UNPUBLISHED

UNITED STATES COURT OF APPEALS 

FOR THE FOURTH CIRCUIT 

No. 08-1476

BREEZEWOOD OF WILMINGTON CONDOMINIUMS HOMEOWNERS’ 

ASSOCIATION, INCORPORATED, 

 Plaintiff - Appellant, 

 v. 

AMERISURE MUTUAL INSURANCE COMPANY, 

 Defendant - Appellee. 

Appeal from the United States District Court for the Eastern 

District of North Carolina, at Wilmington. James C. Dever III, 

District Judge. (7:07-cv-00050-D) 

Argued: March 25, 2009 Decided: July 1, 2009 

Before DUNCAN, Circuit Judge, Robert J. CONRAD, Jr., Chief 

United States District Judge for the Western District of North 

Carolina, sitting by designation, and Thomas D. SCHROEDER, 

United States District Judge for the Middle District of North 

Carolina, sitting by designation. 

Affirmed by unpublished per curiam opinion. 

Brian Schoolman, SAFRAN LAW OFFICES, Raleigh, North Carolina, 

for Appellant. Tracy Lynn Eggleston, COZEN O’CONNOR, Charlotte, 

North Carolina, for Appellee. 

Unpublished opinions are not binding precedent in this circuit. 
PER CURIAM: 

 Breezewood of Wilmington Condominiums Homeowners’ 

Association, Inc. (“Breezewood CHOA”) sought a declaratory 

judgment that Amerisure Mutual Insurance Company (“Amerisure”) 

had a duty to defend and indemnify its insured, Quality Built 

Construction, Inc. (“Quality Built”), in whose shoes Breezewood 

CHOA stands by assignment, with respect to state court claims 

arising out of the construction of a condominium development. 

The district court granted Amerisure’s motion for summary 

judgment. We conclude that Amerisure had no duty to defend 

Quality Built and therefore affirm. 

I. 

Quality Built served as general contractor for a 

condominium development in Wilmington, North Carolina (the 

“Condominium Development”). On May 28, 2004, Breezewood CHOA 

filed a complaint in North Carolina state court against Quality 

Built and the Condominium Development developers,1 alleging 

defects in construction and design of the Condominium 

Development buildings that necessitated “extraordinary repairs 

and reconstruction of major portions of the common elements” 

(the “Underlying Complaint”). (J.A. 38-39.) Approximately a 

 1

 Breezewood of Wilmington, Inc., and Breezewood of Raleigh, 

Inc., were the developers for the Condominium Development. 

2 
year later, in May 2005, Quality Built notified Amerisure of the 

Underlying Complaint and submitted a claim under its commercial 

general liability insurance (the “CGL policy”) for damage to the 

building components and resulting loss of use. Amerisure denied 

coverage on May 25, 2005, on the ground that the Underlying 

Complaint did not allege “property damage” caused by an 

“occurrence.”2 (J.A. 231-33.) Breezewood CHOA subsequently 

settled with Quality Built and one of the developers, accepting 

a $2,000,000 judgment and an assignment of Quality Built’s 

rights against Amerisure. 

Breezewood CHOA initiated the present lawsuit in the 

district court, seeking a declaratory judgment that Amerisure 

breached its duty to defend Quality Built against the Underlying 

Complaint. Amerisure counterclaimed, seeking a declaratory 

judgment that Amerisure had no duty to defend Quality Built. On 

cross-motions for summary judgment, the district court granted 

Amerisure’s motion and denied Breezewood CHOA’s motion. 

Breezewood CHOA timely appeals the district court’s decision. 

 2

 Amerisure also declined coverage and defense based on late 

notice, but that issue is not before us inasmuch as the district 

court did not reach it. 

3 
II 

 We exercise jurisdiction over this appeal under 28 U.S.C. 

§ 1291. A district court’s grant of summary judgment is 

reviewed de novo. Jennings v. Univ. of N.C. at Chapel Hill, 482 

F.3d 686, 694 (4th Cir. 2007) (en banc). Because this is a 

diversity action, we apply the law of North Carolina, which 

treats the interpretation of insurance policy provisions as a 

question of law. ABT Bldg. Prods. Corp. v. Nat’l Union Fire 

Ins. Co., 472 F.3d 99, 115 (4th Cir. 2006); N.C. Farm Bureau 

Mut. Ins. Co. v. Briley, 127 N.C. App. 442, 444, 491 S.E.2d 656, 

658 (1997). Insurance policies are construed in accordance with 

traditional rules of contract interpretation, so where the 

meaning of the policy is clear and only one reasonable 

interpretation exists the courts must enforce the contract as 

written. Patrick v. Wake County Dep’t of Human Servs., 188 N.C. 

