Lexicon, Inc. v. Ace American Ins. Co., 634 F.3d 423

Lexicon built six new silo storage bins for Nu-Iron in Trinidad; Damus Limited subcontracted the fabrication and erection of the silos to Lexicon.
A silo collapsed months after completion due to Damus's faulty welds, causing extensive property damage and loss of damaged DRI; Lexicon reimbursed Nu-Iron for some damages.
Lexicon held CGL insurance with ACE and National Union; Insurers denied coverage for the damages.
Lexicon filed suit for breach of contract and declaratory relief, seeking coverage for property damage under the CGL policies; district court granted summary judgment for the Insurers.
The Eighth Circuit reversed in part, affirming some holdings and remanding for further proceedings on other issues.
Claims involve whether faulty subcontractor workmanship constitutes an 'occurrence' under CGL policies and how the 'your work' exclusion interacts with a subcontractor exception.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does defective subcontractor workmanship constitute an occurrence?	Lexicon argues defective subcontractor work can be an occurrence under CGL.	Insurers argue Holder limits occurrence to damages to the work product itself.	Partial reversal; defective workmanship not an occurrence for damage to work product; but ancillary damages may be covered.
How does the 'your work exclusion' and its subcontractor exception affect coverage?	Lexicon contends subcontractor exception preserves coverage for damages arising from subcontracted work.	Insurers contend the exclusion broadly bars coverage for work performed by Lexicon or its subcontractors, with limited exceptions.	The subcontractor exception harmonizes with the exclusion; coverage extends to non-work-product damages other than the silo itself.
Are damages to lost DRI and nearby equipment covered as property damage arising from an occurrence?	Lexicon seeks coverage for collateral damages beyond the silo itself.	Insurers contend such damages fall outside the occurrence scope under Holder.	Covered to the extent not limited to the silo/work product damage; district court should determine remaining issues consistent with Holder.

Holder v. Essex Ins. Co., 261 S.W.3d 456 (Ark. 2008) (defective workmanship alone not an occurrence; damages to work product only not covered)
Nabholz Constr. Corp. v. St. Paul Fire & Marine Ins. Co., 354 F. Supp. 2d 917 (E.D. Ark. 2005) (absence of coverage where exception cannot create coverage otherwise)
Cincinnati Ins. Cos. v. Collier Landholdings, LLC, 614 F. Supp. 2d 960 (W.D. Ark. 2009) (discusses interpretation of occurrence and related exclusions under CGL policies)