Fifth Circuit Interprets "Ongoing Operations"

The Fifth Circuit had occasion to interpret the phrase “arising out of [an insured’s] ongoing operations” in the context of an additional-insured endorsement in a CGL occurrence policy, which excludes property damage occurring after all work has been completed.   Woodward v. Acceptance Indem. Ins. Co., 2014 WL 1465363 (5th Cir. 2014), reh’g denied, 2014 WL 1465363 (5th Cir. Apr 15, 2014). The allegations of the complaint did not trigger coverage under the subcontractor’s CGL; however, the general contractor provided the insurer with an engineer’s report which concluded the alleged construction defects were the result of damage to exterior walls caused by defects in the subcontractor’s concrete work.    The Court held that “claims for liability can be brought after ongoing operations are complete, but the underlying liability cannot be due to the “completed operations.” Id. at *99 (citing Noble v. Wellington Assoc., 2013 WL 6067991 *4 (Miss. Ct. App. 2013)).

The general contractor requested a rehearing asserting that the court erred in finding that all damage arose from the subcontractor’s completed operations as the engineering report was silent as to when the damage to the exterior walls occurred arguing that it could have been during the subcontractors ongoing operations.  The general contractor claimed that this potential triggered a duty to defend under the CGL and citing cases where the duty to defend was triggered by an insurer’s own investigation.  The Court refused to extend the duty to defend to “an ambiguous explanation in an investigative report by the claimant” and made clear that it was not deciding how liberally an insurer must interpret a report based on a claimant’s own investigation in determining whether a duty to defend exists. Instead, in denying rehearing, the Court held that the identified portions of the report could not reasonably or plausibly state that damages occurred during “ongoing operations.”

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