Opinion ID: 785255
Heading Depth: 3
Heading Rank: 3

Heading: Exclusion 2j(5)

Text: 47 Appellants also assign as error the district court's conclusion that the exclusion found in section 2j(5) of the policy does not apply to Standard's claim. This exclusion precludes coverage for property damage to: 48 That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the property damage arises out of those operations. 49 As previously noted, at the conclusion of the indemnification trial, the district court found as a fact that there was no permission by Love for Terry to dump debris on her land, and that Standard thus had no contract with her. Therefore, it held that the dumping was a trespass. This finding is not clearly erroneous. 50 The district court further held that Exclusion j(5) was not applicable, since it was not intended to apply to claims by third parties, but only to claims by the entity with which the insured construction contractor had expressly contracted. (J.A. at 19-22) (Findings of Fact and Conclusions of Law). Thus, the district court further held that whether Love was a third-party beneficiary of Standard's construction contract with the State was immaterial. 51 We agree with these conclusions. Appellants cite Vinsant Elec. Contractors v. Aetna Cas. & Surety Co., 530 S.W.2d 76 (Tenn.1975), and Standard Fire Ins. Co. v. Chester-O'Donley & Assoc., Inc., 972 S.W.2d 1 (Tenn.App.1998). Neither of these cases, however, is of help to the insurers because neither involved a third party. Rather, both were actions by the owner with whom the insured construction company had contracted. 52 The Tennessee court describes general liability policies as follows: 53 General liability policies are not all-risk policies.... They provide an insured with indemnification for damages up to policy limits for which the insured becomes liable as a result of tort liability to a third party. ... The risk insured by these policies is the possibility that the insured's product or work will cause bodily injury or damage to property other than the work itself for which the insured may be found liable. 54 Standard Fire, 972 S.W.2d at 6-7 (citations omitted) (emphasis added). 55 The Standard Fire court further cites with approval an article by Peter J. Neeson and Phillip J. Meyer entitled The Comprehensive General Liability Policy and Its Business Risk Exclusions: An Overview. Id. at 7 n. 8. There, the learned authors state: 56 The Business Risk exclusions do not purport to bar coverage for personal injuries or for physical injury to other property which are caused by the insured's product or work. 57 Peter J. Neeson & Phillip J. Meyer, The Comprehensive General Liability Policy and Its Business Risk Exclusions: An Overview, 79-80, reprinted in Reference Handbook on the Comprehensive General Liability Policy (American Bar Ass'n 1995). 58 We agree with these observations and also with the authors' application of these principles to construction projects: 59 In every construction project, the owner and contractor incur risks or exposure to loss. Some of these risks can be shifted to insurers — others cannot. The owner has the risk that the contractor will fail to properly perform his contractual obligations. This risk can be shifted by the owner either securing, or requiring the contractor to provide, a performance bond. The owner likewise has the risk the project may be destroyed by fire, explosion or the like during construction. The contractor may have a similar risk. Either or both may shift that risk to an insurer by acquiring a builder's risk policy. Again, such losses are generally beyond the effective control of either the contractor or owner ... [The] risk of third party personal injury or property damage claim[s] due to defective workmanship or materials may be shifted by the contractor purchasing a comprehensive general liability insurance policy. ... However, in addition to and apart from those risks, the contractor likewise has a contractual business risk that he may be liable to the owner resulting from failure to properly complete the building project itself in a manner so as to not cause damage to it. This risk is one the general contractor effectively controls and one which the insurer does not assume because it has no effective control over those risks and cannot establish predictable and affordable insurance rates. 60 Id. at 81-82 (quoting Knutson Constr. Co. v. St. Paul Fire and Marine Ins. Co., 396 N.W.2d 229, 234 (Minn.1986)) (emphasis added). Thus: 61 When read together, these [business risk] provisions exclude coverage when there has been no physical injury to tangible property other than the insured's work. 62 Standard Fire, 972 S.W.2d at 12 (emphasis added). 63 In other words, there is coverage where there has been physical injury to tangible property that is not the insured's work. As we have pointed out earlier in this opinion, we agree with the district court's view that Love's tangible real property is not the insured's work, and that it was physically damaged by having the construction debris from the road-widening project dumped on it. Therefore, this exclusion does not apply. See Thommes v. Milwaukee Mut. Ins. Co., 622 N.W.2d 155, 159-60 (Minn.App.2001) (holding that j(5) exclusion did not bar coverage for claim against insured by third party arising out of insured's damage to third party's property), aff'd, 641 N.W.2d 877 (Minn.2002). Cf. Dewitt Constr. Inc. v. Charter Oak Fire Ins. Co., 307 F.3d 1127, 1134-35 (9th Cir.2002) (holding that j(5) exclusion did not bar coverage for damage to subcontractors' work because damage did not arise from insured's performing operations on subcontractors' work).