App. 592, 596, 655 S.E.2d 920, 924 (2008) (citing Dawes v. Nash 

County, 357 N.C. 442, 448, 584 S.E.2d 760, 764 (2003)). The 

party seeking benefits under an insurance contract bears the 

burden of showing coverage for its claim. Fortune Ins. Co. v. 

Owens, 351 N.C. 424, 430, 526 S.E.2d 463, 467 (2000). Until the 

insured makes a prima facie case of coverage, the insurer has no 

burden to prove the applicability of any policy exclusion. Id.

at 430, 526 S.E.2d at 467. 

4 
An insurer’s duty to defend is broader than its duty to 

indemnify -- the former ordinarily being measured by the facts 

as alleged in the pleadings while the latter by facts ultimately 

determined at trial. Waste Mgmt. of Carolinas, Inc. v. Peerless 

Ins. Co., 315 N.C. 688, 691, 340 S.E.2d 374, 377 (1986). North 

Carolina applies the “comparison test” to determine whether the 

damage alleged by the insured is covered by the insurer’s 

policy. Id. at 693, 340 S.E.2d at 378. Under the comparison 

test, “the pleadings are read side-by-side with the policy to 

determine whether the events as alleged are covered or 

excluded.” Id. at 693, 340 S.E.2d at 378; Harleysville Mut. 

Ins. Co. v. Buzz Off Insect Shield, L.L.C., ___ N.C. App. ___, 

664 S.E.2d 317, 320 (2008). If the pleadings “state facts 

demonstrating that the alleged injury is covered by the policy, 

then the insurer has a duty to defend, whether or not the 

insured is ultimately liable.” Waste Mgmt., 315 N.C. at 391, 

340 S.E.2d at 377. This is true even if the pleadings describe 

a hybrid of covered and excluded events or “disclose a mere 

possibility that the insured is covered.” Id. at 391 n.2, 340 

S.E.2d at 377 n.2. On the other hand, if the pleadings “allege 

facts indicating that the event in question is not covered, and 

the insurer has no knowledge that the facts are otherwise, then 

it is not bound to defend.” Id. at 391, 340 S.E.2d at 377. 

5 
However, once “the insurer knows or could reasonably 

ascertain facts that, if proven, would be covered by its 

policy,” the duty to defend is not dismissed simply because the 

facts alleged in the complaint appear to be outside coverage. 

Waste Mgmt., 315 N.C. at 691, 340 S.E.2d at 377-78. Thus, the 

insurer has a “duty to investigate and evaluate facts expressed 

or implied in the []complaint as well as facts learned from the 

insured and from other sources.” Id. at 691; 340 S.E.2d at 378; 

accord Duke Univ. v. St. Paul Fire and Marine Ins. Co., 96 N.C. 

App. 635, 638, 386 S.E.2d 762, 764 (1990). Any doubt as to 

coverage is resolved in favor of the insured. Waste Mgmt., 315 

N.C. at 693, 340 S.E.2d at 378. If it is later determined that 

an insurer breached its duty to defend, “the insurer is estopped 

from denying coverage and is obligated to pay the amount of any 

reasonable settlement made in good faith by the insured of the 

action brought against him by the injured party.” Pulte Home 

Corp. v. Am. S. Ins. Co., 185 N.C. App. 162, 165, 647 S.E.2d 

614, 617 (2007) (citation omitted). 

6 
III. 

With these principles in mind, we turn to the 

interpretation of the terms of the CGL policy in this case.3 The 

CGL policy requires Amerisure to pay those sums Quality Built 

becomes legally obligated to pay because of “property damage” 

“caused by an ‘occurrence’ that takes place in the ‘coverage 

territory’ and . . . during the policy period.” (J.A. 79.) The 

dispute in this case is whether Breezewood CHOA alleged 

“‘property damage’ caused by an ‘occurrence.’” Because we 

conclude that the allegations do not allege “property damage” 

covered by the CGL policy, we do not address whether Breezewood 

CHOA alleged the existence of an “occurrence.” 

A. 

Where an insurance policy defines a term, that definition 

is to be used in interpreting the pertinent provision. C.D. 

