Texas “your work” exclusion

In American Home Assurance Co. v. Cat Tech, L.L.C., No. 10-20499 (5th Cir. Oct. 5, 2011), claimant Ergon hired insured Cat Tech to perform service on a reactor at Ergon’s refinery.  During a start-up of the reactor after Cat Tech had completed its work, the reactor suffered damage.  Cat Tech performed additional service and repairs.  However, again upon start-up of the reactor, it suffered additional damage.   Ergon hired another contractor to repair the reactor.  Ergon initiated arbitration proceedings against Cat Tech.  Cat Tech’s CGL insurer American Home defended Cat Tech against the Ergon arbitration under a reservation of rights.  After entry of an arbitration award against Cat Tech, American Home and excess insurer National Union filed suit against Cat Tech seeking a declaration of no duty to indemnify Cat Tech against the arbitration award.  The federal district trial court entered summary judgment for American Home and National Union, finding that all of the damages fell within the “your work” exclusion.  On appeal, the U.S. Court of Appeals for the Fifth Circuit reversed.  Applying Texas law, the court held that while the exclusion applied to property damage to any parts of the reactor on which Cat Tech worked, whether to defective work or non-defective work, it did not apply to property damage to any part of the reactor or other property on which Cat Tech did not work.   Finding that the evidence presented by American Home and National Union was insufficient for a determination that the property damage was limited to those components of the reactor on which Cat Tech worked, the court remanded to the district court for “further fact-finding” on this issue.

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