(Summary Judgment Reversed as Water and Faulty Workmanship Exclusions in Property Policy Did Not Apply to Bar Coverage of Damage sustained by Condominiums Due To Rain Events During Roof Replacement Project)
(September 2025) - In 11640 Woodbridge Condominium Homeowners Association (HOA) v. Farmers Insurance Exchange, 110 Cal.App.5th 211 (March 28, 2025) rev. granted by California Supreme Court, 2025 Cal LEXIS 4791 (Cal. July 30, 2025), the California Second District Court of Appeal reversed the trial court's entry of summary judgment in favor of Farmers Insurance Exchange ("Farmers") with respect to a breach of contract and bad faith lawsuit filed by the HOA for property loss sustained by a condominium complex. The parties' dispute arose out of damage sustained by the complex due to two rain events while the roof on the complex was being replaced.
Farmers hired Nelson Alcides Bardales ("Bardales"), doing business as a local roofer, to replace the roof of the complex. On September 29, 2021, after Bardales had removed approximately 80% of the roof membrane of the complex, a rainstorm damaged the exposed insulation and plywood, allowing water to enter in about half of the units in the complex. Subsequently, Bardales removed and replaced the damaged insulation and plywood and added layer of base paper and base felt, hot mopped and tarred the much of the roof and covered the roof with tarps before the next rainstorm was expected. On October 25, 2021, a second rainstorm occurred which blew off the tarp and penetrated the exposed felt layer. As a result, water entered all of the units in the complex.
The HOA tendered the damage claim to its property carrier, Farmers. In response, Farmers investigated the claim and denied coverage under its property policy based on the "water" and "faulty workmanship" exclusions. The Court of Appeal described the property coverage afforded by the Farmers policy as follows:
The HOA was insured under a Condo/Townhome Premier Policy (policy) written by Farmers for the period October 14, 2020, to October 14, 2021. Under the policy, Farmers agreed to pay for "direct physical loss of or damage to Covered Property" at the HOA's premises "caused by or resulting from any Covered Cause of Loss." The policy defined the relevant terms as follows:
—"Covered Property" includes any "uilding and structure described in the Declarations," including "[c]ompleted additions," "[p]ersonal property owned by [the HOA]," and, if not covered by other insurance, "[a]dditions under construction, alterations[,] and repairs to the building or structure." "Covered Property" excludes, among other things, "[p]ersonal property owned by, used by[,] or in the care, custody[,] or control of a unit-owner." (Italics added.)
—"Covered Causes of Loss" are "Risks of Direct Physical Loss" unless the loss is "[e]xcluded in Section B" or "[l]imited in Paragraph A.4." (Italics added.)
The policy also contained two coverage exclusions that are relevant to our analysis:
—Water damage exclusion: Farmers will not pay for loss or damage caused directly or indirectly by "[w]ater," "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." However, Farmers will pay for "[w]ater damage to the interior of any building or structure caused by or resulting from rain, ... whether driven by wind or not, if ... [t]he building or structure first sustains damages by a Covered Cause of Loss to its roof or walls through which the rain ... enters."
—Faulty workmanship exclusion: Farmers will not pay for loss or damage "caused by or resulting from" specified exclusions, including, among others, "[f]aulty, inadequate or defective ... [p]lanning, zoning, development, surveying, siting ... [and] workmanship, repair, construction [or] renovation." (Italics added.) However, "if an excluded cause of loss ... results in a Covered Cause of Loss," Farmers "will pay for the loss or damage caused by that Covered Cause of Loss."
