Colorado “property damage” caused by an “occurrence” and exclusions j(5) and j(6) “that particular part”

In Continental Western Ins. Co. v. Shay Construction, Inc., No. 10-cv-02126 (D. Col. July 28. 2011), general contractor Milender White subcontracted with insured Shay for framing work.   Shay in turn subcontracted some of its work to others.  When Shay’s subcontractors filed suit against Shay and Milender White seeking payment for their work,  Milender White cross-claimed against Shay for breach of contract alleging that,Milender White notified Shay during construction that some of Shay’s work was defective and that when Shay repaired its defective work, it damaged work performed by others.  Shay’s CGL insurer Continental Western filed suit against Milender White and Shay seeking a judicial declaration of no coverage.  The federal district trial court granted Continental Western’s motion for summary judgment.    Applying Colorado law, the court first determined that, because the Continental Western policy had terminated prior to the May 21, 2010 date Colorado General Assembly House Bill 10-1394 was signed into law,  Colo. Rev. Stat. § 13-20-808 (2010) did not apply.   The court then rejected Continental Western’s argument that the CGL Coverage A insuring agreement phrase “those sums that the insured becomes legally obligated to pay as damages” limited coverage to tort damages and did not apply to contract damages, finding that the phrase was arguably ambiguous.   The court next determined that, because the Milender White cross-claim alleged that Shay damaged property other than Shay’s own work, it arguably sought damages because of “property damage” caused by an “occurrence.”  The court then held that all such property damage fell within exclusions j(5) and j(6).  Specifically, the court determined that all of the alleged property damage occurred during ongoing operations and that the “that particular part” phrase of both exclusions was broad enough to apply to not only Shay’s work but also the work of others surrounding Shay’s work that Shay damaged while performing its operations, including Shay’s repair of its own work.