Spangler Constr. Co. v. Indus. Crankshaft and Eng’g Co., 326 

N.C. 133, 142, 388 S.E.2d 557, 563 (1990). The CGL policy 

defines “property damage” as follows: 

(a) Physical injury to tangible property, including 

all resulting loss of use of that property. All such 

loss of use shall be deemed to occur at the time of 

the physical injury that caused it; or 

 3

 Amerisure issued both an Umbrella Liability Policy and the 

CGL policy in favor of Quality Built, and the pertinent insuring 

provisions and definitions contained in both are identical. 

Because Breezewood CHOA addresses only the CGL policy on appeal 

our analysis involves only the provisions of that policy. 

7 
(b) Loss of use of tangible property that is not 

physically injured. All such loss of use shall be 

deemed to occur at the time of the ‘occurrence’ that 

caused it. 

(J.A. 91.) 

North Carolina state courts and federal courts sitting in 

diversity have consistently held that “property damage” in the 

context of commercial general liability policies means “damage 

to property that was previously undamaged” and does not include 

“the expense of repairing property or completing a project that 

was not done correctly or according to contract in the first 

instance” by the insured. Prod. Sys., Inc. v. Amerisure Ins. 

Co., 167 N.C. App. 601, 606, 605 S.E.2d 663, 666 (2004) (citing 

Hobson Constr. Co. v. Great Am. Ins. Co., 71 N.C. App. 586, 590, 

322 S.E.2d 632, 635 (1984)); accord W. World Ins. Co. v. 

Carrington, 90 N.C. App. 520, 524-25, 369 S.E.2d 128, 130-31 

(1998); Wm. C. Vick Constr. Co. v. Penn Nat’l Mut. Cas. Ins. 

Co., 52 F. Supp. 2d 569, 581 (E.D.N.C. 1999), aff’d per curiam, 

213 F.3d 634 (4th Cir. 2000). The rationale underlying this 

view is that “the quality of the insured’s work is a ‘business 

risk’ which is solely within his own control,” and that 

“liability insurance generally does not provide coverage for 

claims arising out of the failure of the insured’s product or 

work to meet the quality or specifications for which the insured 

may be liable as a matter of contract.” W. World, 90 N.C. App. 

8 
at 523, 369 S.E.2d at 130. Rather, such business risks are the 

purpose of performance bonds, not liability insurance policies. 

Id.; see also 9A Lee R. Russ & Thomas F. Segalla, Couch on 

Insurance, § 129.1 (3rd ed. 2008) (explaining that general 

commercial liability policies do not cover business risks that 

“occur as a consequence of the insured not performing well and 

[are] a component of every business relationship that is 

necessarily borne by the insured in order to satisfy its 

customers”). 

This view was also recognized in Travelers Indemnity Co. v. 

Miller Building Corp., 97 F. App’x 431, 434 (4th Cir. 2004) 

(unpublished) (“Miller I”), a case upon which both parties rely 

heavily. In Miller I, this Court addressed the definition of 

“property damage” under North Carolina law in a commercial 

general liability insurance policy containing insuring language 

equivalent to that in the Amerisure policy.4 The general 

contractor was insured under a commercial general liability 

policy and constructed a hotel that suffered damage after its 

completion. Id. at 432. Due to the damage to the hotel, the 

 4

 Although Miller I was unpublished and holds no 

precedential authority, its factual scenario renders it worthy 

of consideration given the facts before us. See Collins v. Pond 

Creek Mining Co., 468 F.3d 213, 219 (4th Cir. 2006) (recognizing 

that “we ordinarily do not accord precedential value to our 

unpublished decisions” and that such decisions “are entitled 

only to the weight they generate by the persuasiveness of their 

reasoning” (citation omitted)). 

9 
developer refused to pay the general contractor. Id. The 

general contractor initiated arbitration proceedings against the 

developer, who counterclaimed for the cost of repairing the 

construction defects and the damage. Id. at 432-33. The 

insurer sought a declaratory judgment that it was not obligated 

to defend the general contractor against the developer’s 

counterclaims. Id. at 433. 

