The Fifth Circuit Court of Appeals, in the case of Mid Continent Cas. Co. v. JHP Dev., Inc., ___ F.3d ____, 2009 WL 189886 (5th Cir. 2009), held that in section J(5) of an insured’s CGL policy, "performing operations" did not include a prolonged, open-ended, and complete suspension of construction activities and that the term "that particular part" in section J(6) of an insured’s policy distinguishes defective work from non-defective work.

      JHP Development, Inc. was a general contractor hired to build a four unit condominium. The finishing-out of the units was put on hold because it was contingent on buyers purchasing the units and determining the finish-out. During the time the construction, defective construction of the exterior walls allowed water to infiltrate into building. The water caused damage to interior framing, drywall, wiring, and the flooring. JHP sought coverage under its commercial general liability policy and the litigation ensued.

      The court of appeals determined that since the water intrusion occurred during a time that JHP was not actively engaged in construction that the "performing operations" limitation and exclusion of J(5) in the CGL policy did not apply. The court also held that the term "that particular part" found in the exclusion J(6) of the CGL policy barred coverage for property damage to the property that was itself the subject of the defective work by the insured. Since the exterior walls were the subject defective work, the court held that the exclusion did not apply for damage to the interior of the building.