A contractor who specialized in luxury residential renovation projects had just completed plastering work required in just the living room and library of a Fifth Avenue apartment in New York City. A $15 million dollar renovation contract with the owner of the apartment, that occupied an entire floor (7,000 square feet), required three years for completion.

Fans were installed in the apartment foyer to blow steam to the newly-plastered rooms, a process used to expedite drying. One of the special purpose fans caught fire, which burned the entrance area and caused extensive smoke damage throughout the apartment. Repair and restorative work necessitated by the incident amounted to almost $500,000, for which claim was made under the contractor's general liability insurance. The insurer declined coverage on the basis of a policy exclusion for property damage to:

"That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations."

The insured and the insurer filed cross-motions for summary judgment. The contractor argued that the quoted language only excluded coverage for damage to the precise portion of the apartment on which work was being performed at the time of the accident.

The court found no New York cases that interpreted the pertinent exclusionary language, but cited cases in other states where the contractor's position was uniformly rejected, notable among which was Jet Line Service, Inc. v. American Employers Insurance Company, 404 Mass. 706, 537 N.E.2d 107 (1989). Therein, the exclusion was held to apply to the entire tank that the insured contractor had been retained to clean, not just the bottom of the tank where cleaning procedures were under way when an explosion occurred.

In the case at hand, the insurer's motion for summary judgment was granted; the contractor's motion was denied and the complaint was dismissed.

Editor's Note: The insured had contended that the language interpretation eventually made would leave a construction company "unprotected against the risks of its own malfeasance in the area of its own operations." The court was not persuaded, pointing out that builders risk insurance., which the insured did not purchase and was explained by the insurer, would cover that risk. It is also notable that the insurer made clear that claims arising from damage to parts of the building other than the apartment worked on were covered within the limits of insurance.

(WILLIAM CRAWFORD, INC., Plaintiff v. TRAVELERS INS. CO., Defendant. U.S. District Court for the Southern District of NY. No. 92 Civ 7812 (ML). December 9, 1993. CCH 1994 Fire and Casualty Cases, Paragraph 4770.)