Maine Drilling & Blasting, Inc. v. Insurance Co. of North America

GLASSMAN, Justice,

with whom DANA, Justice, joins, dissenting.

I am appreciative of the language of the question certified to the Court. Because, however, I conclude that the damages sought by the claim of Brox Industries, Inc. against Maine Drilling and Blasting, Inc. resulted not from a business risk but from an occurrence of harm risk for which the endorsement to the insurance policy at issue unambiguously provided coverage, I must respectfully dissent.

In the first instance, it must be noted that the Insurance Company of North America does not contend that (j)(5) and (j)(6) exclude coverage for an occurrence of harm risk. It asserts that the “only category of claims (j)(5) and (j)(6) remove from coverage are claims for the very property into which Maine Drilling is drilling and detonating explosives.”

Typically, a comprehensive general liability policy provides coverage for an occurrence of harm risk and excludes coverage for a business risk. In Peerless, we noted that distinction by explaining that

[a]n “occurrence of harm risk” is a risk that a person or property other than the product itself will be damaged through the fault of the contractor. A “business risk” is a risk that the contractor will not do his job competently, and thus will be obligated to replace or repair his faulty work.

Peerless Ins. Co. v. Brennon, 564 A.2d 383, 386 (Me.1989). See also Travelers Ins. Co. v. Volentine, 578 S.W.2d 501, 503-04 (Tex.Civ.App.1979) (liability policy containing business risk exclusion does not insure policyholder against liability to repair or replace own defective work or product, but provides coverage for liability for damages to other property resulting from defective condition of work); Bundy Tubing Co. v. Royal Indem. Co., 298 F.2d 151, 154 (6th Cir.1962) (cost of replacing defective tubing excluded from coverage but cost of tearing out concrete floor to remove tubing within coverage).

Critical to the issue of distinguishing between an “occurrence of harm risk” and a “business risk” is defining the work product. The scope of the contractual performance defines the work product. Travelers Ins. Co. v. Volentine, 578 S.W.2d at 504. Once the work product has been defined, the issue becomes whether the claimed damages are “directly related to the cost of repairing and *676replacing deficiencies in [the contractor’s] work on the project — and therefore excluded from the CGL coverage as business risks— [or] are claims beyond the scope of the contractual expectations for additional tort damages caused by the alleged deficiencies in [the contractor’s] performance.” Glens Falls Ins. Co. v. Donmac Golf Shaping Co., Inc., 203 Ga.App. 508, 417 S.E.2d 197, 201 (1992).

The contract between Brox and Maine Drilling provides that Maine Drilling was to blast an estimated 30,752 cubic yards of open ledge at $5.55 per cubic yard and 1,880 cubic yards of trench ledge at $22 per cubic yard. The ledge was to be blasted “to size that will be crushed for base course materials.”

In its action against Maine Drilling, Brox did not seek damages for Maine Drilling’s faulty performance of its contractual obligation to blast a specific amount of ledge to a certain size, which would be a business risk. Rather, it sought recovery of its cost for the extra work incurred by it for the repair of damage to the underlying ledge alleged to have been caused by Maine Drilling’s “over-blasting.” Because Brox’s claim against Maine Drilling is beyond the scope of the parties’ contractual expectations and is for damages to property other than the product itself caused by alleged deficiencies in Maine Drilling’s performance, exclusions (j)(5) and (j)(6) are not applicable, and the sole issue becomes whether Maine Drilling has insurance coverage for an occurrence of harm risk. Peerless Ins. Co., 564 A.2d at 386; Glens Falls Ins. Co., 417 S.E.2d at 201.

Prior to 1986, and to the date of the policy at issue in this case, the standard comprehensive general liability policy contained exclusion (q) expressly excluding coverage for property damage arising out of blasting or explosion. The instant policy provides no such exclusion. Accordingly, in the absence of an endorsement, the present policy provides coverage to Maine Drilling for all “property damage,” defined as “physical injury to tangible property, including all resulting loss of use of that property.”

Here, the first sentence of the endorsement uses the exact wording of exclusion (q) as it appeared in the body of the standard comprehensive general liability policy issued before 1986. Insurance Company of North America concedes that “when this old form was in use, it was necessary for those involved in the blasting business to obtain an endorsement that would partially override exclusion (q).”

An examination of the language of the endorsement discloses that it provides insurance to Maine Drilling for property damage arising from its blasting activity if the property damage arises from the intentional detonation of explosives at the job site with its personnel present. The exclusions set forth in the endorsement, including the business risk of “[p]oor breakage, including any failure to obtain desired fragmentation or fracture,” are not applicable to the present case.

Accordingly, I would respond to the certified question that on the undisputed facts of this case, the Explosives Limitation Endorsement attached to the standard Comprehensive General Liability policy provides coverage for Brox’s claims against Maine Drilling.