In construing the definition of “property damage,” this 

Court recognized that under North Carolina law “to fall within 

the scope of a general liability policy, the property allegedly 

damaged has to have been undamaged or uninjured at some previous 

point in time.” Id. at 433-34 (citation omitted). The Court 

concluded that the underlying allegations were claims for 

defective construction and that “property damage” does not 

contemplate faulty workmanship. Id. at 434. However, the 

general contractor’s faulty installation of windows and sliding 

glass doors caused water damage to guest-room carpet that had 

been provided (undamaged) by the hotel owner. Id. The insurer 

argued that such damage was not covered because the carpet was a 

component of the “defective-from-the-beginning hotel,” which was 

not “previously undamaged.” Id. This Court held that the 

damage to the carpet fell within the scope of “property damage” 

because it was “separate tangible property” from the hotel 

inasmuch as it had been supplied by the owner, not the general 

10 
contractor. Id. While the insurer’s argument “might have some 

force . . . as to another component of the hotel,” the opinion 

noted, the owner-provided guest-room carpet must be viewed as 

“separate from the hotel, not an undifferentiated component of 

the hotel, and the damage to that carpet as a discrete form of 

property damage.” Id. The district court’s grant of summary 

judgment to the insurance company was vacated and the case 

remanded. Id. at 437. 

On remand, the district court determined that coverage 

under the commercial general liability policy “extends to damage 

to property separate from the hotel that was not subjectively 

foreseeable” to the general contractor (i.e., an “occurrence”). 

Travelers Indem. Co. v. Miller Bldg. Co., 221 F. App’x 265, 267 

(4th Cir. 2007) (unpublished) (“Miller II”). In affirming the 

district court’s decision, this Court restated that “the only 

claims that could fall within the definition of ‘property 

damage,’ as we construed North Carolina law, were those that 

alleged damages to the owner’s own property that was separate 

from the hotel.” Id. at 269. The opinion specifically noted 

that between Miller I and Miller II, the North Carolina Court of 

Appeals clarified the definition of “property damage” in 

Production Systems Inc. v. Amerisure Insurance Co., 167 N.C. 

App. 601, 605 S.E.2d 663 (2004), and its interpretation was 

11 
consistent with the Miller I analysis. Miller II, 221 F. App’x 

at 269. 

Production Systems involved a contractor who defectively 

installed conveyor belts in two oven feed line systems. 167 

N.C. App. 602-603, 605 S.E.2d at 664. The insured-contractor 

was responsible for “designing, building and installing the two 

line systems.” Id. at 603, 605 S.E.2d at 664. “[D]efective 

conveyor belt assemblies caused damage to other [correctly 

installed] parts of the oven line system” resulting in loss of 

use of the line system. Id. at 603, 605 S.E.2d at 664. The 

trial court concluded there was no “property damage” under 

virtually identical insuring provisions. Id. at 605-07, 605 

S.E.2d at 666-67. The North Carolina Court of Appeals affirmed, 

reiterating that “property damage” contemplates coverage of 

“damage to property that was previously undamaged, and not the 

expense of repairing property or completing a project that was 

not done correctly or according to contract in the first 

instance.” Id. at 606, 605 S.E.2d at 666. The court then 

stated: “We conclude that under the precedent of Hobson, 

‘property damage’ does not refer to repairs to property 

necessitated by an insured’s failure to properly construct the 

property to begin with.” Id. at 607, 605 S.E.2d at 666 (citing 

Hobson Constr. Co., Inc. v. Great Am. Ins. Co., 71 N.C. App. 

586, 322 S.E.2d 632). The North Carolina Court of Appeals then 

12 
applied this conclusion to the facts and held that “there was no 

‘property damage’ to the oven feed line systems because the only 

‘damage’ was repair of defects in, or caused by, the faulty 

workmanship in the initial construction.” Id. at 607, 605 

S.E.2d at 667 (emphasis added). The trial court’s grant of 

summary judgment dismissing the case was affirmed. Id. at 607, 

605 S.E.2d at 667. 

With this outline of the case law in mind, we turn to the 

issues in this case. 

B. 

The insured, in this case Breezewood CHOA standing in the 

shoes of Quality Built, bears the burden of proving coverage 

under the CGL policy. Fortune Ins. Co. v. Owens, 351 N.C. 424, 

430, 526 S.E.2d 463, 467 (2000). Breezewood CHOA makes the 

following arguments: (1) the Underlying Complaint alleges events 

covered by the CGL policy; (2) if it does not, sufficient facts 

were discoverable so as to warrant coverage; and (3) loss of use 

resulting from the damage should be covered. 

1. 

