson’s time, a complaintagainst a builder based on negligencewould have been summarily dismissedunder the economic loss rule. Today, itmight well stand based upon the manyexceptions courts have created to whatwas otherwise a bright-line rule. Just asthe line between tort and contract isblurring, so too is the line betweenaccidents and business risks.
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