A common issue that arises in construction insurance litigation is whether there is coverage under a CGL policy for “get-to” or “rip-and-tear” expenses incurred when a contractor or subcontractor must remove, repair, and/or replace non-defective work in order to repair an otherwise inaccessible construction defect.  When faced with this question, courts have generally followed a three step process in determining whether coverage exists: (1) Was there “property damage” within the scope of coverage of the CGL policy? (2) Was the “property damage” caused by an “occurrence,” i.e. an “accident,” sufficient to bring it within the scope of coverage of the CGL policy? and (3) Does an exclusion¹ apply to bar coverage under the CGL policy?²  Operating within this three step framework, courts are split on their determination as to whether these damages are covered within the scope of a CGL policy, and there does not appear to be a majority rule.  However, the cases demonstrate that a court is more likely to find coverage for rip and tear costs in the following circumstances: (1) the underlying “property damage” is covered by the terms of the CGL policy or (2) the rip and tear damages are caused by a covered “occurrence” under the terms of the CGL policy or are themselves an “occurrence.”

Are Rip and Tear Damages “Property Damage”?

In determining whether there is coverage for rip and tear damages, some courts have based their analysis on whether the insured’s underlying defective work is covered “property damage” under the terms of the CGL policy.  In these types of cases, courts have generally held when the insured’s underlying defective work is covered “property damage” under the terms of the policy, the rip and tear costs are also covered property damage.  The majority view under the “property damage” analysis is that “the costs to rip out otherwise non-defective work in order to repair otherwise non-covered defective work is not ‘property damage,’ but the costs to rip out non-defective work in order to repair covered ‘property damage’ is considered ‘property damage’ and is covered.  The rationale of many of these decisions is that the nature of the repairs cannot create coverage if none exists.”³  In other words, the analysis depends on whether the defective work is covered.⁴  Under this analysis, if there is no coverage for repairing the insured’s underlying defective work, there will be no coverage for “rip and tear” damages associated with repairing the insured’s underlying defective work.⁵   

For example, in Palm Beach Grading, Inc. v. Nautilus Insurance Co.,⁶  the Eleventh Circuit Court of Appeals held that the rip and tear costs associated with repairing and replacing a defective pipe, which did not cause any damage  that would not otherwise have been caused by tearing out the pipe, was not a covered claim for “property damage” under the general contractor’s CGL policy.

Similarly, in Golden Eagle Insurance Co. v. Travelers Companies,⁷  the Ninth Circuit held that there was no coverage for rip and tear costs when the insured’s underlying defective work was not covered property damage under the terms of the insured’s CGL policy.  In Golden Eagle, the Ninth Circuit held that because the repair of the insured’s defective concrete floors was excluded from coverage under the terms of the CGL policy, the rip and tear damages, which included the cost of the necessary removal of the non-defective, undamaged floor coverings in order to repair the concrete floors, were also not “property damage” because these rip and tear repairs “cannot create coverage where none exists.”⁸

However, in Clear, LLC v. American and Foreign Insurance Co.,⁹  the U.S. District Court of Alaska held that rip and tear costs were covered under an insured’s policy because “making repairs to covered property damage necessarily includes the costs involved in removing and replacing other materials to gain access to the damaged property[.]”  In cases such as Clear, the analysis is based on the existence of some covered “property damage” from which more damage in the form of corrective repair activities flow. ¹⁰  Therefore, “the recovery is not limited merely to the ‘property damage’ itself, but extends to the damages flowing from such damage.”¹¹   

Do Rip and Tear Damages Constitute an “Occurrence”?

Other courts have analyzed “rip and tear” cases by determining whether there was a covered “occurrence” within the terms of the insured’s CGL policy.  For example, in Colorado Pool Systems, Inc. v. Scottsdale Insurance Co.,¹² the court held that a pool builder’s CGL policy covered rip and tear damages to third party work necessitated by the demolition and replacement of a defective pool it had installed.  The court held that while the demolition and replacement of the defective pool was not covered by the pool builder’s CGL policy, the rip and tear damage to the non-defective third party work, including the damage done to a deck, sidewalk, retaining wall, and electrical conduits, was covered because it found that this damage was the result of an “accident.”¹³  The court based its decision on a Tenth Circuit Court of Appeals opinion which held that “injuries flowing from improper or faulty workmanship constitute an ‘occurrence’ so long as the resulting damage is to nondefective property, and is caused without expectation or foresight.”¹⁴  Therefore, because the rip and tear damages in this case were to non-defective property, were not foreseeable, and were an injury resulting from the insured’s faulty workmanship, the court held that the rip and tear damages were an “occurrence” within the terms of the CGL policy.¹⁵  

