In United Fire & Casualty v. Boulder Plaza, the 10th Circuit wades into some weighty yet somewhat obscure coverage issues dealing with builders, contractors, subcontractors and the indemnity agreements between them.
The subcontractor was insured with United Fire (UFC); and the general contractor was an additional insured for imputed liability arising out of the ongoing operations of the subcontractor. The floors the subcontractor put in were bad, apparently because of excessive moisture in the concrete below them. Owners sued the builder who general contractor who sued the subcontractor. And of course there were various cross claims, counterclaims, etc. Subcontractor was eventually exonerated in these cases. The general contractor wanted UFC to defend it in the claims. When UFC declined, a declaratory judgment action was filed, and UFC was granted summary judgment which the 10th Circuit affirmed (but on different grounds).
First, Colorado law applies the 4 corner rule to duty to defend claims, looking at the 4 corners of the complaint. Second, under occurrence policies, coverage is only triggered when a third party suffers actual damage within the policy period. The occurrence is when the damage happens, not when the negligent act occurs. The underlying complaint alleged the subcontractor’s work was complete before the damage occurred, and therefore, the damage did not arise out of "ongoing operations" and there was no coverage. The CGL policy was not a performance bond and did not cover completed operations.