In TIG Insurance Co. v. Woodsboro Farmers Cooperative, the United States Court of
Appeal for the Fifth Circuit, ruled in favor of the policyholder and found that questions of
fact remained. In the case, Woodsboro hired Erwin Construction to provide a grain silo.
The silo essentially was a kit that needed to be assembled. Erwin Construction
subcontracted the actual assembly to a subcontractor. However, the subcontractor did a
faulty job and did not correctly assemble the silo. This caused the silo to leak.
Woodsboro retained an expert to examine the silo. The expert determined that the faulty
work had allowed wind to flex and rain to penetrate the silo causing it to leak and also
causing further damage to the materials of the silo.
Woodsboro filed an arbitration proceeding against Erwin. TIG Insurance Company filed
a declaratory judgment action seeking a determination that it had no duty to defend or
indemnify Erwin. Eventually, the arbitration panel ruled for Woodsboro and then the
district court ruled for the insurer finding that the defective work did not cause any
property damage to the silo and that even if it did, the “your operations” and “your work”
exclusions prevented coverage.
The Fifth Circuit reversed finding that fact questions remained about whether the faulty
construction caused additional damage other than merely the defective work and
whether damage occurred after completion of the work. The Court noted that the work
consisted of assembling the kit and distinguished this from construction of an entirely
new assembly. As a result, the evidence that the improper assembly caused damage to
the components of the silo, which could be physical damage under the policy and would
not be excluded.