## Facts

- Homeowners on two separate projects alleged Stone-E-Brick, Inc., a masonry contractor, performed defective work.
- On the Weedo project, Stone-E-Brick poured a concrete floor on a veranda and applied exterior stucco; cracks and other defects required removal and replacement of the stucco.
- The Weedos sued for damages consisting of the cost to correct and replace the defective stucco work.
- On the Gellas project, Stone-E-Brick worked as a subcontractor on a residence; the homeowners sued the general contractor (Vivino), who sought recovery over against Stone-E-Brick.
- The damages sought in the Gellas-related claims were, in substance, the cost of repairing or replacing Stone-E-Brick’s own faulty workmanship.
- Stone-E-Brick sought defense and indemnity under a Comprehensive General Liability (CGL) policy issued by Pennsylvania National Mutual Casualty Insurance Company.
- The policy covered sums the insured became legally obligated to pay as damages because of bodily injury or property damage caused by an “occurrence,” but contained exclusions commonly associated with “business risks,” including exclusions tied to the insured’s products and the insured’s work, and an exclusion addressing certain contractual liabilities and workmanship/quality warranties.
- The insurer denied coverage and refused to defend, asserting the claims were for the cost of correcting the insured’s own work and were excluded.

## Issues

1. Whether a CGL policy covers, and thereby triggers a duty to defend and indemnify, claims alleging faulty workmanship and breach of contract where the damages sought are the costs to correct or replace the insured contractor’s own defective work.
2. Whether the policy’s “business risk” exclusions (including those addressing the insured’s work and products and certain contractual/warranty liabilities) are ambiguous when read together and thus construed against the insurer.

## Decision

- The Supreme Court of New Jersey reversed the Appellate Division.
- The court held the CGL policy did not cover the claimed damages because they sought only the cost of repairing or replacing the insured’s defective workmanship.
- The court rejected the finding of ambiguity, concluding the relevant exclusions were clear when read as a whole.
- The insurer had no duty to indemnify and no duty to defend because the operative allegations did not present a potentially covered risk.

## Legal Principles

- A standard CGL policy is intended to insure against tort-type liability for accidental injury to persons or damage to the property of others, not to serve as a performance guarantee for the insured’s own work.
- The ordinary expense of correcting defective workmanship is a contractor’s business risk and, absent resulting injury to other property or persons within policy terms, is not covered by CGL insurance.
- “Your work/your product” and related business-risk exclusions are enforceable as written to bar coverage for the cost to repair or replace the insured’s own defective work.
- Allegations framed as breach of warranty of workmanship or quality do not transform the cost of correcting the insured’s own work into covered “property damage” under a CGL policy.
- Where the complaint’s allegations, properly construed, assert only excluded business-risk damages, there is no potential for coverage and thus no duty to defend.

## Conclusion

The court held that a CGL policy does not insure a contractor against claims seeking only the costs to correct or replace the contractor’s own defective work, and that clear business-risk exclusions bar both defense and indemnity for such workmanship claims.


Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 405 A.2d 788 (N.J. 1979)