372 So.3d 32
La. Ct. App.2023Background
- Plaintiffs Ladonna and Gary Allen contracted with Southwest Builders to build a custom home and alleged defective, incomplete, and untimely work causing property damage and consequential losses.
- Plaintiffs later added Maxum Indemnity Company as a defendant after discovery showed Southwest used subcontractors and Maxum issued commercial general liability (CGL) policies to Southwest.
- Plaintiffs moved for summary judgment arguing Maxum's policies (including the products-completed operations hazard, PCOH) cover consequential damages from subcontractor work; they submitted only the policies.
- Maxum cross-moved for summary judgment, arguing multiple policy exclusions bar coverage (breach-of-contract exclusion, "your work"/work-product exclusions, impaired property, mold, and that plaintiffs’ claims are not covered "property damage"/"occurrence").
- The trial court denied the plaintiffs’ motion, granted Maxum’s motion, and dismissed the plaintiffs’ claims with prejudice; the First Circuit affirmed on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the PCOH provision entitles plaintiffs to summary judgment covering consequential damages from subcontractor work | PCOH covers consequential damages arising out of subcontractors’ work and therefore policies cover plaintiffs’ damages | PCOH does not apply because plaintiffs claim damage to the work product itself (the home), not injury to other property or third parties; plaintiffs’ motion relies only on pleadings and the policies | Denied. Genuine issues of material fact exist whether plaintiffs’ damages are to other property/third parties (PCOH applicability), so plaintiffs were not entitled to SJ |
| Whether Maxum is entitled to summary judgment based on the breach-of-contract exclusion | Plaintiffs argued consequential damages were covered and exclusion did not bar recovery under policy language | Maxum argued the breach-of-contract exclusion unambiguously precludes coverage for owner claims against contractor/subcontractor for defective or incomplete work | Granted. Breach-of-contract exclusion bars plaintiffs’ claims; plaintiffs failed to produce factual evidence creating a genuine issue of material fact |
Key Cases Cited
- Supreme Services & Specialty Co., Inc. v. Sonny Greer, Inc., 958 So.2d 634 (La. 2007) (clarifies PCOH vs. work-product exclusion: PCOH covers damage arising out of faulty work to other property, not the faulty work itself)
- Provost v. Homes by Lawrence & Pauline, Inc., 103 So.3d 1280 (La. App. 3 Cir. 2012) (breach-of-contract exclusion in CGL policy bars homeowner claims for defective workmanship)
- Everett v. Philibert, 13 So.3d 616 (La. App. 1 Cir. 2009) (commercial general liability breach-of-contract exclusion precludes negligence/homebuilding defect claims)
- Smith v. Our Lady of the Lake Hosp., Inc., 639 So.2d 730 (La. 1994) (standard for determining whether genuine issue of material fact exists on summary judgment)