The problem with lumping together of exclusion j. (5) and j. (6), which is the most prevalent when the property damage being claimed is to real property, is that this approach tends to conflate the meaning of the exclusions. While it may not matter in some instances, exclusions j. (5) and j. (6) do not exclude property damage for exactly the same situations. This should be obvious. Courts do not generally treat words as “mere surplusage” and seek to give effect to all the policy wording. Thus, there would be no need for j. (5) if it excludes property damage in precisely the same situations as exclusion j. (6) and vice versa. 

Coverage Enhancements. The distinction between the double js is especially important in situations where an insurer removes one of the exclusions but leaves the other. For example, one insurer deleted exclusion j. (5) entirely, purporting to afford “riggers” liability coverage to its insured. However, exclusion j. (6) was still applicable. Another insurer provided a “Care, Custody or Control Coverage” enhancement to its CGL policy with a $50,000 per occurrence sublimit for property damage, deleting exclusions j. (4) and j. (5), but leaving intact exclusion j. (6). If exclusion j. (6) applies to the same causes of property damage as exclusion j. (5), these insurers’ offers are illusory and would provide no coverage at all. It is highly doubtful that an insurer would knowingly offer illusory coverage. Nonetheless, failure of those insurers’ claims adjusters to understand the difference between the double js will result in illusory coverage—a result unacceptable to all courts. 

The Differences Between the Double Js 

The full wording of each exclusion:

(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or

(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

Paragraph (6) of this exclusion does not apply to “property damage” included in the “products-completed operations hazard”. ²

That Particular Part. Both exclusion j. (5) and j. (6) apply narrowly—each excludes only property damage to “that particular part” of certain types of property. A substantial number of coverage dispute focus on what is meant by “that particular part,” with states reaching different conclusions. Generally, the conclusions fall into one of two camps. 

The first and most limiting camp interprets the phrase “that particular part” as excluding property damage to all work of the insured – eliminating coverage for property damage to non-defective work done by that insured if caused by that insured’s defective work. The second camp recognizes that “that particular part” is “trebly restrictive” and property damage to that insured’s non-defective work caused by the insured’s defective work is not excluded. However, as the phrase “that particular part” is used in both exclusion j. (5) and j. (6), such conclusions shed little light on the differences between the double js. 

Two Recognizable Differences. The first and most noticeable difference between the double js is that exclusion j. (5) applies only to real property. Exclusion j. (6) applies to any property – real or personal. However, another exclusion applies to property damage to personal property in the care, custody or control of the insured – exclusion j. (4). Second, the CGL includes a specific exception to exclusion j. (6) that does not apply to j. (5). Exclusion j. (6) does not apply to property damage that takes place within the products-completed operations hazard. This alone should signify that exclusions J. (5) and j. (6) serve different purposes. 

Example Scenarios

Consider the following to explain the workings of the double js. 

Example 1

Nick’s Contracting, Inc. has contracted with the Sunshine Condominium Association to repair, and replace as needed, the 12 chimneys in the main building. Nick has purchased an ISO CGL policy, which includes the double js exclusion with the wording found above. Nick’s Contracting, Inc. is a named insured on the CGL policy. 

After examining the first chimney, Nick determines that the seal around the chimney is cracked and decides to use tar to patch the area. In heating the tar, it catches fire and the fire damages the chimney and the roof of the building. 

Exclusion j. (5). As this is property damage that arose out of operations performed by Nick on real property, exclusion j. (5) applies. But only the property damage to the chimney is excluded. Because the chimney is “that particular part,” property damage to the chimney is excluded. The property damage to the roof is not “that particular part” and therefore is not excluded by j. (5).  

Here is where insurers are inclined to assert that exclusion j. (6) also applies. After all, isn’t this a situation where property must be repaired or replaced because “your work” was incorrectly performed on it—it meaning the chimney? The short answer is no—that misconstrues the purpose of exclusion j. (6) and is the result of conflating the workings of exclusion j. (6) with j. (5). In other words, as explained below, exclusion j. (6) applies to a different situation entirely. 

Example 2

The situation is the same. Nick’s Contracting, Inc. has been contracted with the Sunshine Condominium Association to repair, and replace as needed, the 12 chimneys in the main building. His CGL coverage is also the same. This time, however, Nick did not cause a fire when patching the tar cracking around the roof. That portion of his repair was done without incident. 

Instead, Nick finds the second chimney to be in very poor shape—a number of bricks have fallen out and lay on the roof. The mortar has all but disappeared. Nick takes down what is left of the chimney and prepares to completely rebuild the chimney. He first notifies Sunshine to avoid using chimney number two as he will be rebuilding it. He mixes new mortar and is able rebuild the chimney by the end of the day. 

