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Property & Casualty Insurance/Auto Repair Shop Faulty Work

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QUESTION: Hi Jay!  Hope that you are well.  You helped us with a garage question a couple of years ago and we are back with another one!  Our claims rep's sharp eye has us scrambling for an answer. Our insured is a truck wash and auto repair shop.  We write both a CGL policy and a BAP with a garagekeepers endorsement (CA9937). While the insured was washing the exterior of a vehicle with an acid wash the vehicle's paint came off!  Since the vehicle is in the insured's care, custody and control we believe that there is no coverage under the CGL due to j.(4) and j.(6).  However, we told the claims rep to pay the claim under the garagekeepers endorsement.  It is our underwriting intent to provide cover for this type of claim.  The claims rep pointed to Exclusion C.1.d. Faulty Work (faulty "work you performed").  He believes that neither the CGL nor the garagekeepers endorsement provide coverage for this situation.  We are a little red faced but he might be right.  We would appreciate a second opinion.   Thank you.  Kathy

ANSWER: Hey Kathy,

Thanks so much for thinking of me again!  

I just took a look at the "Work you performed" definition in the CA 99 37.  The definition only adds work performed by others on behalf of the insured to the term.  There really is no true definition of that term.  So now we will need to look deeper into what went wrong.

The first questions that come to my mind are: does the insured use the same procedure washing other trucks?  Is this an acceptable method of washing?  Was the chemical used designed to be used for the purpose the insured used it?  

What I'm trying to determine is if the insured do something wrong or did the chemical do something wrong.  If the insured correctly performed their job and the answers to the questions above are yes, then how can that be Faulty Work?  So...was it faulty work or products liability?

Is there any way we can get answers to those questions above?

Jay

---------- FOLLOW-UP ----------

QUESTION: Jay, thanks for your quick response!  I just clarified the situation and the employee used the wrong chemical.  He did not realize what he had done until the paint started to deteriorate. Kathy

ANSWER: Unfortunately, that's a faulty work claim.

Sorry about that!

---------- FOLLOW-UP ----------

QUESTION: Ok, so what if the chemical was designed for cleaning trucks and the method of washing was also acceptable (correct pressure etc.)?  Would this be an example of a products liability claim?  Thanks again Jay.

Answer
Hey Kathy,

Yes it would. The CCC exclusions only apply to occurrences arising out of ongoing work. In the hypothetical you give, the damage is the result of the chemical, not the work or the application. Therefore that makes it a products liability claim.  

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Jay K. Williams, AAI, AIP, CIC, CRM

Expertise

I can answer questions relating to the following coverages: personal auto; homeowners; commercial auto; commercial liability; commercial property; business income and all other property and casualty coverages.

Experience

I have been in the insurance industry in Florida since 1979. I am currently the president of a Florida domestic insurance company subsidiary. I've taught continuing education classes in Florida and across the country. I am quite familiar with all coverages including Florida Condominium master policies and unit owner policies. I also specialize in agent professional liability. I have been a professional educator since 2001.

Organizations
I am a member of the Florida Associaion of Insurance Agents, the state affiliate of the Independent Insurance Agents and Brokers of America.

Education/Credentials
I currently carry the following professional designations: Accredited Advisor in Insurance (AAI) Associate in Insurance Production (AIP) Certified Insurance Counselor (CIC) Certified Risk Manager (CRM)

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