The Underlying Complaint charges that “[p]roblems and 

defects have been discovered as a result of defective design 

and/or construction.” (J.A. 38.) It provides a non-exhaustive 

list of fourteen “defects in construction and design complained 

of,” and alleges that “[a]s a direct and proximate result of the 

13 
above-referenced design and construction deficiencies, 

Breezewood [C]HOA has [spent] and will continue to spend 

substantial sums of money for the extraordinary repairs and 

reconstruction of major portions of the common elements.” (J.A. 

38-39.) The Underlying Complaint alleges causes of action for, 

among other things, construction negligence (failure to “deliver 

the project free of construction defects and design and built in 

conformity with the customary and ordinary standards of the 

building and construction industry”), breach of duty (to 

“supervise and review the design and otherwise deliver the 

project free of construction defects and design”), breach of 

express warranty (“that the buildings would be free from 

construction defects”), breach of implied warranty (that “the 

project would be constructed in a careful, diligent, and 

workmanlike manner, free of construction defects”), unfair and 

deceptive trade practices (failure to “disclose design and/or 

construction defects”), and fraud. (J.A. 39-45.) The 

Underlying Complaint seeks compensatory and punitive damages for 

“extraordinary repairs, maintenance and reconstruction costs.” 

(J.A. 40-41, 44, 46.) 

Breezewood CHOA’s allegations in the Underlying Complaint 

squarely allege faulty workmanship by the insured and damages 

associated with repairing the deficient construction. Under 

North Carolina law, such allegations do not constitute property 

14 
damage. Prod. Sys. Inc. v. Amerisure Ins. Co., 167 N.C. App. 

601, 607, 605 S.E.2d 663, 667 (2004) (holding “property damage” 

does not include “repair of defects in, or caused by, the faulty 

workmanship in the initial construction”). Breezewood CHOA also 

charges that Quality Built did not construct the Condominium 

Development according to contract in the first instance. Costs 

associated with bringing the project into compliance with 

Breezewood CHOA’s contractual expectations is not “property 

damage” covered by a CGL policy. Id. at 606, 605 S.E.2d at 666 

(holding “property damage” does not include “the expense of . . 

. completing a project that was not done correctly or according 

to contract in the first instance”); Wm. C. Vick Constr. v. Penn 

Nat’l Mut. Cas. Ins. Co., 52 F. Supp. 2d 569, 582 (E.D.N.C. 

1999), aff’d per curiam, 213 F.3d 634 (4th Cir. 2000). Thus, 

the district court properly concluded that the Underlying 

Complaint failed to allege “property damage” under North 

Carolina law. 

2. 

Breezewood CHOA contends next that, even if the Underlying 

Complaint did not establish “property damage,” coverage was 

established when Amerisure was apprised of sufficient facts 

through two other sources: investigative reports prepared by 

R.V. Buric Construction Consultants (“Buric”), and a letter from 

15 
Breezewood CHOA to Quality Built dated July 25, 2006. We 

disagree. 

In pursuing the allegations in its Underlying Complaint, 

Breezewood CHOA retained Buric to investigate the cause and 

extent of the damage to the Condominium Development. Buric 

prepared two reports, a preliminary report dated January 14, 

2005 (the “Buric preliminary report”), and a full report dated 

May 26, 2006 (the “Buric full report”). It is apparent that the 

Buric preliminary report was delivered to Amerisure no earlier 

than Breezewood CHOA’s initial notice to Amerisure in May 2005. 

However, the record is unclear as to whether the Buric full 

report was provided to Amerisure.5 Nevertheless, because neither 

report contains allegations of damage that would be covered 

under the CGL policy, as noted below, their receipt by Amerisure 

does not impact our conclusion. 

The Buric preliminary report reveals a non-exhaustive list 

of “exterior building deficiencies and damages,” “exterior site 

and parking lot deficiencies and damages,” and “interior 

building deficiencies and damages” which constitute “violations 

 5

 Breezewood CHOA’s counsel could not represent 

affirmatively at oral argument that the Buric full report had 

been shared with Amerisure. However, he did point out that 

Quality Built’s counsel testified by affidavit that it would 

have been his standard practice to forward such documents to 

Amerisure. Breezewood CHOA’s counsel further noted that this 

assertion by Quality Built’s counsel was not contested. 

