The insurer denied the insured contractor’s claim seeking a defense for faulty workmanship based upon the ongoing operations exclusion. PJR Constr. of N.J. v. Valley Forge Ins. Co., 2019 U.S. Dist. LEXIS 127973 (D. N. J. July 31, 2019).
PJR Construction was the general contractor to build a swim club and pavilion building for Cambridge Real Property, LLC. PJR began construction on May 29, 2012, and was to complete the construction by March 1, 2013. The project took much longer than anticipated. PJR was denied access to the site on November 13, 2014. Cambridge contended PJR tolerated shoddy workmanship and breached the terms of the contract documents. Cambridge estimated that the project was between 55% and 74.3% complete.
PJR and Cambridge went to arbitration. PJR sought a defense from the insurers. Coverage was denied based upon exclusions j (5) and j (6). Exclusion j (5), which the court referred to as the “Ongoing Operations Exclusion,” provided the policy did not apply to,
Property Damage to . . . [t]hat 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.
Exclusion j (6), referred to as the “Business Risk Exclusion,” stated the policy did not apply to,
Property Damage to . . . [t]hat particular part of any property that must be restored, repaired or replaced because your work was incorrectly performed on it.
PJR sued and the insurers filed a motion for summary judgment. The insurers argued that the Ongoing Operations Exclusion barred coverage because when PJR was terminated in November 2014, it was still in the process of performing work and Cambridge’s alleged damages occurred while PJR”s work operations were ongoing. The sole basis for Cambridge’s claim against PJR is that its work needed to be “restored, repaired, or replaced,” since it “was incorrectly performed.”
The court found that although PJR may have completed some portions of the project, other portions of the project were incomplete at the time the damage occurred to Cambridge. PJR was hired to construct a building and at the time the damage occurred, PJR was still attempting to complete the building. Cambridge did not complain of damage to other parts of the worksite that PJR was not responsible for. Rather, Cambridge complained of the work PJR did on the project and damage resulting from PJR’s work. Therefore, PJR was still performing wkor on that particular part of the property that was damaged.
Therefore, the Ongoing Operations Exclusion precluded coverage.