## F I L E D United States Court of Appeals Tenth Circuit 

### August 1, 2005 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

FARMINGTON CASUALTY COMPANY, a Connecticut corporation, Plaintiff-Appellant,

v. No. 04-1200 RICK DUGGAN,

Defendant-Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO (D.C. NO. 02-Z-1205-CBS)

Kevin F. Amatuzio, John R. Chase, and Susan Prose, Montgomery, Kolodny, Amatuzio & Dusbabek, L.L.P., Denver, Colorado, for Plaintiff-Appellant. Jerre W. Dixon, Dixon and Snow, P.C., Denver, Color ado, for DefendantAppellee.

Before HARTZ , McKAY, and McCONNELL , Circuit Judges.

McCONNELL , Circuit Judge.

I. Without so much as the blast of a shofar, the perim eter masonry block walls2

of Defendant-Appellee Rick Duggan’s partially const ructed office building in Golden, Colorado, came tumbling down in a high wind in December 1997. An arbitrator attributed the event primarily to the ne gligence of the subcontractor, Masonry Designs, which allowed the supportive brace s to be removed prematurely and also performed substandard masonry work. The arbitrator ordered Masonry Designs to pay Mr. Duggan over $500,000 in compensation. This turned out to be little comfort when Masonry Designs went out of bus iness. Mr. Duggan had not obtained a performance bond, which is the usual way the owner of a construction project protects itself against losses caused by co ntractor negligence. Fearing that it would be the next deep pocket, Plaintiff-Appella nt Farmington Casualty Company, which had issued Masonry Designs a commerc ial general liability policy, brought suit against Mr. Duggan seeking a d eclaratory judgement that its policy did not cover the arbitrator’s award againstMasonry Designs. Following a bench trial, the district court concluded that Farm ington’s policy did cover the arbitrator’s award. Farmington appeals, and we rev erse. II. We review de novo the district court’s interpretati on of the insurance policy. Old Republic Ins. Co. v. Durango Air Serv., Inc. , 283 F.3d 1222, 1225 (10th Cir. 2002). We apply Colorado law, interpreting the policy as w e think a Colorado court would. Reg’l Bank of Colorado v. St. Paul Fire and Marine Ins.3

Co. , 35 F.3d 494, 496 (10th Cir. 1994). The purpose of a commercial general liability polic y is to protect the insured from liability for damages when his own def ective work or product damages someone else’s property. Hartford Acc. & Indem. Co. v. Pacific Mut. Life Ins. Co. , 861 F.2d 250, 253 (10th Cir. 1988). Damage to an insured’s own work resulting from his faulty workmanship on it is usually covered by a performance bond, not a commercial general liability policy. Id .; see also Union
Ins. Co. v. Hottenstein , 83 P.3d 1196, 1202 (Colo. Ct. App. 2003) (approvi ng conclusion that “finding the breach of a business c ontract to be a [covered] occurrence would distort the purpose of liability i nsurance policies”); A. D. Irwin Investments, Inc. v. Great Am. Ins. Co. , 475 P.2d 633, (Colo. Ct. App. 1970) (“[An insurer] d[oes] not, by its contract of liabi lity insurance, become a guarantor of perfect performance.”); Lee R. Russ & Thomas F. Segalla, 9 Couch
on Insurance § 129:11 (3d ed. 1995 & Supp. 2005) (“Most policies of commercial general liability insurance exclude the insured’s f aulty workmanship from coverage. The rationale for such exclusions is that faulty workmanship is not an insurable ‘fortuitous event,’ but a business risk t o be borne by the insured.”). In district court, Farmington pointed to a number o f provisions of the commercial general liability policy it sold to Maso nry Designs that, it contended, precluded coverage for the collapsed walls. The di strict court disagreed on all4