Exclusion j. (6). The next day, Nick finds the chimney he has just rebuilt has fallen apart. Apparently, he did not mix the mortar properly and the bricks simply tumbled to the ground during the night. The chimney needs to be completely rebuilt. Again. Sunshine makes claim against Nick for the cost of rebuilding the chimney he built the previous day. 

The purpose of exclusion j. (6) is to eliminate coverage for the cost of rebuilding the chimney. The fallen chimney is that particular part of any property that must be restored, repaired or replaced because Nick’s work (using defective mortar) was incorrectly performed on it(the chimney). 

Purpose of Exclusion j. (6)

This exclusion has been historically referred to as the “faulty workmanship” exclusion. That is, the exclusion applies only to the cost of making good work that was incorrectly performed. 

By its terms, the exclusion only applies to “that particular part of any property…made necessary by reason of faulty workmanship thereon.” Given the narrow scope of the exclusion, we conclude it applies only to repair defective workmanship…”³

Exclusion j. (6) should be viewed as a complementary exclusion to exclusion l. Damage to Your Work, sans the subcontractor exception. Put differently, exclusion j. (6) and exclusion l. are two sides of the same coin – both exclusions eliminate property damage coverage for the cost of repairing or replacing faulty work i.e., work that was incorrectly performed. But exclusion j. (6) applies only in situations where some portion of the work has been completed, but that work does not yet fall within the products-completed operations hazard. In the case of Nick’s Contracting, the chimney was completed, but because the project was not completed (recall the contract was for all 12 chimneys), the property damage that occurred to the chimney when it crumbled was not within the products-completed operations hazard. If the chimney fell apart a couple of months after completing the entire project, the repair of all 12 chimneys, exclusion j. (6) would not apply. Instead, exclusion l. would apply to eliminate any coverage for Nick to the cost of rebuilding the chimney. 

Historical Roots of j. (6). The notion that exclusion j. (6) applies only to the cost of making good work that was incorrectly performed and not to parts of the project not yet completed but damaged when performing operations has its historical roots in the Broad Form Property Damage endorsement. In ISO’s Circular of January 29, 1979, entitled “Broad Form Property Damage Coverage Explained,” the policy drafters stated, as respects exclusion j. (6) (formerly (2) (d) (iii)):

This section excluded property damage to that particular part of any property which occurs after work on that part has been completed and where it can be established that the property damage was the result of faulty workmanship of the insured or his subcontractor. 

FC&S Bulletins, Casualty and Surety, Public Liability, August, 1982, page Epb-1-10, provides the following commentary:

Subparagraph (iii) [exclusion j. (6)] emphasizes that the insurance does not cover any obligation to the insured to repair or replace faulty products or to re-do faulty work, even if the faulty work may have been done by a subcontractor.

FC&S labels exclusion J. (5) as “Property Being Worked On” and labels exclusion j. (6) as “Faulty Workmanship” FC&S labeling provides a simple, clear and useful distinction between the double js. 

Conclusion

In our example of Nick’s Contracting, Inc., exclusion j. (6) did not apply to the fire damage to the chimney because the damages being sought from Nick were not to redo a portion of completed work Nick had performed incorrectly. Rather, the damages were to real property being worked on. Negligently causing property damage to the property being worked is clearly distinguishable from the cost to replace a portion of completed work that was done incorrectly. In other words, the fire damage is not the type of “faulty workmanship” to which exclusion j. (6) applies. Any such interpretation conflates exclusion j. (5) with exclusion j. (6), encouraging the demonstrably flawed belief that exclusions j. (5) and j. (6) are interchangeable and apply to exactly the same situations. 

Sources

¹ Randy Maniloff, “Exclusion j. (5) and j. (6): Appeals Court Provides a Simple Tutorial,” Coverage Opinions, White and Williams, LLP, February 6, 2019. Volume 8, Issue 2.

² Commercial General Liability Coverage Form CG 00 01 04 13 © Insurance Services Office, Inc. 2012

³ Southwestern Contractors v. Cincinnati Indemnity, 390 F.Supp.3d 1009, United States District Court, D. Arizona (2019) citing Desert Mountain Properties Ltd. P’ship v. Liberty Mut. Fire Ins. Co. 225 Ariz. 194, Ariz. Ct. App. 2010)

LEGAL DISCLAIMER Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.  This This article was originally published by AMWins.

Roof maintenance should be done each spring and fall and after any major storm that could damage it. Depending on the type of roof you have and your ability to access it, you may want to consider hiring a roof inspector to avoid personal injury.

