George J. Igel & Co. v. United States Fidelity & Guaranty Co., 81 N.Y.2d 1033 (1993)
A “work product” exclusion in a comprehensive liability insurance policy bars coverage for claims arising from defects in the insured’s completed work, including discretionary choices made during the course of that work.
Summary
George J. Igel & Co., a residential land developer, was sued by homeowners alleging the developer failed to provide a safe water supply. The homes, not connected to a public system, relied on wells contaminated with various substances. Igel sought defense and indemnification from its insurer, United States Fidelity & Guaranty Co. The insurer disclaimed coverage based on a “work product” exclusion in the policy. The New York Court of Appeals held that the exclusion applied, as the choice of the site and its water supply access was part of the developer’s work product. Therefore, the insurer was not obligated to defend or indemnify the developer.
Facts
George J. Igel & Co. developed a residential area in the Town of New Scotland, Orchard Park, consisting of 35 homes.
The 30 homeowners sued the developer, claiming that their homes were not built in a workmanlike manner because they lacked a safe water supply.
The homes relied on ground water wells contaminated with iron, iron bacteria, sodium, chloride, and methane gas, which allegedly damaged household fixtures, appliances, and posed a health hazard.
Procedural History
The developer sought defense and indemnification from its comprehensive liability insurer, United States Fidelity & Guaranty Co.
The insurer disclaimed coverage based on a “work product” exclusion in the policy.
The Appellate Division upheld the insurer’s decision.
The New York Court of Appeals affirmed the Appellate Division’s order, concluding that the exclusion applied.
Issue(s)
Whether the “work product” exclusion in the developer’s comprehensive liability insurance policy bars coverage for claims arising from the developer’s choice of a site dependent on a contaminated water supply.
Holding
Yes, because the choice of site, including considerations of its water supply, is part of the developer’s work product, and the insurance policy excludes liability arising from defects in that work product.
Court’s Reasoning
The court reasoned that the “work product” exclusion exists to exclude coverage for business risks, including claims that the insured’s product or completed work was not what the damaged person bargained for. The court cited Henderson, Insurance Protection for Products Liability and Completed Operations — What Every Lawyer Should Know, 50 Neb L Rev 415, 441. The court determined that the “work product” of a residential land developer includes the numerous discretionary choices that must be made during construction, including site choice and access to a water supply. The court stated, “The builder’s site choice, a choice that necessarily includes consideration of its access to a water supply, is clearly part of that work product.” The court referenced Gene & Harvey Bldrs. v Pennsylvania Mfrs. Assn. Ins. Co., 512 Pa 420, 427, 517 A2d 910, 913-914 and Garneau v Curtis & Bedell, 158 Vt 363, 368, 610 A2d 132, 134 to support their claim. Because the homeowners’ claims arose from the developer’s choice of a site dependent on a contaminated water supply, the court held that the “work product” exclusion applied, and the insurer was not obligated to defend or indemnify the developer.