Minnesota “your work” exclusion l. minus subcontractor exception, and dimunition in value as “property damage.”

In Grinnell Mutual Reinsurance Co. v. Wollak Construction, Inc., Civ. No. 10-350 (RHK/LIB)(D. Minn. Oct. 15, 2o10), claimant Duran hired insured general contractor Wollak to build a house on a lot owned by Duran.  After completion, Duran sued Wollak for breach of contract, breach of warranties, and negligence, alleging defective construction resulting in physical injury to the house and diminuntion in value of the lot.  Wollack’s CGL insurer, Grinnell, defended under a reservation of rights and filed a declaratory judgment action.  The federal district court granted Grinnell’s motion for summary judgment on the duty to defend and indemnify.  Applying Minnesota law, the court held that all of the damages alleged in the Duran complaint fell within exclusion l. for “your work.”    Grinnell had endorsed the policy to remove the subcontractor work exception from exclusion l.  The court rejected Wollak’s argument that, because the lot, owned by the Duran’s, did not constitute Wollak’s “your work,” exclusion l. did not apply to the alleged diminution in value to the lot resulting from the defective construction of the house.  The court held that diminution in value does not constitute “property damage” and, even assuming it did, because the lot with the defective house was worth more than the lot without the defective house, it was factually impossible for the lot to have suffered diminution in value.