Opinion ID: 2601906
Heading Depth: 2
Heading Rank: 3

Heading: impaired property exclusion

Text: ¶ 25 The policy also excludes: Property damage to impaired property or property that has not been physically injured, arising out of: (1) a defect, deficiency, inadequacy or dangerous condition in your product or your work; or (2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms. This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to your product or your work after it has been put to its intended use. CP at 648. Impaired property is defined as tangible property other than `your product' or `your work' that cannot be used or is less useful ... if such property can be restored to use by ... repair, replacement, adjustment or removal of `your product' or `your work.' CP at 655. Again, it is MOE's position that it is not responsible for the cost of removing and replacing the siding where there was no evidence that the subsurface material and interior walls had been damaged merely because of the potential that the siding was leaking causing a likelihood of future damage. MOE reasons the policy does not cover future potential damage. Again, the impaired property is not the siding installed by T & G but the subsurface and interior walls beneath the siding. The King County coverage court relied heavily upon the findings of the Snohomish County liability court's findings of fact. Among other things, the Snohomish County judge found: It is very likely plaintiff standing in [the general contractor's] shoes would have been able to prove the need for total removal of siding and building paper. Numerous invasive investigative opening done at the Villas condominiums during discovery showed that the building paper underneath all of the siding was misapplied in a manner causing water intrusion. The barrier had gaps, holes and tears. The building paper and flashing problems were proved to be pervasive. Rot, decay and elevated moisture levels were already showing on buildings only a few years old. Only full strip and reclad can assure there won't be further water intrusions from the problems. Full siding removal is the only way of discovering all the defects and the only remedy that would allow the homeowners to sell their property in the future for full value by advising future owners that the problem has been fully remedied. CP at 615. The trial court concluded that virtually all of the subsurfaces were impaired because of the manner in which T & G reverse lapped and misapplied the weather protective material that trapped water and caused rot and decay. The trial court rejected MOE's spot or surgical repairs because the rot and decay was so pervasive. ¶ 26 However, MOE focuses on that part of the finding that refers to the future value of the property, which it argues is contract damages rather than covered damages. MOE is correct; the coverage issue is different from the global damages issue. But the policy does cover all damages reasonably necessary to mitigate the impaired property. Although the coverage court may rely upon the factual findings of the liability court, where the issues presented to the liability court differ from the issues before coverage court, the coverage court must determine that the damages are covered damages. It may be that the coverage court concluded that all of the subsurfaces were impaired by the manner in which the weather resistance paper was applied. But we agree with the Court of Appeals that from the record before us we cannot tell if the coverage trial court concluded substantially all of the subsurfaces were impaired or merely accepted the findings of the liability judge that the settlement was reasonable given (among other things) that the value of all the poorly sided property had been impaired even if there had been no actual property damage to a particular wall. Therefore we remand to the trial court for further proceedings on the applicability of this exclusion.