Tennessee “property damage” caused by an “occurrence,” and “your work” exclusion.

In Travelers Indemnity Co. of America v. Moore & Associates, Inc., 216 S.W. 3d 302 (Tenn. 2007), claimant Hilcom hired insured general contractor Moore to design and construct a hotel. Following completion, Hilcom filed a demand for arbitration alleging negligent defective window design and installation by Moore’s subcontractor resulted in moisture penetration property damage to other parts of the hotel.   Moore’s CGL insurer Travelers denied a defense and then filed suit seeking a judicial declaration of no duty to defend or indemnify Moore in the Hilcom arbitration.  The trial court entered summary judgment for Moore, holding that Travelers had a duty to defend, and reserved ruling on the duty to indemnify.  The intermediate appellate court affirmed and the Supreme Court of Tennessee affirmed.  The court first held that, because “Moore could not have foreseen the water penetration” which resulted from the negligent installation of the windows, the water penetration constituted an “occurrence.”  The court next held that, while the defective installation of the windows does not, by itself, constitute “property damage,” the resulting moisture penetration damage did not constitute “property damage.”  The court then held that, because the entire hotel constituted Moore’s “your work,” all of the damages to the hotel initially fell within the “your work” exclusion.  However, because of the subcontractor work exception,” all damages to the hotel “resulting from the subcontractors’ faulty installation of the windows are not excluded” by the “your work” exclusion.