NOVEMBER 2013 BAD FAITH CASES: PRODUCTS-COMPLETED OPERATIONS HAZARD EXTENDS ONLY TO WORK BY GENERAL CONTRACTOR; DAMAGE CAUSED BY SUBCONTRACTOR NOT COVERED, PRECLUDING BAD FAITH CLAIM FOR DENIAL (Western District)
Plaintiff, a general contractor, brought suit against its insurer after a scratch was discovered in the store-front glass at one of plaintiff’s project sites, and the insurer refused to cover the claim. The scratch was discovered shortly before the project was completed, and the client would not sign-off on the project unless the glass was replaced. Plaintiff filed a claim seeking to have the glass, which was installed and then cleaned by two separate subcontractors, replaced so the project could be completed.
The insurer denied the claim, alleging the damage to the glass did not meet the definition of “products-completed operations hazards,” as well as several other exclusions that precluded coverage. After the denial, plaintiff filed a three-count Complaint, setting forth claims for breach of contract, declaratory judgment, and bad faith against the insurer.
The parties agreed the scratch in the glass was caused by one of the two subcontractors, either the glass installation company, or the cleaning company. Based on this undisputed fact, the court determined no coverage existed under the policy because the products-completed operations hazard only provided coverage for plaintiff’s work, not subcontractors. Therefore, because no coverage existed, plaintiff’s bad faith claim was precluded. Accordingly, the insurer was granted summary judgment on the bad faith claim.