16 
of building code or failure to comply with appropriate industry 

standards.” (J.A. 278-79.) It also indicates, however, that 

“excessive moisture is being introduced into the wood products 

and may be causing damage.” (J.A. 279.) The reported waterrelated damage was to a “wood rail” and “interior finishes” of 

the Condominium Development. (Id.) The report concludes that 

further investigation and testing is needed with respect to “the 

necessary repairs and the cost for such repairs.” (Id.) 

The Buric full report specifically attributes “damages to 

building components” to “Code violations and improper 

workmanship.” (J.A. 348-49.) The report groups the damage into 

four categories of deficiencies6 and concludes that “[d]ue to 

Code violations and improper workmanship, water damage has 

occurred to the exterior wall sheathing, framing, and other 

building components at the Breezewood Condominiums.” (J.A. 348-

49.) The report prefaces its recommendations with the 

following: 

Construction deficiencies from original construction 

are causing building problems and damages to the 

buildings at Breezewood Condominiums. Water intrusion 

must be stopped and water-damaged and incorrectly 

installed building components repaired or replaced. 

(J.A. 350.) 

 6

 The deficiencies are categorized as “Cladding Systems 

Installation Deficiencies”, “Flashing Installation 

Deficiencies”, “Grading and Drainage Deficiencies”, and 

“Additional Building Deficiencies.” (J.A. 348-49.) 

17 
On July 25, 2006, Breezewood CHOA addressed Amerisure’s 

denial of coverage in a letter to Quality Built, which Quality 

Built forwarded to Amerisure.7 The letter states that Breezewood 

CHOA’s claim was “not limited to the correction of defective 

work, but also includes costs for water damage to other building 

components which were previously undamaged” when installed, 

including wall sheathing, framing, hand rails, and metal stairs. 

(J.A. 236.) The letter concludes that “as a result of the 

construction performed by Quality Built, water was able to 

penetrate the exterior of the condominium buildings” and “was a 

cause of at least some of the damage to the buildings.” (J.A. 

235.) To be sure, Breezewood CHOA clearly continued to contend 

that the water damage to the Condominium Development arose out 

of or was caused by Quality Built’s deficient construction. 

Based on both Buric reports and the letter, Breezewood CHOA 

now argues that, even if the faulty workmanship is considered 

previously damaged property, proper notice was provided that the 

resulting water damage occurred in previously undamaged property 

and is therefore covered by the CGL policy. Amerisure responds 

that Quality Built’s product is the Condominium Development as a 

whole. As such, Breezewood CHOA’s allegations of defect, it 

contends, relate to tangible property which is not separate from 

 7

 Amerisure acknowledged receipt of the letter in 

correspondence dated October 23, 2006. 

18 
the Condominium Development itself. Because the Condominium 

Development was “defective-from-the-beginning,” it reasons, the 

analysis of Miller I leads to the conclusion that the waterdamaged property is not covered “property damage.” Travelers 

Indem. Co. v. Miller Bldg. Corp., 97 F. App’x 431, 434 (4th Cir. 

2004) (unpublished). 

We do not need to decide whether Quality Built’s product is 

the entire Condominium Development (including all separate 

buildings) under the “defective-from-the-beginning” argument 

advanced by Amerisure,8 because under North Carolina law, not 

only is the cost of repair or replacement of faulty workmanship 

not “property damage,” but neither is damage to the insured’s 

 8 Miller I supports the inference that, had the carpet been 

supplied by the insured-general contractor rather than the hotel 

owner, it would have been considered an undifferentiated 

component of the hotel and any damage to it would not have 

constituted covered “property damage.” 97 F. App’x at 434-35. 

Miller I did not so hold, however, merely stating that this 

argument was “unavailing” with respect to this case because the 

carpet was supplied by the owner. Id. As an unpublished case, 

it also lacks precedential authority. However, the same 

inference can be drawn from Production Systems, where the North 

Carolina Court of Appeals denied coverage for damage to 

previously undamaged components of the insured’s work resulting 

from the insured’s faulty workmanship. 167 N.C. App. at 603, 

605 S.E. 2d at 664 (where the ovens as a whole may have been 

deemed previously undamaged). This logic also finds support in 

cases from other jurisdictions. See, e.g., Westfield Ins. Co. 

v. Sheehan Constr. Co., Inc., 580 F. Supp. 2d 701, 711 (S.D. 

Ind. 2008) (refusing to treat damage to non-faulty portions of a 

house as distinct from the faulty workmanship itself and holding 

under Indiana law that “a general contractor’s product is the 

entire project or house which he built and sold, including 

components”). 

