Q: A carrier is attaching the Multi-Unit and Tract Housing Residential Exclusion (CG 77 44 02 15) to every contractor policy regardless of business class. How will this exclusion apply to different types of contractors? For example, if a customer is a landscaper who mows lawns for a multi-family residential building on behalf of the building owner, does this exclusion negate coverage for all bodily injury and property damage claims? 

Response 1: As I interpret it, this exclusion would not reduce coverage for a landscaper mowing a lawn, but it could do so for other types of original construction activities. The exclusion says:

This insurance does not apply to: 

Multi-Unit and Tract Housing

“Bodily injury", “property damage" or “personal and advertising injury liability" arising out of any “construction operations" whether ongoing operations or operations included within the products-completed operations hazard that involve a “housing tract" or “multi-unit residential building".

The endorsement defines “construction operations" as:

pre-construction, construction, post-construction, reconstruction, renovation, remodeling, conversion of the building to a condominium, townhouse, cooperative building or any other type of multiple unit residential structure, maintenance or repair.

It does not further define any of those terms, so a court would rely on dictionary definitions. “Construction" is the act of constructing. The verb “construct" means “to build or form by putting together parts."

Now, look at the words in sequence: pre-construction, construction, post-construction, reconstruction, renovation, remodeling, conversion of the building … maintenance or repair." What do they all have in common? They all involve either creating something new or changing something that already exists. The only possible exception is the word “maintenance," but the endorsement still uses that word in the context of these other words that pertain to building or altering.

I have read court opinions where the court deduced a word's meaning in part based on the other words surrounding it. If a court followed that method, I suspect it would rule that the “construction activities" are limited to the creation or alteration of an artificial structure. Cutting grass does not fit that description.

However, dozens of other activities would be uninsured, including floor cleaning, painting, repair of damaged steps, light bulb replacement, plumbing and heating repairs and service, and a lot more.

The exceptions to the exclusion described in a. and c. below appear to limit its application to a contractor fixing its own work, as opposed to replacing a 30-year-old furnace in an individual unit or replacing LED lights at the end of their useful life:

a. Remodeling, maintenance or repair performed for the “owner" of a detached single family dwelling provided that the work does not involve the repair or replacement of either “your work", or the work of any other insured under this policy, that was part of the original construction of the building …

c. Remodeling, maintenance or repair within the interior of an individual unit within a condominium, townhouse or cooperative building provided that the work is for the “owner" of the building and does not involve the repair or replacement of either “your work", or the work of any other insured under this policy, that was part of the original construction of the building or conversion of an apartment building to a condominium, townhouse or cooperative building.

The endorsement leaves coverage gaps for the original contractor. I think it's less of a problem for others.

Response 2: Common sense tells me that a lawn mowing operation doesn't fit the definition of "construction operations," but my opinion isn't worth anything in this respect. The only opinion that counts is that of the carrier. You need to ask them the question you've posed here. If you can't get a straight answer that leaves your client with coverage, you need to find another carrier.

Generally, I'd resist this endorsement for anybody. In my experience, contractors wander into new lines of work without sharing that information with their insurance agent. If one of your "non-construction" clients decides to take a job that falls into this very broad definition of "construction operations," they lose their coverage, which is hardly what they or you expected when you sold them a CGL with "automatic coverage for new activities."

Response 3: This is an interesting question. Based on the definition of "construction operations," the intent appears to be to restrict coverage related to building or working on structures. While mowing lawns involves property upkeep, I wouldn't classify it as maintaining a structure. Therefore, I believe your lawn mowing company is likely not affected. However, the endorsement is quite restrictive and seems poorly worded, leaving room for different interpretations by an adjuster.

One thing seems clear: Contractors working on or maintaining the structure itself will probably be excluded unless they are doing so for the "owner," and the "owner" fits the very narrow definition in the endorsement:

“Owner" means the person or persons that own the individual residential dwelling or unit but does not include a limited liability company, sole proprietor, partnership, joint venture, corporation, unincorporated association, trust, or the developer of the property or real estate manager or any entity related to either. 

To avoid complications, it would be wise to consult with the insurance carrier and clarify the endorsement's intent before placing additional contractor business with them.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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