After Farmers denied the HOA's claim based on the water and faulty work exclusions, the HOA filed a complaint for breach of contract and bad faith against Farmers. In response, Farmers filed a motion for summary judgment which the trial court granted. In reversing the trial court's entry of judgment, the Court of Appeal addressed issues related to the scope of coverage afforded by the Farmers policy and the water and faulty workmanship exclusions:
The Water Exclusion
As an initial matter, we reject Farmers' contention that the property was without a "roof" when it suffered rain damage in October 2021. The policy does not define "roof," and we agree with the cited cases that a common sense meaning of "roof" includes a covering over a building that provides structural integrity and protection from the elements. We note in this regard that because no roof is permanent, all roofs must be periodically replaced. Replacing a roof requires removing worn outer layers and replacing them with new materials, thus leaving a structure not fully protected from the elements for a least a short time. Yet, nothing in the relevant condominium policy informed an insured that it would be without coverage for rain damage during periodic reroofing. To the contrary, the policy defines "covered property" to include "[a]dditions under construction, alterations and repairs to the building or structure," unless covered by other insurance. In view of this language, we conclude that a roof under repair remains a "roof" within the meaning of the policy.
In the present case, therefore, the property was never without a "roof" because Bardales removed just some of the roof's outer layers, leaving the lower layers intact.
Specifically, at the time of the first rainstorm, Bardales had removed much of the roof's top layers, but other layers, including the plywood sheathing and insulation, remained. By the time of the second rainstorm, Bardales had replaced about 80 percent of the insulation and plywood, added a layer of "base paper" and "base felt," hot-mopped and tarred much of the roof, and covered the entire roof with tarps. Like the courts in Dewsnup, Victory Peach, and Wellsville Manor, we conclude that the remaining layers of roof, even without the roof membrane, were sufficient to constitute a "roof" within the meaning of the policy.
Having concluded that the property had a "roof" at all points during the repairs, we must consider whether rain entered the property through "damage" to the roof caused by a "Covered Cause of Loss." Farmers asserts that the policy covers only losses caused by "perils"—i.e., by "'fortuitous ... forces ... which bring about the loss.'" It thus urges there is no coverage here because rainwater entered the property through openings in the roof deliberately created by Bardales, not as the result of fortuitous weather damage. But the words "perils" and "fortuities" do not appear anywhere in the policy. Instead, the policy defines "Covered Cause of Loss" to mean any cause of physical damage to the property not otherwise excluded, and nowhere in the policy's several pages of exclusions is there an exclusion for losses that result from deliberate conduct.
Moreover, the policy does not purport to exclude losses that result from workmanship generally, but only from such "workmanship, repair [or] construction" that is "faulty, inadequate or defective." HN8[ ] Under the maxim expressio unius est exclusio alterius, "[t]he fact that [a] contract expressly so provides tends to negate any inference that the parties also intended another consequence to flow from the same event." (Stephenson v. Drever (1997) 16 Cal.4th 1167, 1175 [69 Cal. Rptr. 2d 764, 947 P.2d 1301]; see G & W Warren's, Inc. v. Dabney (2017) 11 Cal.App.5th 565, 576 [218 Cal. Rptr. 3d 75].) Accordingly, the exclusion for damages caused by negligent workmanship suggests that the policy does not exclude damages caused by workmanship that was not negligent.
We therefore conclude that rain damage resulting from roof repairs are covered unless expressly excluded by another provision of the policy, such as the faulty workmanship exclusion. We turn now to that question.
After finding that the water exclusion was ambiguous, the Court of Appeal addressed the faulty workmanship exclusion and found as follows:
The policy's faulty workmanship exclusion says that Farmers will not pay for loss or damage "caused by or resulting from" specified exclusions, including from "negligent work," defined as "[f]aulty, inadequate or defective ... workmanship, repair, construction, renovation [or] remodeling" and "[p]lanning, zoning, development surveying, siting." Farmers urges this exclusion applies because it is undisputed that all of the HOA's losses were "caused by or result[ed] from" faulty workmanship—namely, by Bardales's decision to remove the entire roof before replacing any part of it.
