PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LIMBACH COMPANY LLC, 

Plaintiff-Appellant,

v.  No. 04-1261

ZURICH AMERICAN INSURANCE

COMPANY,

Defendant-Appellee. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Claude M. Hilton, Chief District Judge.

(CA-03-685-A)

Argued: October 29, 2004

Decided: January 24, 2005

Before WIDENER and MOTZ, Circuit Judges,

and Glen E. CONRAD, United States District Judge for the

Western District of Virginia, sitting by designation.

Reversed and remanded by published per curiam opinion. 

COUNSEL

ARGUED: Douglas Leo Patin, SPRIGGS & HOLLINGSWORTH,

Washington, D.C., for Appellant. David Drake Hudgins, Alexandria,

Virginia, for Appellee. ON BRIEF: Christyne K. Brennan, SPRIGGS

& HOLLINGSWORTH, Washington, D.C., for Appellant. 
OPINION

PER CURIAM: 

This appeal arises from an insurance coverage dispute. On May 27,

2003, Limbach Company LLC (Limbach) filed an action against

Zurich American Insurance Company (Zurich), claiming that a commercial liability policy issued by Zurich provided coverage for property damage caused by Limbach’s faulty workmanship. On crossmotions for summary judgment, the district court ruled that the property damage was excluded from coverage by the policy. Accordingly,

the court awarded summary judgment to Zurich. Limbach has

appealed and, for the reasons explained below, we reverse and

remand.

I.

A.

In 1999, Limbach entered into a subcontract with Morse Diesel/Essex to perform mechanical work at the Howard University

Health Sciences Building in Washington, D.C. Under the subcontract,

Limbach was responsible for installing a prefabricated, insulated,

underground steam line. Limbach contracted with Thermacor Process,

Inc. (Thermacor) for the production of the steam pipe. Legacy Builders, one of Limbach’s subcontractors, excavated the trench for the

steam pipe and backfilled the trench after the pipe was installed. Limbach completed its work in November 2000.

On June 19, 2001, after Howard University began using the steam

line, a leak in the steam line was discovered. It is undisputed that

Limbach’s employees caused the leak when they improperly unpackaged the steam pipe prior to installation. The employees used an acetylene torch to remove the pipe’s shipping bar. The torch weakened

the pipe, which caused the pipe to leak. The leak damaged the insulation covering the pipe, the backfill placed around the steam line, and

the landscaping in the area surrounding the leak. Morse Diesel/Essex

directed Limbach to replace the damaged pipe and to repair the property damage caused by the leak. In order to excavate the damaged

2 LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE
steam pipe, Limbach had to remove concrete that was installed by a

third party. As a result, Limbach had to hire a company to perform

concrete replacement work.

B.

During the relevant period, Limbach was insured under a commercial liability policy issued by Zurich. The policy provides that Zurich

"will pay those sums that the insured becomes legally obligated to pay

as damages because of ‘bodily injury’ or ‘property damage’ to which

this insurance applies." The policy applies to completed operations,

as defined in the policy under "products-completed operations hazard." This term is defined, in pertinent part, as follows: 

"Products completed operations hazard":

a. Includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of

"your product" or "your work" except:

(1) Products that are still in your physical possession; or 

(2) Work that has not yet been completed or abandoned.

However, "your work" will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract

has been completed.

(b) When all of the work to be done at the job site

has been completed if your contract calls for work

at more than one job site.

(c) When that part of the work done at a job site

has been put to its intended use by any person or

organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair

or replacement, but which is otherwise complete, will be

treated as completed. 

LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE 3
The insurance policy contains several exclusions that limit Zurich’s

duty to provide coverage to Limbach. One of those exclusions is relevant to the present controversy. Pursuant to exclusion (l) (the "your

work" exclusion), the insurance policy does not apply to "Damage To

Your Work." This exclusion reads as follows: 

Damage to Your Work 

"Property damage" to "your work" arising out of it or any

part of it and included in the "products-completed operations hazard."

The exclusion includes the following exception:

This exclusion does not apply if the damaged work or the

work out of which the damage arises was performed on your

behalf by a subcontractor. 

The insurance policy defines "your work" as "[w]ork or operations

performed by you or on your behalf," and "[m]aterials, parts or equipment furnished in connection with such work or operations." 

C.

Limbach filed a timely notice and claim with Zurich for the costs

of replacing the damaged steam pipe and repairing the work damaged

by the leak. Limbach’s claim included (1) the cost of repairing the

damaged backfill; (2) the cost of replacing the damaged steam pipe;

(3) the cost of repairing the damaged landscaping; (4) the cost of

replacing concrete; and (5) the cost of a temporary steam boiler. By

letter dated May 3, 2002, Zurich agreed to cover the cost of the temporary steam boiler, as well as a portion of the cost of repairing the

damaged landscaping. However, Zurich denied coverage for the balance of Limbach’s claim. The company did not respond to Limbach’s

request for reconsideration. 

