When it comes to cases involving CGL property damage exclusions (J)(5) and (J)(6), the issue is often whether the term “that particular part” should be interpreted narrowly or broadly.  The court in Cincinnati Ins. Co. v. Charlotte Paint Co., No. 18-657 (D.S.C. Oct. 13, 2020) applied it to the specific work that the insured was hired to do and damages caused by the insured’s work. Policyholders will see this as a broad application.  The court would describe it as narrow.

I’ll keep this brief and limit it to what’s needed to get to the lesson.  Cases involving exclusions (J)(5) and (J)(6) are fact specific and anyone who finds the case to be of interest would need to read it.    

Southeastern Wall Systems was hired for the replacement of the stucco cladding on buildings. After Southeastern substantially completed its work, cuts in the Blueskin membrane flashing around certain window openings were discovered.  The cuts allegedly damaged the Blueskin waterproof membrane and the wall sheathing—a product called DensGlass.  It was alleged that the cuts took place while Southeasten was completing its work.  A repair plan involved removal of some stucco around the windows and sliding glass doors, repairing the Blueskin, replacing the stucco, and restoring sealants at all affected locations.

The project’s general contractor filed suit against Southeastern, which sought coverage from Cincinnati Insurance Company.  At issue in the coverage action was the potential applicability of exclusions (J)(5) and (J)(6):

This insurance does not apply to:
j. Damage To Property
“Property damage” to:
(5) That particular part of real property on which you . . . are performing operations, if the “property damage” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired, or replaced because “your work” was incorrectly performed on it.

As is often the case, the parties disputed how broadly these exclusions should be interpreted.

CIC contended that exclusion j.(5) was broad enough to include not only the specific work an insured is hired to do, but the area an insured damages while performing such work.  The GC, pursuing coverage, saw it differently, focusing on the language “that particular part” in exclusion j.(5) and asserting that “the use of the word ‘particular’ suggests the exclusion should only apply to the smallest unit of division available to the work in question. The ‘particular part’ language is too limiting to allow the entire property to fall within the exclusion.”  If so, according to the GC, the exclusion should apply to the component parts of the stucco and nothing else.

The court sided with CIC.  As I said, if you are involved with this issue you’ll want to read the case, but here is an excerpt from the court’s explanation of its decision:  

“If Southeastern caused the damage, then it happened while Southeastern was performing operations on ‘that particular part’ of the Shipwatch property on which Southeastern was contractually engaged to install stucco. It would strain credulity to divorce the DensGlass and Blueskin from ‘that particular part’ of the property on which Southeastern was performing work. Without the DensGlass there would be no walls on which to install the stucco. The door and window openings were not considered complete without the Blueskin lining being installed to ensure waterproofing. . . . Moreover, CIC is not seeking to apply the "particular part" language to exclude damage to unrelated parts of the entire property and it is hyperbole for Pro-Tec to suggest as much. . . . Some of the case law cited by Pro-Tec shows courts wrestling with delineating the boundaries of the phrase ‘that particular part,’ and the extent to which it limits the scope of the exclusion. But the facts of this case do not require the Court to grapple with those boundaries. This case does not involve alleged damage to the whole property, to neighboring property, or to unrelated building components. Rather, Pro-Tec’s claims in the Underlying Action are for damage to the very building components on which Southeastern performed its stucco installation, and which Southeastern was contractually bound to protect while performing that installation—to wit, the exterior walls, which were composed of DensGlass sheathing and Blueskin borders around door and window openings.”

The court here would tell you that it was not interpreting “that particular part” broadly.  Policyholders would likely disagree.