In contrast, a Fourth Circuit case applying Maryland law, the court held that rip and tear costs were not covered by the subcontractor’s CGL policy because there was no “occurrence” as “the so-called damage was not accidental.”¹⁶  In OneBeacon Insurance Co. v. Metro Ready-Mix, Inc.,¹⁷ the court held that there was no occurrence when an insured subcontractor supplied defective grout to a construction project.¹⁸  The grout ultimately had to be removed because it was too weak, which necessitated the removal of the non-defective, and otherwise undamaged, pile caps and columns that had been installed by a third party on top of the grout.¹⁹  The court held that rip out and replacement of the third party’s work was not covered because it was foreseeable that the insured would not only have to pay for any defects in its property, but also any incidental costs that are incurred in remedying those defects.²⁰

In reaching this conclusion, the Fourth Circuit relied on Woodfin Equities Corp. v. Harford Mutual Insurance Corp.²¹  In Woodfin, the Maryland Court of Special Appeals held that damages that resulted from repairing and removing defective HVAC units in a hotel, including costs associated with tearing out undamaged, non-defective walls, molding, and carpeting, were not caused by an “occurrence” and therefore, were not within the scope of coverage of the HVAC company’s CGL policy.  The court held that there was no coverage for the defective HVAC units under the policy because the property damage was confined to the insured’s own work product.²²  Therefore, because the property damage to the HVAC units was not an occurrence, the damages resulting from the property damage to the HVAC systems were also not a covered occurrence.²³

In Nas Surety Group v. Precision Wood Products, Inc.,²⁴ the Middle District of North Carolina held that there was no “occurrence” giving rise to “property damage” under an insured subcontractor’s CGL policy for cost of repair and replacement of defective cabinetry and millwork, including the costs to repair non-defective drywall, repair walls, and reinstall sinks, wiring, and plumbing as a result of defective workmanship, as these are all foreseeable consequences of repairing and replacing the defective work.  Because of this foreseeability, the rip out costs did not constitute an “occurrence” subject to coverage under the terms of the CGL policy.²⁵

Similarly, an Arizona state court in Desert Mountain Properties Ltd. Partnership v. Liberty Mutual Fire Insurance Co.²⁶ also considered whether the cost of “getting to” damages incurred by a property developer as a result of repairing poorly compacted soil that homes had been built upon were covered by a CGL policy.  In order to repair the defective poorly compacted soil, the property developer had to damage or destroy non-defective property, including walls, floors, slabs, or other portions of the homes that had not been affected by the poorly compacted soil.²⁷  The court recognized that while “damage to other property caused by or resulting from the defect” may be a covered “occurrence” within meaning of the CGL policy, “the cost of repairing a defect is not recoverable under a CGL policy in Arizona.”²⁸  Therefore, because the removal or destruction of this non-defective work was not damage caused by the poorly compacted soil, but rather damage caused by the repair of the poorly compacted soil, the court held that the “get-to” damages were not a covered “occurrence” under the CGL policies at issue.²⁹

In the recent case of Big-D Construction Corp. v. Take it for Granite Too,³⁰  the U.S. District Court for the District of Nevada considered whether the removal of stucco substrate from the exterior of a building was “property damage” caused by an “occurrence” after stone tiles that were adhered to it began falling off the building to the ground.  The court held that because the stone tiles falling constituted “occurrences,” the reasoning applied by other courts in cases such as OneBeacon, Nas Surety, and Desert Mountain, as described above, did not apply. The courts in those cases either found no occurrence or that damage resulting from repairing defective work is not covered.³¹  In Big-D, the court found that there was “property damage” resulting from: (1) the stone tiles falling and hitting the ground, which constituted an “occurrence,” and (2) the safety measures taken to prevent future property damage or future bodily injury, including the removal of tiles and stucco.³²  Therefore, the insurer’s argument that the “rip and tear” damages of removing the stucco were not covered by the CGL policy failed because the stone tiles had to be removed from the stucco to prevent property or bodily damage^.33

Do Any Patterns Emerge from These Cases?