On May 27, 2003, Limbach filed an action against Zurich in the

Eastern District of Virginia, claiming that the costs of repairing and

replacing the work damaged by the leak were covered under the

4 LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE
insurance policy, and that the company was entitled to the unpaid portion of its insurance claim. Jurisdiction in this dispute is based upon

diversity of citizenship pursuant to 28 U.S.C. § 1332. Limbach and

Zurich filed cross-motions for summary judgment. The district court

ruled in favor of Zurich, concluding that all of the damaged work was

excluded from coverage by the "your work" exclusion. Accordingly,

the court awarded summary judgment to Zurich. Limbach has

appealed.

II.

We review a grant of summary judgment de novo, viewing all facts

and inferences in the light most favorable to the nonmoving party.

Love-Lane v. Martin, 355 F.3d 766, 775 (4th Cir. 2004). We may

uphold an award of summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a

matter of law." Fed. R. Civ. P. 56(c). 

III.

Limbach contends that its insurance claim covers the cost of repairing or replacing damaged work performed by subcontractors and third

parties, and that the damaged work is not excluded from coverage by

the insurance policy. Zurich contends that the damaged work is

excluded from coverage by the "your work" exclusion.

A.

In an action based upon diversity of citizenship, the relevant state

law controls. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct.

817, 82 L. Ed. 1188 (1938). The district court must apply the law of

the forum state, including its choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-497, 61 S. Ct. 1020, 85 L. Ed.

1477 (1941). Applying Virginia choice of law rules, the district court

properly chose to apply Pennsylvania law, since the parties agree that

the insurance contract was delivered in Pennsylvania. See Keco

Indus., Inc. v. ACF Indus., Inc., 316 F.2d 513, 514 (4th Cir. 1963).

LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE 5
Under Pennsylvania law, the interpretation of an insurance policy

is a matter of law for the court. Reliance Ins. Co. v. Moessner, 121

F.3d 895, 900 (3rd Cir. 1997) (citing Standard Venetian Blind Co. v.

American Empire Ins. Co., 503 Pa. 300, 469 A.2d 563, 566 (Pa.

1983)). "When the policy language is clear and unambiguous, the

court must give effect to the language of the contract." Travelers Cas.

& Sur. Co. v. Castegnaro, 565 Pa. 246, 772 A.2d 456, 458 (Pa. 2001).

Conversely, where the policy is ambiguous, the ambiguous term must

be construed in favor of the insured. Medical Protective Co. v. Watkins, 198 F.3d 100, 104 (3rd Cir. 1999).

B.

As noted above, the commercial liability policy issued by Zurich

provides coverage for damage to the property of others that arises

after the insured’s work has been completed. However, the policy

contains an exclusion for "Damage To Your Work." In assessing

whether the property damage at issue in this case is covered by the

policy, we must determine whether the "your work" exclusion eliminates coverage.

1.

A portion of Limbach’s insurance claim covers the cost of repairing the damaged backfill. The parties stipulated that the leak damaged

the backfill placed around the steam line. It is undisputed that the

backfill work was performed on Limbach’s behalf by a subcontractor,

Legacy Builders. Since "your work," as defined in the insurance policy, includes work performed on an insured’s behalf, Zurich maintains that the "your work" exclusion precludes coverage for the cost

of repairing the damaged backfill. We disagree.

The "your work" exclusion contains an exception for work performed by a subcontractor. The exclusion specifically states that it

"does not apply if the damaged work or the work out of which the

damage arises was performed on your behalf by a subcontractor."

(emphasis added). 

The history of this exception was reviewed by the Pennsylvania

Superior Court in Kvaerner Metals Div. of Kvaerner U.S., Inc. v.

6 LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE
Commer. Union Ins. Co., 2003 Pa. Super. 149, 825 A.2d 641, 655-

656 (Pa. Super. 2003), appeal granted, 577 Pa. 667, 848 A.2d 925

(Pa. Apr. 5, 2004) (quoting the Comprehensive General Liability Policy Handbook, p. 106 (Nelson, P., Ed.)) (emphasis added):

In 1986, the Insurance Services office (ISO) issued

reworded Commercial General liability forms. The new

form of the insured’s work exclusion now states that the

insurance does not apply to:

Property damage to ‘your work’ arising out of it or

any part of it and included in the ‘productscompleted operations hazard.’

This exclusion does not apply if the damaged work

or the work out of which the damage arises was

performed on your behalf by a subcontractor. 

In light of these changes, in theory there should no longer

be any doubt as to the limited scope of this exclusion. 

. . . . 

