What and Where of Rip and Tear
An overview of rip and tear costs, related coverage, and verdict issues.
By Eric Gilkey
CLM’s Construction Claims Community recently presented a webinar that provided an overview of rip and tear costs, related coverage, and verdict issues.
Seth Kirby, partner at Freeman Mathis & Gary LLP
H. Eric Hilton, partner at Freeman Mathis & Gary LLP
Stuart Harris, assistant general counsel at Nationwide Insurance Co.*
“‘Rip and tear’ is also known as ‘get-to costs’ and it’s a term of art in the industry that is not universally used by courts or commentators. It’s become more prevalent in the construction world, though. It refers to costs that are incurred due to the need to remove or replace non-defective work in order to get to defective work.”
“Jurisdictions are very split on whether or not these consequential damages are covered under general liability insurance policies. Coverage often hinges on the specific facts presented in the case. The factual analysis and how it applies to the situation is going to help you make a determination of whether rip and tear costs are covered.”
“CGL policies don’t operate as warranties on the workmanship of a contractor. They only cover damage to other property caused by the negligence of a contractor or subcontractor. Any time a CGL policy is being asked to provide a warranty-type repair, the courts generally say it’s either not an occurrence or it falls into the policy’s business risk exclusions.”
“In states like Maryland and Arizona, there must be resulting damage for the courts to find an occurrence. For instance, in the Desert Mountain Properties v. Liberty Mutual case, the get-to damages involved an issue with poorly compacted soil preparation, which affected everything on top of it. Drilling through the concrete floors to shore it up and the rip and tear was not covered.”
“You can have very similar claims across the country, but the outcomes and the courts’ view of rip and tear can be extremely different, even though the facts look the same.”
[Quoting Randy Maniloff’s Coverage Opinion, Vol. 4, Issue 12] “Here is how the impaired property exclusion was described by Austin’s Shidlofsky Law Firm: ‘The impaired property exclusion as a whole is utterly confusing and requires several shots of tequila before it even remotely makes the slightest bit of sense.’”
“Having knowledge of the various scopes of work and subcontractor exclusions in the policies is of premium importance. From an in-house perspective, you will want to work closely with your in-house risk manager and broker to advocate for coverage. Your position is, everything should be covered.”
“In-house project personnel don’t care about case law; they just want to make sure that if they start the process of ripping out the building, then there will be coverage at the end. So consulting with the project personnel is important.”
*Harris’ thoughts and opinions should not be construed as a position statement by Nationwide Insurance Co.