Tennessee “property damage” and subcontractor work exception to “Your Work” exclusion

In Forrest Construction, Inc. v. The Cincinnati Ins. Co., No. 3:09-1036 (M.D. Tenn. Aug. 2, 2010), insured general contractor Forrest built a residence for Laughlin.  Forrest filed suit against Laughlin for amounts owned under the contract and Laughlin counterclaimed for negligence and breach of contract seeking damages for costs incurred in repairing defective construction including foundation cracks.  Forrest’s CGL insurer, Cincinnati, denied a defense to the counterclaim and Forrest filed suit.   The federal district trial court, applying Tennessee law, held that Cincinnati had a duty to defend the Laughlin counterclaim.  Specifically, the court held that the allegations of (1) foundation cracks occurring after completion of the foundation, and (2) damage to “other items,” alleged the possibility that the defective foundation caused damage to other parts of the house which would constitute “property damage.”  The court next held that the allegation that Forrest either performed or “caused to be performed” the defective work sufficiently alleged subcontractor work for purposes of the subcontractor work exception to the “Your Work” exclusion l.