The 1986 revisions to the CGL policy significantly limit the

effect of the work/product exclusions in construction defect

cases. If the completed structure no longer qualifies as the

insured contractor’s "product", the exclusions would likely

apply only to the extent that the contractor’s own work was

damaged as a result of its own faulty workmanship. 

Upon reviewing the history of the subcontractor exception in

Kvaerner Metals, the Pennsylvania Superior Court remanded the case

to the trial court for application of the exception. Id. at 658. The court

noted that the subcontractor exception "alters the definition of ‘your

work’ . . . so as to exclude work performed by a subcontractor." Id.

at 655. See also Spears v. Smith, 117 Ohio App. 3d 262, 690 N.E.2d

557, 560 (Ohio Ct. App. 1996) (holding that the "unambiguous terms"

of the "your work" exclusion do not eliminate coverage for harm done

to a subcontractor’s work). 

LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE 7
In the present case, the parties stipulated that the leak from the

steam line damaged the backfill placed around the steam line. The

backfill work was performed on Limbach’s behalf by a subcontractor,

Legacy Builders. As a result, the "your work" exclusion does not preclude coverage for the cost of repairing the damaged backfill. To hold

otherwise would be to ignore the unambiguous terms of the exclusion’s exception for work performed by a subcontractor. 

2.

Limbach’s insurance claim also includes the cost of replacing the

damaged steam pipe. Limbach argued in its motion for summary

judgment that the damaged pipe was not excluded from coverage,

because the pipe was manufactured by a subcontractor, Thermacor.

The district court ultimately determined that Thermacor was a

"materialman" rather than a subcontractor, and that the damaged

steam pipe was therefore excluded from coverage by the "your work"

exclusion. We disagree. 

The district court emphasized in its opinion that although the manufacturer of custom-built materials may be considered a subcontractor, "the fact that something might be custom built is not dispositive."

To support this assertion, the district court cited to United States v.

Lane Constr. Corp., 477 F. Supp. 400 (M.D. Penn. 1979), a case

involving the determination of whether a manufacturer who produced

hydraulic gates to be used in the construction of a dam was a subcontractor within the meaning of the Miller Act. While the Lane court

noted that "custom manufacturing by itself is not sufficient" to establish a contractor-subcontractor relationship, the court ultimately concluded that the manufacturer was a subcontractor within the meaning

of the Miller Act. Id. at 411-412. Although the court recognized that

the manufacturer’s work constituted only two percent of the primary

contract’s value, and that the manufacturer did not perform any significant on-site work, the court based its conclusion on the following

facts: (1) the manufacturer had to prepare shop drawings to be submitted to the Corps of Engineers; (2) the gates had to be manufactured

according to Corps specifications; (3) the contractor conceded that it

could not manufacture the gates itself; (4) once manufactured, the

gates could not be used in another structure; and (5) the gates were

an important part of the dam structure. Id.

8 LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE
The facts of this case are similar to those presented in Lane. Limbach’s contract with Morse Diesel/Essex required the installation of

an insulated steam pipe. Since Limbach could not fabricate the pipe

itself, the company contracted with Thermacor for the production of

the pipe. According to the affidavit of the foreman assigned to the

Howard University project, Thermacor submitted shop drawings,

which were approved by Limbach. Thereafter, Thermacor custom

manufactured the steam pipe in accordance with the shop drawings

and project specifications. One of Thermacor’s representatives visited

the work site, reviewed the installation drawings with Limbach, and

provided specific instructions regarding the installation of the pipe. 

Thermacor’s role is highly distinguishable from that of the supplier

in Webster Brick v. Fidelity & Deposit Co., 27 Pa. D. & C.3d 7 (Pa.

D. & C. 1983), another case cited by the district court. In Webster

Brick, the court considered whether a brick supplier was a subcontractor within the meaning of the Miller Act. Id. at 8-9. In deciding that

the brick supplier was not a subcontractor, the court emphasized that

the "ordinary, generic bricks" provided by the supplier were "neither

custom-made to the prime contractor’s specifications, nor [were they]

. . . of relatively great importance in relation to the entire project." Id.

at 11. The court further noted that it could "think of few building

materials which are more interchangeable and less customized than a

brick." Id.

Although we are unable to find any Pennsylvania cases that consider the issue of whether a manufacturer or supplier is a subcontractor for purposes of the exception to the "your work" exclusion, this

issue was thoroughly considered by the United States District Court

for the Eastern District of Missouri in the case of Nat’l Union Fire

Ins. Co. v. Structural Sys. Tech., Inc., 756 F. Supp. 1232 (E.D. Mo.