19 
own work that is “caused by” such faulty workmanship. Prod. 

Sys., 167 N.C. App. at 607, 605 S.E.2d at 667 (rejecting 

coverage as “property damage” for repair work and alleged 

consequential damages from faulty construction).9 Here, 

Breezewood CHOA’s own evidence charges that Quality Built’s 

faulty workmanship caused water damage to the Condominium 

Development, Quality Built’s work. Thus, it cannot be “property 

damage” under North Carolina law. 

This conclusion is consistent with the CGL policy, read as 

a whole, which contains a “your work” exclusion to coverage. 

Henderson v. U.S. Fid & Guar. Co., 124 N.C. App. 103, 108-09, 

476 S.E.2d 459, 462 (1996) (“The terms of an insurance policy 

cannot be read in isolation but must be construed in the context 

of [the] instrument as a whole.”) (citations omitted)). Like 

most such policies, the CGL policy contains an exclusion for 

“‘property damage’ to ‘your work’ arising out of it or any part 

of it.”10 (J.A. 82.) 

 9 See also Miller I, 97 F. App’x at 438 (Wilkinson, J., 

dissenting) (stating that the water damage to the owner’s carpet 

was a direct consequence, and “substantively an extension,” of 

the defective workmanship). 

10 “Your work” is defined in pertinent part as “work or 

operations performed by you or on your behalf.” (J.A. 91.) The 

record indicates that Quality Built’s construction of the 

Condominium Development falls within this definition as Quality 

Built was the Condominium Development’s builder and general 

contractor. The exclusion also requires that the work be 

“included in the ‘products-completed operations hazard,’” which 

(Continued) 

20 
This Court examined the “your work” exclusion in Limbach 

Co. LLC v. Zurich American Ins. Co., 396 F.3d 358 (4th Cir. 

2005) (applying Pennsylvania law), where it was noted that 

“[g]eneral 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.” Id. at 

365 (emphasis added) (quoting Ryan Homes, Inc. v. Home Indem. 

Co., 436 Pa. Super. 342, 348-49, 647 A.2d 939, 942 (1994)). The 

Court observed that the “your work” exclusion does not exclude 

all property damage arising from an insured’s work but “[b]y its 

plain language . . . only excludes coverage for damage to an 

insured’s work that arises out of the insured’s faulty 

workmanship.” Id. The Court thus concluded that the commercial 

general liability policy covered damage to a third party’s work 

 

includes property damage “occurring away from premises you own 

or rent and arising out of ‘your product’ or ‘your work.’” 

(J.A. 90.) The record indicates that Genesis Built, Inc. 

(“Genesis Built”), was the owner of the real estate and 

buildings in the Condominium Development and held declarant 

control over the Breezewood CHOA until approximately July 2002. 

Breezewood CHOA alleged in its First Amended Complaint that 

Genesis Built was the predecessor of Breezewood of Wilmington. 

Thus, the record indicates that Quality Built, as the 

Condominium Development’s builder and general contractor, 

neither owned nor rented the property. 

21 
that resulted from the general contractor’s effort to repair his 

faulty workmanship. Id.11 

Moreover, in French v. Assurance Co. of America, 448 F.3d 

693 (4th Cir. 2006) (applying Maryland law), this Court examined 

in depth the “your work” exclusion and its interplay with the 

exception for damages caused by the faulty work of a 

subcontractor. In French, a subcontractor negligently applied 

exterior synthetic stucco to a house which otherwise had been 

properly built by the general contractor. 448 F.3d at 704-05. 

The subcontractor’s faulty application caused moisture damage to 

major portions of the components of the house built by the 

general contractor. Id. at 704. There, as here, the 

subcontractor exception provided: “This [‘your work’] 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.” 

Id. at 698; (J.A. 82.) The Court noted that the subcontractor 

exception restored coverage limited by the “your work” 

 11 Accord Missouri Terrazzo Co. v. Iowa Nat’l Mut. Ins. Co., 

740 F.2d 647, 650 (8th Cir. 1984) (holding under Missouri law 

that the “your work” exclusion in a predecessor Insurance 

Services Office (“ISO”) form “did not bar coverage for injury to 

property other than that of the insured”); Westfield, 580 F. 

