27/03/2019
“Rip and tear” damages are the costs of removal and replacement of non-defective property required to repair defective work, also known as “get to” damages. For example, if an insured contractor installs a defective pipe which is hidden behind a non-defective wall, some or all of the wall may need to be taken apart in order to access the pipe. Are these costs covered “property damage” under a commercial general liability policy? As the law on this issue continues to develop, courts have come to opposite conclusions, for a variety of reasons.
“Rip and tear” damages not covered
Multiple courts have found that “rip and tear” damages are not covered under general liability policies, citing a range of reasons for their conclusions. For example, in Regional Steel Corp. v. Liberty Surplus Ins. Corp., 226 Cal. App. 4th 1377 (2014), the California Court of Appeals held that “rip and tear” damages were not covered because there was no underlying “property damage.” There, the insured subcontractor installed two types of seismic tie hooks, which were then encased by concrete. After the building inspector determined that only one type of hook should have been used, the concrete had to be torn out in order to correct the “inadequate installation” of the tie hooks.
In Woodfin Equities Corp. v. Hartford Mutual, 110 Md. App. 616 (Ct. Sp. App. 1996), the Appellate Court of Maryland determined that costs associated with ripping out non-defective walls, molding, and carpeting in order to repair and remove defectively installed HVAC units did not meet the definition of “property damage” in a general liability policy. The court found that there was no evidence that the defective HVAC units had ruined walls or carpeting in the hotel and that “[v]oluntarily pulling up carpeting or breaking through dry-wall to access the HVAC units is not property damage; it is the cost incurred in replacing and repairing the HVAC systems.” The court went on to state that “[e]ven if it could be considered ‘property damage,’ we would hold that it was not caused by an ‘occurrence,’ because the so-called damage was not accidental.”
In that vein, in NAS Surety Group v. Precision Wood Products, Inc., 271 F. Supp. 2d 776 (M.D.N.C. 2003), a subcontractor installed defective cabinets and millwork. The repair of the cabinets required other, non-defective, kitchen components to be damaged. The court found that the costs involved with the repair of drywall, repainting of walls, and the reinstallation of sinks, wiring, and plumbing were not covered because they “were incident to, and a foreseeable consequence of, the repair and replacement effort.” In other words, the act of ripping and tearing into non-defective property is not accidental and, thus, not an “occurrence.”
“Rip and tear” damages covered
On the other hand, in Colorado Pool Systems, Inc. v. Scottsdale Ins. Co., 317 P.3d 1262 (Colo. App. 2012), a general contractor sought coverage for losses associated with demolishing and replacing a defectively-constructed pool. The Colorado Court of Appeals held that costs incurred in demolishing and replacing the defective pool itself were not covered. However, “rip and tear damage to non-defective third-party work (including damage to the deck, sidewalk, retaining wall, and electrical conduits) is covered” because it is consequential damage resulting from an “accident.” Similarly, in the unpublished case Clear, LLC v. Am. & Foreign Ins. Co., No. 3:07-cv-00110 JWS, 2008 U.S. Dist. LEXIS 23355 (D. Alaska Mar. 24, 2008), the United States District Court for the District of Alaska held that “rip and tear” costs were covered because “making repairs to covered property damage necessarily includes the costs involved in removing and replacing other materials to gain access to the damaged property[.]”
Finally, in Dewitt Constr. Inc. v. Charter Oak Fire Ins. Co., 307 F.3d 1127 (9th Cir. 2002), the insured subcontractor drilled and placed into the ground improperly constructed concrete piles meant to serve as a primary component of a building’s foundation. The court found that the resulting removal and destruction of other subcontractors’ work constituted covered “property damage.” There, the court also found that the initial defective workmanship was the “occurrence” that caused the “property damage.”
Comment
In the construction defect context, insurers should anticipate arguments by insureds that even when a defect that needs to be repaired is not itself covered, “getting to” the defect by means of removing or replacing non-defective property should be covered. Courts across the nation have differed significantly in how they view “rip and tear” costs under general liability policies, making it difficult to predict how courts that have no yet examined the issue might rule. When analyzing the issue, a good starting point is to consider whether there is any covered “property damage” in the first instance. To the extent that the required repairs and remediation are wholly limited to defective work, a stronger argument exits that “rip and tear” damages should not be covered as consequential damages.