The HOA urges that the term "faulty workmanship" is ambiguous because it "is reasonably susceptible to at least two different interpretations: (1) the flawed quality of a finished product or (2) a flawed process." The HOA suggests that in the present case, only Bardales's process was faulty because the roof repairs were uncompleted at the time of the rain damage. The HOA thus contends that the faulty workmanship exception should not apply because it is reasonable to interpret "faulty workmanship" to apply only to a flawed product. Alternatively, the HOA urges that even if "faulty workmanship" applies to both faulty products and processes, Farmers was not entitled to summary judgment because it did not establish that Bardales's alleged faulty workmanship was the sole cause of the HOA's losses.
. . .
However, although we do not adopt Allstate's reasoning, we nonetheless conclude that the faulty workmanship exclusion does not unambiguously exclude coverage in this case. To establish the absence of coverage, Farmers had to demonstrate that there were no triable issues regarding the cause of the damage to the HOA's property—or, stated differently, that the undisputed evidence established that the damage to the HOA's property was "caused by or result[ed]" from Bardales's negligence. But there was evidence that roof damage was caused not only by Bardales's alleged negligence, but also by wind and rain. Specifically, Bardales testified that rain damaged the exposed plywood and insulation layers on October 4, and wind blew off tarps Bardales placed over the partially constructed roof on October 25. Farmers did not establish that the damage to the plywood, insulation, and tarps—that is, to the "roof"—did not contribute, at least in part, to the interior water damage.
Moreover, as the HOA notes, Farmers introduced no evidence that the roof repairs could have been done in a way that would have fully protected the property in the event of a rainstorm. That is, while Farmers evidence suggested that Bardales failed to follow industry standards by removing nearly the entire roof membrane at once, it did not establish that compliance with industry standards would have avoided rain damage entirely—and thus that the damage resulted entirely from Bardales's alleged negligence.
Farmers suggests that the HOA has admitted that Bardales's negligence caused all of its damages, but the portions of the record Farmers cites do not bear out that assertion. Specifically, Farmers notes that when asked in an interrogatory to describe "the location and nature of all physical damage first sustained to the building roof and walls through which the rain entered," the HOA responded that "[t]he physical damage first sustained to the building and walls through which the rain entered the building was from the methods and construction, and flawed process undertaken by [Bardales] in removing the entire top layer of the building's roof down to the roof decking instead of removing it part by part." But nothing in that response suggests that Bardales's alleged negligence was the sole cause of roof damage; to the contrary, the response identifies both "construction" and a "flawed process undertaken by [Bardales]" as causes of damage. Moreover, in the next sentence of the interrogatory response, the HOA identified a third cause of damage—namely, that "[w]ind also blew off the temporary roof coverings put in place by [Bardales]."
Farmers also suggests that the HOA's complaint alleged that Bardales's alleged negligence was the sole cause of loss. Specifically, Farmers quotes the HOA's allegation that the roof was not fully protected by the elements "ecause the processes employed by [Bardales] were faulty" and its "processes for protecting the roof were not sufficient." Unquestionably, the HOA alleged that Bardales was negligent, but these allegations do not, as Farmers suggests, constitute a judicial admission that his negligence was the sole cause of damage. To the contrary, the HOA also alleged that roof decking "[g]enerally ... can provide adequate protection against wind and rain," "the building's roof was damaged" by "storms," and "the water damage was not excluded since the building first sustained damage to its roof before water entered the building." In short, the complaint alleged that Bardales's negligence was a cause, but not the sole cause, of the HOA's losses.
For the foregoing reasons, therefore, Farmers did not establish that but for Bardales's alleged negligence, no rain would have entered the HOA's property. It thus did not demonstrate that it was entitled to summary judgment under the faulty workmanship exclusion.
The Court of Appeal also reversed the trial court's entry of summary judgment relative the HOA's causes of action for bad faith and request for punitive damages. Essentially, the Court of Appeal held that there was a question of fact relative to whether Farmers had acted unreasonably in connection with its interpretation and application of the water and faulty workmanship exclusions.
The California Supreme Court has accepted review of the 11640 Woodbridge Condominium Homeowners' Assn decision.
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