As these cases demonstrate, there is no obvious majority rule regarding coverage for rip and tear damages associated with the removal and replacement of non-defective, and otherwise undamaged, work to access and repair underlying defective work. While the analysis varies, the cases do demonstrate several patterns.  First, if the underlying defective work is covered “property damage” under the terms of the CGL policy, the rip and tear damages will more likely be covered under the terms of the CGL policy.  Second, if the rip and tear costs are caused by a covered “occurrence,” or are a covered occurrence in and of themselves, there will more likely be coverage under the terms of the CGL policy.  If these insuring requirements are met, various exclusions are then examined.  Therefore, caution is urged to those determining whether coverage exists for claims involving rip and tear damages because of the different reasoning employed by courts on this subject.

_{1 The exclusions considered by courts when determining whether coverage is barred for rip and tear damages will be discussed in the next article: “Rip-Out”   Claims & Exclusions for “Your Work,” “Your Product,” and “Impaired Property” by Eric Hulett.} 

_{2  Woodfin Equities Corp. v. Harford Mut. Ins. Co., 110 Md. Ct. Sp. App. 616, 648-50, 678 A.2d 116, 131-32 (1996), aff’d. in part, rev’d in part on other grounds, 334 Md. 399, 687 A.2d 652 (1997); see also Dewitt Const. Inc. v. Charter Oak Fire Ins. Co., 307 F.3d 1127, 1133 (9th Cir. 2002).}   

_{3 Lee H. Shidlofsky, Deconstructing CGL Insurance Coverage Issues in Construction Cases, J. AM. C. CONSTRUCTION LAW., August 2015.} 

_{4 SCOTT TURNER, “Because of . . .”— Coverage of Consequential Damages, INSURANCE COVERAGE OF CONSTRUCTION DISPUTES § 6:22, n.31 (Nov. 2016 update).} 

_{5 Id.} 

_{6 434 Fed. Appx. 829, 831 (11th Cir. 2011).} 

_{7 103 F.3d 750, 757 (9th Cir. 1996), overruled on other grounds by Gov. Employees v. Dizol, 133 F.3d 1220 (9th Cir. 1998).} 

_{8 Id.} 

_{9 2008 WL 818978, at *7 (D. Alaska Mar. 24, 2008).}  

_{10 PHILIP L. BRUNER & PATRICK J. O’CONNOR, JR., Coverage for Rip and Tear Damages to Non-Defective Work, BRUNER & O’CONNOR ON CONSTRUCTION LAW § 11:239 (Dec. 2016 update).} 

_{11 Id.} 

_{12 317 P.3d 1262 (Colo. Ct. App. 2012).} 

_{13 Id. at 1271.} 

_{14 Id. (quoting Greystone Constr., Inc. v. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272, 1284 (10th Cir. 2011)).} 

_{15 Id.} 

_{16 OneBeacon Insurance Co. v. Metro Ready-Mix, Inc., 242 Fed. Appx. 936, at *3 (4th Cir. 2007), (citing French v. Assurance Co. of Am., 448 F.3d 693, 700 (4th Cir. 2006)).} 

_{17 242 Fed. Appx. 936 (4th Cir. 2007).} 

_{18 Id. at *3-4.} 

_{19 Id. at *4.}  

_{20 Id. at *4} 

_{21 110 Md. Ct. Spec. App. 616, 648-49, 678 A.2d 116, 131 (1996), aff’d. in part, rev’d in part on other grounds, 334 Md. 399, 687 A.2d 652 (1997).} 

_{22 Id.} 

_{23 110 Md. App. at 649.} 

_{24 271 F. Supp. 2d 776, 783 (M.D.N.C. 2003).} 

_{25 Id.} 

_{26 225 Ariz. 194, 236 P.3d 421 (Ariz. Ct. App. 2010).} 

_{27 Id. at 214, 236 P.3d at 441.} 

_{28 Id.} 

_{29 Id.} 

_{30 917 F. Supp. 2d 1096, 1109-10 (D. Nev. 2013).} 

_{31 Id. at 1109.} 

_{32 Id.} 

_{33 Id. at 1110.}