points. On appeal, Farmington reiterates arguments relating to four of the policy’s provisions, but in order to prevail, it ne ed only be correct as to any one of them. We therefore address one of Farmington’s arguments, which we consider valid, and express no opinion as to the ot her three. Section I(A)(1) of the Commercial General Liability Coverage Form (CGLCF) at issue provides coverage for sums the ins ured becomes legally obligated to pay as damages because of “property da mage” caused by an “occurrence.” However, the policy does not cover p roperty damage resulting from shoddy work; rather, it excludes from coverage damage to “[t]hat particular part of any property that must be restored, repaire d or replaced because ‘your work’ was incorrectly performed on it.” Id. § I(A)(2)(j)(6). An exception to this exclusion extends coverage to property damage inclu ded in the “productscompleted operations hazard,” § I(A)(2)(j)(6), but that subsection in turn excludes work that has not yet been completed. Id. § V(11)(a)(2). The end result of this exclusion from an exception to an exclusion is thatfaulty work is covered as property damage only if the work has been completed . Work is completed “[w]hen all of the work called for in your contracthas been completed.” Id. § V(11)(b)(1). The contract between Schubert (the general contract or) and Masonry (a subcontractor) required Masonry not only to build the masonry block walls but5

also to “clean [the] walls with [a] light acid solu tion.” Aplt. App. 125. The district court found as a fact that only one-third of the acid-washing had been completed when the walls fell. Dist. Ct. Op. 4. N otwithstanding this finding, the district court concluded that, for purposes of the products-completed operations hazard, “[t]he work called for in Masonry Design’s contract with Schubert was completed when the walls fell.” Id. at 7. Farmington contends this conclusion was in error, and we agree. The district court offered two justifications for i ts conclusion. First, the court identified a potential ambiguity in the defin ition of “your work” as it relates to the products-completed operations hazard. Exclu sion J(6) excludes from coverage property damage caused by the faulty perfo rmance of “your work.” The district court observed that the definition of “you r work” is not restricted to work called for in the contract, but includes “[m]ateria ls, parts or equipment furnished in connection with such work or operations.” CGLCF § V(15)(b). “Your work” is deemed completed, however, when the work called for in the contract is complete. Id. § V(11)(b)(1). The district court concluded that the intersection of these two provisions created an ambiguity; for purp oses of determining what work falls within Exclusion J(6), “your work” includes w ork not specifically called for in the contract, but for purposes of determining wh en work is completed, only work called for in the contract is considered. Hav ing discovered an ambiguity,6

the district court resolved it in favor of coverage , as required by Colorado law. Dist. Ct. Op. at 6–7, citing Cyprus Amax Minerals Co. v. Lexington Ins. Co. , 74 P.3d 294, 299 (Colo. 2003). Next, the district cou rt determined that the work called for in the contract was mostly complete when the walls fell and that mostly complete is good enough to fall within the products -completed operations hazard. Neither of these justifications is persuasive. The fact that the policy sometimes restricts the de finition of “your work” to the work called for in the contract, and sometimes defines “your work” more broadly to include “[m]aterials, parts or equipmentfurnished in connection with” the contractual work, makes no difference with resp ect to Masonry Designs’ acid washing. Acid washing was required under the contr act, and the district court found as a fact that the acid washing had not been completed at the time the walls fell. The relevant coverage under the policy kicks in only after the work has been completed. So even if, when determining whether ornot the work had been completed, we choose the narrower definition of “yo ur work” (namely, the work specified in the contract) and construe the policy in favor of coverage, Masonry loses. The district court also erred in adopting a substan tial completeness test. While acknowledging that only one-third of the acid washing was complete when the walls collapsed, the district court characteriz ed the remaining work as “ de7

minimis given the scope and nature of Masonry Design’s work on the project.” Dist. Ct. Op. at 7. Three weeks after the districtcourt issued its opinion, the Colorado Court of Appeals held that a substantially similar products-completed operations hazard provision was unambiguous and exc luded coverage unless all the work called for in the contract was complete wh en the damage occurred. McGowan v. State Farm Fire and Cas. Co. , 100 P.3d 521, 526 (Colo. Ct. App. 2004). A provision that applies when all the work is completed applies only when allthe work has been completed: “the plain language o f the products-completed operations hazard provision belies th[e] assertion” that the provision can operate when only part of the work is completed. Id

. The district court found that the acid washing expl icitly called for in the contract was only one-third complete when the walls came tumbling down, and that is the end of the matter. Exclusion J(6) excl udes the damage from coverage, and the decision of the district court is REVERSED.