Roof Styles

As you might expect, different types of styles and materials are popular in various regions because of architectural tastes and weather patterns. Among the most popular styles are:

1. Gable Roofs

Gable roofs, which have a triangular shape, are inexpensive to build, shed water and snow and offer the benefit of extra attic space or vaulted ceilings. However, they are less common in hurricane-prone areas or places with frequent high winds because they are less wind-resistant than other roof shapes.

2. Hip Roofs

Hip roofs slope on four sides and meet to form a ridge at the top, which gives added strength in high wind and allows snow to slide off easily. However, the extra seams on these roofs make water leaks more common.

3. Mansard Roofs

Mansard roofs have four sides with a double-slope on each side that meet to form a low-pitched roof. The advantage of this roof style is that it allows for additional upper level living space or for a future addition, but the low-pitched section doesn’t work well in areas with a lot of snow.

4. Barn or Gambrel Roofs

A barn or gambrel roof is similar to a mansard roof but it has only two sides. These roofs are commonly found on barns, farmhouses, and Georgian-style and Dutch Colonial-style houses. Although this roof style allows for extra space indoors, the shape isn’t ideal for areas with high winds or heavy snow.

5. Flat Roofs

Flat roofs, often seen on commercial buildings, are becoming more popular for houses since people can add a roof deck, a green roof or garden, and solar panels to the roof. However, flat roofs are more likely to leak and are less popular in areas with a lot of rain and snow.

Roof Materials

Roof materials vary by region:

1. Northeast

Asphalt shingles are common in the Northeast because they are lightweight, flexible, resilient and can insulate your house well and support snow.

2. Southeast and Northwest

Metal roofs work well in rainy climates because they aren’t affected by moisture and humidity that can cause mold and they protect your home in a tropical storm or hurricane.

Slate tiles hold up well against the pressure of heavy snowfall and are among the most durable types of roofs.

3. Great Plains

Wood shingles provide insulation and yet allow air to circulate in the attic. They’re natural products and provide a rustic look that complements cottage, bungalow, Craftsmen-style, Tudor and Cape Cod-style homes.

Clay tiles are extremely durable and energy-efficient, provide good air circulation and natural insulation They complement Mission, Mediterranean and Spanish-style architecture and can withstand harsh sun and heavy rain.[clearboth]

Maintaining Your Roof

Although there are some tasks specific to the material of your roof, all homeowners should regularly sweep, blow or wash debris off their roof. Leaves, sticks and trash that accumulates on your roof can cause a variety of problems such as allowing algae to grow, damaging shingles or clogging your gutters. You should also trim tree branches away from your roof to minimize the possibility branches causing damage during a storm and of animals getting into your house.

If you live in an area that gets snow, watch out for too much snow accumulating on your roof. To avoid a roof collapse, buy a roof rake and pull some of the snow off your roof.

Some tasks are specific to your roof type:

Metal Roof

Check for rust and use a wire brush to prime and paint the rusted area. Keeping your gutters clean is particularly important for a metal roof, which needs to dry after rain or snow to avoid corrosion.

Asphalt Roof

Remove debris at least three times per year and repair or replace loose or damaged shingles immediately. Make sure tree branches aren’t scraping the roof, which could cause additional wear and tear on the asphalt shingles. Check to see if any of your shingles are curling or buckling, which could mean they need to be replaced.

Slate Tile Roof

Schedule an annual inspection each spring to look for broken or slipped tiles and repair them.

Wood Roof

Use a garden house to wash away debris and check for moss, mildew and mold. If you find mold, scrape it away and clean with a mix of one quart of bleach, one ounce of detergent and three quarts of warm water.

Clay Tile Roof

Clay tiles can crack or leak, so inspect them annually for leaks or broken tiles. Do an inspection with binoculars and a ladder rather than walking on the roof, which could be dangerous and cause more cracks. Use a power washer with warm water and mild dish detergent to clean the roof, but use low pressure to avoid cracking the tiles.

Remember, if you are uncomfortable doing any of these tasks, call a repair person to help with this.

Checking for Damage and Making Repairs

In addition to checking the roof itself, you should also:

• Investigate the flashing, which is the material that seals your chimney to the roof , and mortar or caulk, which is used to seal roof joints, should be checked for cracks or deterioration that could allow water into your home or allow moss or algae to grow on your roof. If you find signs of deterioration, remove the debris and clean the area before resealing.
• Check for moss or algae when you inspect your roof. If you find some, install (or hire someone to do this) zinc or lead control strips. You can make strips yourself or buy them and tuck them between your shingles to prevent moss and algae growing back.
• Look at your ceiling and attic interior for dark or damp spots or mold and then try to identify where the leak has occurred. Check your attic to see if you can see any daylight filtering through from the roof. A professional roof inspection and repair is far less costly than waiting until the leak gets worse.

