When defective work causes property damage, the repair bill often includes more than just fixing the defective work itself. Contractors may also have to remove and replace properly installed work simply to reach the problem and complete the repair. Those costs are often called “rip-and-tear” costs, and they can have a major impact on the size of a construction-defect claim.
For example, imagine a pipe hidden in a wall between a kitchen and a media room leaks and damages the wall area and the ceiling below. Locating and repairing the leak will require removing and replacing cabinets, counters, appliances, and wall finishes, or complicated electronics on the other side of the wall, even though those items were installed correctly and were not damaged by the leak. In that case, the rip-and-tear costs to access the defective work and the damaged area could substantially exceed the cost of fixing the leak or repairing the ceiling.
A typical Commercial General Liability (“CGL”) policy covers property damage caused by an “occurrence,” which generally means unintended damage to property. In Maine, courts generally distinguish between covered accident risks and uncovered business risks. The cost of repairing or replacing an insured contractor’s own defective work is typically considered a business expense that CGL insurance does not cover. At the same time, Maine law recognizes that faulty workmanship can sometimes cause separate damage to non-defective property, and that consequential damage is covered under the policy, if all other requirements are met.
Maine courts have recognized that damage to non-defective property (the cabinets, for instance, in the example above) that may need to be removed to reach the damaged area may qualify as covered property damage, even though fixing the defective work, the leak itself, is usually not covered.
Standard CGL policies do not directly address rip-and-tear costs, and courts in different states have reached different conclusions on whether those costs are covered. Are they part of repairing covered consequential property damage, or are they excluded as part of faulty workmanship? How your insurer answers that question can make a significant difference because the same repair project may include both covered and uncovered costs, and the balance between the two can shift significantly depending on how that question is answered.
Under established Maine law, the plumber’s CGL policy should cover the repair to the resulting damage to the internal wall area and the ceiling if the claim otherwise satisfies the policy requirements. However, no Maine case has squarely decided whether the insurer must also pay the rip-and-tear costs to get to the damaged area behind the wall and to the ceiling. The coverage question is whether removing and replacing unaffected work is inseparable from repairing covered property damage or is instead part of correcting faulty workmanship. And that may be a question of fact specific to the repair.
Rip-and-tear costs fall somewhere between those two concepts. They are not the defective work itself, but they may be necessary to reach and repair the defective work or cover resulting damage. Because the Maine Supreme Judicial Court has not directly addressed this issue, there is no definitive answer. Policyholders have a strong argument that rip-and-tear costs should be covered when they are necessary to repair covered property damage, and not merely part of replacing defective work.
How we can help
When faced with a claim involving significant rip-and-tear costs, if you receive any push back from your insurer regarding rip-and-tear costs, consider consulting with counsel and carefully document why the removal and replacement work was necessary. If your insurer denies or limits coverage for those costs, do not assume the decision is the final word. The policy language, the scope of the property damage, the reason unaffected work had to be removed, and the proposed repair method can all affect the outcome. Review those issues promptly with an attorney to preserve leverage, build the claim record, and determine whether Maine law leaves room to pursue payment for those costs.
David Pierson is a construction and zoning attorney who brings a rare dual perspective as a former construction manager and business owner, advising owners, developers, municipalities, and builders on contracting, permitting, land use matters, and dispute resolution with practical, field-tested insight. He can be reached at [email protected].
Bernstein Shur’s Construction Group helps developers, contractors, and construction professionals manage risk and keep projects on track at every stage of the project lifecycle. The group provides sophisticated legal solutions spanning contract negotiation, project administration, dispute avoidance, and litigation, drawing on deep experience in the construction industry.