Supp. 2d at 710 (noting under Indiana law that in general two 

types of risk arise from a contractor’s work: the (uncovered) 

business risk that a contractor will have to pay to repair 

faulty workmanship; and the (covered) risk that the completed 

product of the contractor, once relinquished, will cause bodily 

injury or damage “to property other than the product or 

completed work itself”) (internal citations omitted)). 

22 
exclusion. French, 448 F.3d at 706. The Court also observed 

that a plain reading, along with a thorough examination of the 

history of the “your work” provision, compelled the following 

conclusion: the standard comprehensive general liability policy 

does not provide coverage to a general contractor to correct 

defective workmanship of a subcontractor but does provide 

coverage to the general contractor for the damages caused by the 

subcontractor’s defective workmanship.12 Id. Thus, the damage 

to the general contractor’s work was covered only because it 

fell within the subcontractor exception to the “your work” 

exclusion.13 

 12 Breezewood CHOA’s argument that the CGL covers damage 

caused by the insured’s faulty workmanship to the insured’s own 

property would make the subcontractor exception meaningless. 

The purpose of the subcontractor exception is to restore 

coverage for damage to the insured’s property only to the extent 

it was caused by a subcontractor’s faulty workmanship. The 

subcontractor exception thus informs the scope of the “your 

work” exclusion, Stanley Martin Cos. v. Ohio Cas. Group, No. 07-

2102, 2009 WL 367589, at *11 n.2 (4th Cir. Feb. 12, 2009) 

(applying Virginia law) (unpublished), and Breezewood CHOA’s 

argument is simply incompatible with any reasonable 

reconciliation of the two. 

13 See also Stanley Martin, 2009 WL 367589, at *4 (holding 

under Virginia law that the commercial general liability policy 

covers mold damage to the general contractor’s work caused by a 

subcontractor’s installation of defective trusses but does not 

cover the replacement cost of the defective trusses). Both 

French and Stanley Martin found coverage under the subcontractor 

exception to the “your work” exclusion and therefore needed to 

reach the issue of whether an “occurrence” existed to decide the 

issue of coverage. Here, we do not reach the “occurrence” issue 

because we find there is no allegation of covered “property 

damage.” 

23 
Our holding today that the CGL policy excludes coverage for 

damage to an insured’s completed property caused by an insured’s 

faulty workmanship is fully consistent with this Court’s 

previous interpretations of the “your work” exception inasmuch 

as the alleged water damage “arises out of” Quality Built’s work 

within the meaning of the “your work” exclusion and is not 

alleged to have been performed by a subcontractor.14 

3. 

Finally, Breezewood CHOA argues that Amerisure should have 

defended the Underlying Complaint because it alleged “loss of 

use” of the Condominium Development resulting from the damaged 

property. As noted earlier, the CGL Policy defines “property 

damage” as “[p]hysical injury to tangible property, including 

all resulting loss of use of that property.” (J.A. 91.) In 

Production Systems, the plaintiff also sought damages for loss 

of use of the defective oven line systems while they were being 

repaired, yet the North Carolina Court of Appeals denied 

coverage when it held that all damages resulted from “faulty 

 14 At oral argument, Breezewood CHOA argued that Amerisure’s 

duty to defend was triggered because some of the damage could 

have been caused by a subcontractor’s faulty workmanship. The 

burden of producing such evidence rests with the party seeking 

application of the exception to the exclusion – here, Breezewood 

CHOA. Home Indem. Co. v. Hoechst Celanese Corp., 128 N.C. App. 

189, 202, 494 S.E.2d 774, 783 (1998). We find nothing in the 

record to indicate that any of the water-damaged work at issue 

was performed by a subcontractor, nor could Breezewood CHOA’s 

counsel represent during oral argument that it was. 

24 
25 

workmanship in the initial construction.” 167 N.C. App. at 607, 

605 S.E.2d at 665, 667. Having rejected coverage for faulty 

workmanship and damage it caused to undamaged property of the 

insured, it was a logical conclusion to deny coverage as to any 

loss of use “caused by” the faulty workmanship as well. 

Accordingly, we conclude that claims of loss of use resulting 

from Quality Built’s allegedly defective construction fall 

outside the coverage of the CGL policy. 

IV. 

For the foregoing reasons, we conclude that Breezewood 

CHOA’s allegations do not establish coverage under the CGL 

policy. Amerisure had no duty to defend and is therefore not 

liable for indemnity of the loss. Accordingly, the district 

court’s grant of Amerisure’s motion for summary judgment is 

AFFIRMED.