Insurance

According to the National Roof Certification and Inspection Association, 39 percent of all homeowner insurance claims are for roof issues. You should check your homeowner’s insurance policy annually to make sure your coverage is up to date and that serious roof damage is covered.

Although a roof repair or replacement required because of storm damage is generally covered, a roof replacement required simply because of the age of your roof and normal wear and tear usually won’t be covered. However, if you have interior damage because of your aging roof, such as water damage from a leaky roof, the costs of repairing that damage may be covered even if you must pay for your own roof replacement.

Roof Value Schedule Option

When you review your homeowner’s insurance policy to check your roof coverage, you can check to see whether you have specific deductibles for wind, hail or hurricane damage, which could vary by state. If you do not have a specific deductible for wind, hail or hurricane damage your all peril policy deductible would apply. Typically roofs are covered under the dwelling portion of your policy.

Another option is the “Roof Value Schedule” endorsement. The RVS endorsement provides an upfront schedule of the percentage of replacement cost that will be covered, which depends on the age and materials of your roof. The benefit of the RVS schedule for consumers is transparency: you’ll know how much you can expect to receive if you have a covered roof loss. The coverage will gradually reduce over time based on the roof’s age and material.

The RVS endorsement applies only to damage caused by windstorm or hail. If you have an RVS endorsement and your roof is damaged by a fire, you’ll have your full repair or replacement costs covered – minus only your deductible.

When you evaluate your homeowner’s insurance, be sure to estimate your potential out-of-pocket costs and your other financial needs to see if an RVS could be helpful to your individual circumstances. Your insurance company can provide a personalized discussion about your roof coverage based on the age and materials of your roof as well as the risk profile for your area.

Hopefully, between routine maintenance and regular inspections, the roof over your head will protect you and your home for its full expected lifespan and beyond. The more you know about your roof and how to care for it, the more likely it is to provide you with lasting protection.

Call us 877-239-0067 or visit our HO Insurance Quote page if you are looking for homeowners insurance in California.

Here’s the answer, in a nutshell: The home office deduction is perfectly legitimate and you should absolutely consider it. Here are some important facts about this deduction—all sourced from the IRS’ summary, Publication 587 (Business Use of Your Home) and Form 8829 (Expenses for Business Use of Your Home). Of course, you should also check with your accountant.

Number 1: To even consider getting the deduction, a part of your home has to be your principal place of business. 

Your bedroom doesn’t count and neither does your kitchen. It must be an area that is exclusively and regularly used for business—seeing customers/clients or storing stuff. Your work-from-home employees may qualify too, particularly if they’re working from home at your behest. There are different rules for rental properties. Publication 587 goes into more detail and provides specific case studies which may match your situation. If for example, you’re operating a day care facility from your home, Form 587 has specific instructions for you too. Sorry, Xanax is not deductible.

Number 2: You must be filing either a Schedule C or a Schedule A with your personal tax return.

Schedule C is the form for an unincorporated business or proprietorship. This is the form where you list all revenues and expenses related to your business, including the home office deduction. Schedule A is the itemized deduction form and will include other items such as medical expenses, taxes paid and charitable contributions. You will only use Schedule A if your itemized deductions exceed the standard deduction on your personal return ($6,300 for single filers, $12,600 for married filing jointly).

Number 3: You can be complicated. 

If you desire, you can submit a full detail of expenses related to your home office on Form 8829. You can calculate depreciation. You can list out your costs for insurance, repairs, telephone and internet services, rentals?, taxes, interest—as long as they’re all related to your business activities in your home. Some of these expenses are directly related, others you’ll need to allocate based on the percentage of space your office takes up in your home. Your deduction is limited based on the income your home office is generating.

Number 4: Or you can be simple. 

In 2013, the IRS recognized that many people are operating businesses from their home and don’t want to be bothered with the complexities of the detailed calculations above. So the agency is now allowing you to simplify the process. You can just take the square footage of the business use of your home and multiply it by a standard $5. The square footage is limited to 300 feet. Again, Form 587 offers examples.

Number 5: Having a home office doesn’t increase your chances of an audit. 

The IRS doesn’t disclose how it determines who they pick for an audit. But relax. For starters, a small, small, small percentage of people and small businesses are picked by the IRS for an audit every year. Most of their efforts go towards following the big money from big companies or high-wealth individuals. That’s not to say that you won’t win (or lose) the audit lottery and be chosen. But it won’t be because of your home office unless you’re claiming something so outrageous and so large that it causes the IRS computers to spit out their floppy disks and stop their reel-to-reel tape drives. Having said that, you still want to play by the rules because if you are unlucky enough to be chosen — even for a cursory review you want to make sure your numbers add up.

The home office deduction may be a thing for you. Talk to your accountant. Don’t ignore this potential tax-saver.