Opinion ID: 453219
Heading Depth: 2
Heading Rank: 2

Heading: The Work-Product Exclusion

Text: 28 Turbine Service and Gonzales were covered by identical comprehensive general liability insurance policies issued by Travelers and Sentry, respectively. These policies included a work-product or injury-to-work exclusion which eliminated coverage for the costs of repairing or replacing the insured's work product. In Todd I, the district court construed the exclusion to relieve Travelers from paying for replacing blades in rows 11-14 and sixty-three other blades in the LP turbine at a cost of $51,323. Todd I, supra, at 1312. Travelers and Sentry remained liable for the remainder of the LP turbine repair damages. 29 On appeal from that decision, Travelers and Sentry argued that their insureds' work product was the entire LP turbine and that consequently the entire cost of repairing the turbine should have been excluded. We upheld the applicability of the work-product exclusion in general, but found this contention to be plainly contrary to the facts. Todd II, supra, at 421. We stated that, on the record of this case, the work product of the insureds was only the specific components they attempted to repair. Id. 20 Travelers and Sentry, however, were not denied all relief. In Todd I, the district court had only excluded the actual replacement costs of the insureds' work product. We determined on appeal that the work-product exclusion also applied to all out-of-pocket expenses associated with repairing and replacing the insureds' work product. We concluded: At the risk of oversimplification, it appears that all economic losses suffered by the KATRIN's Owners may be attributable either to the 'down time' of the KATRIN or to the repair or replacement of the work product of Todd, Turbine Service and Gonzales. Id. at 423. We remanded for the district court to determine anew Travelers' and Sentry's liability. 30 On remand, the district court once again identified that the insureds' work product consisted of the blades in rows 11-14 and sixty-three other blades and calculated that the cost of replacing these blades comprised 23% of the total repair costs of the LP turbine. The court then reported that it had examined every invoice in minute detail and, whenever a cost of inspecting, crating, shipping, or reinstalling the LP turbine was included in an item of damage, excluded 23% of the charges. Finally, the court deducted (1) the cost of replacing the insureds' work product and (2) the amount of out-of-pocket expenses attributable to such repair from the underwriters' total liability. Travelers and Sentry remained liable for such damages as loss of use of the vessel, general expenses from the master's account, and pilotage, wharfage, tug, repatriation, and recrewing expenses. Todd III, supra, at 388. 31 On appeal from that decision, Travelers and Sentry assert that, in refusing to exclude the entire costs of inspecting, crating, shipping, and reinstalling the LP turbine, the district court failed to carry out this Court's specific instructions. They point out that in Todd II we stated that losses suffered by Auto could be attributable either to the down time of the KATRIN or to the repair or replacement of the work product. Todd II, supra, at 423 (emphasis supplied). According to the underwriters, this statement directed the district court to exclude from coverage the cost of repairing the entire LP turbine. 21 We find this contention ill-conceived. As the district court observed in rejecting the same argument in Todd III, the portion of the opinion relied upon by Travelers and Sentry appears at the end of a lengthy discussion concerning the scope of the policies' coverage. In the course of this discussion, we expressly upheld the district court's conclusion that the work product of the insureds was not the LP turbine in its entirety but only portions thereof. See Todd II, supra, at 421. Moreover, we observed that, under Louisiana law, the [work product] exclusion does not exclude damages to property other than the insured's work product. Id. at 423. This being the case, our opinion in Todd II clearly required the district court to segregate costs and dissect invoices in order to determine that portion of the entire costs of inspecting, crating, shipping, and reinstalling the LP turbine that was attributable to repairing specifically the insureds' work product. While the summary of that discussion, upon which Travelers and Sentry rely, might have been worded more carefully, our analysis, taken as a whole, provided adequate guidelines to the district court for use in determining the exact amount of Travelers' and Sentry's liability. The district court correctly applied these guidelines on remand, and its determination and allocation of damages is not clearly erroneous. See King Fisher Marine Service, Inc., supra, at 1187; Florida East Coast Railway Co. v. Revilo Corp., 637 F.2d 1060, 1067 (5th Cir.1981). 22