The Eleventh Circuit has reversed an insurer’s award of summary judgment after finding that uncertainty about when the alleged property damage occurred raised questions about whether the damage came within the scope of the “Your Work” exclusion. More specifically, the court found unclear whether the damage occurred before or after the contractor abandoned the job, thereby triggering an exception to the “Your Work” exclusion for damage to work that had “not yet been completed or abandoned.”  The decision illustrates how timing can be a critical factor when it comes to triggering coverage for work and completed operations.

In Southern-Owners Insurance Company v. MAC Contractors of Florida, LLC, a pair of trustees hired MAC Contractors (doing business as KJIMS Construction) to serve as the general contractor for a custom residence.  After construction began, disputes between the trustees and KJIMS caused the contractor to abandon the job before completing the project.  The trustees followed with a lawsuit alleging, among other things, that KJIMS had damaged wood floors and a metal roof, which KJIMS had promised to remediate but never did.

KJIMS’s general liability insurer, Southern-Owners, initially agreed to defend the lawsuit, but later withdrew its defense citing the policy’s “Your Work” exclusion. The insurer sought a declaration that the policy’s “Your Work” exclusion barred coverage because the alleged property damage arose out of KJIMS’s abandoned work.  According to its terms, the “Your Work” exclusion bars coverage for “property damage to your work arising out of it or any part of it and included in the products-completed operations hazard.”  The “products-completed operations hazard” was defined to mean all “bodily injury and property damage occurring away from premises you own or rent and arising out of your product or your work except . . . [w]ork that has not yet been completed or abandoned.”

On summary judgment, the district court agreed with the insurer and held that the exclusion barred coverage for property damage once the insured abandons the project on which it was working. But on appeal, the Eleventh Circuit reversed.  The panel reasoned that the exclusion does not bar coverage for property damage that occurs before an insured’s work has been abandoned.  The court then held that although the complaint alleged that KJIMS abandoned its work, the complaint did not clearly allege when the property damage occurred and could be reasonably construed to allege that the damage occurred before KJIMS abandoned the work.  As a result, the Eleventh Circuit held that the exclusion did not clearly bar coverage and, thus, the insurer had a duty to defend.

It is widely understood that policy-based ambiguities often result in a construction favoring the insured and coverage. However, factual ambiguities in the claim itself may also result in sufficient uncertainty to trigger an insurer’s duty to defend, even against unambiguous policy language, since the insurer must defend if there is a potential for coverage.  The timing of critical events is one area that is especially susceptible to factual uncertainty.  Insureds should therefore pay close attention to the alleged timing of such events and be ready to hold their insurers to their broad duty to defend.