Double AA Builders, Ltd. v. Preferred Contractors Insurance Co.
241 Ariz. 304
Ariz. Ct. App.2016Background
- Harkins Theatres hired Double AA Builders as general contractor for a theater project; Double AA subcontracted Anchor Roofing to install BUR.
- Anchor Roofing was the Named Insured under Preferred CGL policies; Double AA was added as an Additional Insured under Anchor’s policies.
- After completion, the BUR leaked, damaging work by others and causing Harkins to lose business; Double AA replaced the BUR and sought indemnification for the replacement costs.
- Trial court granted summary judgment for Double AA, finding coverage under the policy’s occurrence/property damage, and applying the subcontractor exception to the your-work exclusion.
- Preferred appealed, arguing the your-work exclusion barred coverage and the subcontractor exception did not apply; Double AA argued an exception should apply as an Additional Insured.
- Arizona Court of Appeals reverses, holds there is no coverage for Double AA; the your-work exclusion applies and the subcontractor exception does not apply to an Additional Insured.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy’s your-work exclusion bar coverage here? | Double AA contends coverage for property damage caused by an occurrence within policy terms. | Preferred argues the your-work exclusion bars coverage for Anchor’s defective work absent a valid exception. | Yes; the exclusion applies and the exception does not. |
| Does the subcontractor exception to the your-work exclusion apply to an Additional Insured like Double AA? | Double AA relies on the subcontractor exception to extend coverage to its costs. | Anchor’s subcontractor exception does not reach Double AA because Double AA did not perform work as Anchor’s subcontractor. | No; the exception does not apply. |
| Does the status as Additional Insured affect eligibility for the subcontractor exception and coverage? | Double AA argues it should be treated like a Named Insured for coverage purposes. | Additional Insured status does not convert Double AA into a Named Insured with broader rights; Separation of insureds does not render the exception applicable. | No; Additional Insured coverage is limited and does not confer Named Insured status. |
Key Cases Cited
- United States Fidelity & Guaranty Corp. v. Advance Roofing & Supply Co., Inc., 163 Ariz. 476 (App. 1989) (recognizes limited interpretation of faulty-work coverage in duty-to-defend context)
- Lennar Corp. v. Auto-Owners Insurance Co., 214 Ariz. 255 (App. 2007) (faulty workmanship causing property damage can be an occurrence under a CGL policy)
- Desert Mountain Properties Limited Partnership v. Liberty Mutual Fire Insurance Co., 225 Ariz. 194 (App. 2010) (specific fault-work exclusion does not bar repair of damage from defective workmanship)
- PNL Asset Mgmt. Co. v. Brendgen & Taylor P’ship, 193 Ariz. 126 (2009) (remand with instructions when cross-motions exist)