A federal court in Texas held that the “your work” exclusion is unambiguous and enforceable, barring a homeowner from collecting under a contractor’s policy a judgment against the contractor for completed work. Feaster v. Mid-Continent Casualty Co., No. 2015 WL 164041, (S.D. Tex. Jan. 13, 2015), appeal filed (5th Cir. Feb. 9, 2015).
The insured, a home developer, constructed a home purchased for homeowners, who began to encounter structural and cosmetic damages to their home, consisting of cracks and other defects formed in the sheet rock, brick mortar and woodwork, and sloping and deflections developed in the floors, after they took possession of it. The homeowners sued the insured alleging defective construction, for which its insurer denied coverage. The insured did not answer the homeowners’ lawsuit, and a default judgment was obtained against it. The insured assigned its claims against its insurer to the homeowners who then sued the insurer.
The insurer was granted summary judgment. The court, following Lamar Homes, Inc. v. Mid–Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007), held that the “your work” exclusion barred coverage for defective construction. It also held that the exclusion was neither unconscionable nor unenforceable under Texas law as the Texas Department of Insurance approved the standard form developed by the Insurance Services Office, Inc. containing the “your work” exclusion.