1991). In determining that a manufacturer of prefabricated steel rods

for a tower was a subcontractor, the court explained as follows:

The policy does not define "subcontractor." Webster defines

subcontract as "a contract that assigns some of the obligations of a prior contract to another party," and subcontractor

as "one that enters into a subcontract and assumes some of

the obligations of the primary contractor." Similarly, subcontractor also is defined as "One who takes [a] portion of

LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE 9
a contract from [the] principal contractor or another subcontractor," and "One who has entered into a contract, express

or implied, for the performance of an act with the person

who has already contracted for its performance." 

In determining the applicability of this exception, the Court

is guided by several principles of contract construction.

First, plain and unambiguous language in an insurance contract must be given its plain meaning. Second, the insurer

bears the burden of proving the applicability of an exclusion. And finally, the provisions restricting coverage are

construed in favor of the insured and against the insurer.

In this particular case, National has not proven to this court

that LeBlanc & Royle was merely a materialman and not a

subcontractor within the meaning of the contract. Rather, it

appears from all indications that LeBlanc & Royle’s role

was actually one of a major component of the tower, the

steel rods. According to the contract between SST and

LeBlanc & Royle, the latter was to "Provide, Fabricate, Galvanize & Deliver to the site all materials per" certain specifications. The contract then outlines certain design and

manufacturing specifications. Therefore, with respect to the

tower, the exception to the exclusion does apply. 

Id. at 1239-1240 (citations omitted). On appeal, the United States

Court of Appeals for the Eighth Circuit affirmed the district court’s

decision that the manufacturer of prefabricated steel rods was a subcontractor for purposes of the exception to the "your work" exclusion.

Nat’l Union Fire Ins. Co. v. Structural Sys. Tech., Inc., 964 F.2d 759,

763 (8th Cir. 1992). See also Wanzek Constr., Inc. v. Employers Ins.,

679 N.W.2d 322, 329 (Minn. 2004) (holding that a supplier of coping

stones for a new swimming pool was a subcontractor for purposes of

the "your work" exclusion, since the supplier custom manufactured

the coping stones to the architect’s specifications and provided on-site

supervision in connection with the installation). 

Upon reviewing the cases cited by the district court as well as those

directly on point, we reject the district court’s characterization and

conclude that Thermacor was a subcontractor. As previously

10 LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE
explained, Thermacor custom manufactured the steam pipe in accordance with the shop drawings and project specifications, and the company provided on-site installation instructions. Furthermore, the

parties’ differing interpretations of the term "subcontractor" demonstrate that the term is ambiguous. Under Pennsylvania law, ambiguous terms in an insurance policy must be construed in favor of the

insured. Medical Protective Co., 198 F.3d at 104. Since we conclude

that the steam pipe was manufactured by a subcontractor, and since

the parties stipulated that the pipe was damaged by the leak, the "your

work" exclusion does not preclude coverage for the cost of replacing

the pipe. The damaged pipe clearly falls within the exclusion’s exception for work performed by a subcontractor. 

3.

The final portion of Limbach’s insurance claim includes the costs

of replacing concrete and repairing damaged landscaping.* Neither

the concrete work nor the landscaping work was performed by Limbach or on Limbach’s behalf. The parties stipulated that the leak damaged the landscaping around the pipe. In order to replace the damaged

steam pipe, Limbach had to remove concrete. Limbach argued in its

cross-motion for summary judgment that the costs of replacing the

concrete and repairing the damaged landscaping were covered by the

insurance policy. Although the district court did not specifically

address the concrete or landscaping costs, the court apparently concluded that these costs were excluded from coverage by the "your

work" exclusion. We disagree.

"General liability insurance policies are intended to provide coverage where the insured’s product or work causes personal injury or

damage to the person or property of another." Ryan Homes, Inc. v.

Home Indem. Co., 436 Pa. Super. 342, 647 A.2d 939, 942 (Pa. Super.

1994). Therefore, instead of excluding all property damage arising

from an insured’s work, the policy at issue in this case specifically

excludes "Damage to Your Work." (emphasis added). By its plain language, the "your work" exclusion only excludes coverage for damage

to an insured’s work that arises out of the insured’s faulty workmanship. It does not exclude coverage for damage to a third party’s work.

*Zurich paid for part of the cost of repairing the damaged landscaping.

LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE 11
See Missouri Terrazzo Co. v. Iowa Nat’l Mut. Ins. Co., 740 F.2d 647,

650 (8th Cir. 1984) (affirming the district court’s decision that a similar exclusion for work performed by the insured "did not bar coverage

for injury to property other than that of the insured."). Since the landscaping and concrete work were performed by third parties, the "your

work" exclusion does not preclude coverage for the costs of repairing

and replacing the landscaping and concrete.

IV.

Pursuant to the foregoing, we reverse the award of summary judgment to Zurich and remand for further proceedings consistent with

this opinion.

REVERSED AND REMANDED

12 LIMBACH COMPANY v. ZURICH AMERICAN INSURANCE