The opinion of the court was delivered by: Lowell A. Senior, District Judge.
Cain Village Associates is the owner of the Caln Village Shopping
Center. Caln Village Associates is owned, inter alia, by Hough-Loew
Associates, Inc., George Goldstone and Jack Loew. Hough-Loew Associates,
Inc. is also the general partner of Caln Village Associates. (Appendix in
Support of Defendant, American Insurance company's Motion for Summary
Judgement ("Fireman's Fund App."), Tab 3 at 12, & Tab 4 at 37). Herbert
Yentis and Company ("HYC") is the managing agent of the Caln Village
Shopping Center. Charles Ambrose has been the vice president of HYC since
1991 and was responsible for the day to day inspection of the Cain
Village Shopping Center.
Construction of the Cain Village Shopping Center began in the latter
half of 1990 and was substantially completed in September, 1991.
Hough-Loew Construction, Inc., ("Hough-Loew") was the general
contractor. Hough-Loew in turn is owned by Jack Loew. (Fireman's Fund
App., Tab 4 at 37). HYC rented the stores and tenants moved into the
stores in late September, 1991.
The shopping center has twenty-two inline stores which are divided into
three sections and four individual stores. The center section contains
stores D through K. Caln Village asserts that those eight stores (D-K)
suffered damage for which it is entitled to insurance coverage.
Specifically, Caln Village claims that the general contractor's use of
un-cured slag during construction has resulted in ongoing and progressive
damage to the stores. Because the slag was un-cured, Caln Village
contends that it has swelled and as a result the concrete floors in each
of the stores (D-K) has risen which in turn has caused damage to the
floors, doorways, walls, ceilings and fixtures.
The record is replete with internal memos and letters to and from Cain
Village representatives complaining about damage to the stores at the
shopping center. The complaints range from small things that need fixing
(weather stripping, toilet seats and sticking doors) to "water problems
caused by driving rain entering the through doors to the rear of the
stores and cracks in the walls and floors. Complaints about settlement
cracks were a consistent theme, beginning in 1992." (See Fireman's Fund
App., Tabs 13-32). The record indicates that on January 8, 1992, Ambrose
reported to a Hough-Loew representative that there was a "severe
settlement crack" in unit E. (Id. at Tab 13). The crack was approximately
20 feet long which had run completely through a four inch concrete slab.
(Goldstone Dep. at 125). Settlement problems were again reported on
August 7, 1992. (Fireman's Fund App. at Tab 17). A January 5, 1993, memo
queries whether Hough-Loew has resolved the floor cracking problem yet.
(Id. at Tab 19). On January 15, 1993, Ambrose called Hough-Loew about a
crack in the wall through
which the tenants "could see their neighbor." (Id. at Tab 20). On June
21, 1993. Ambrose wrote that stores D-K have a "fairly serious settlement
problem in the front of each store." (Id. at Tab 24). On August 24, 1993,
Ambrose asked for an update on the continuing settlement problems.
(Appendix of Defendant, Aetna Casualty Company of Connecticut in Support
of Its Motion for Summary Judgement ("Aetna App."), Tab 8, Exh. G).
On September 21, 1993, Mr. Goldstone, a part-owner of HYC, wrote to
Hough-Loew with concerns about the continuing settlement problem. "We
have a serious problem with the settlement condition, which is continuing
along the fronts of the stores in the D through K units." (Id. at Tab 8,
Exh. H (emphasis in original)). Goldstone explained that the setting
caused the window sills to move down and, as a result, Caln Village
expected to experience problems with glass breakage or leakage. He also
linked the sticking of doors to the falling of the thresholds and
settlement of door jams. Finally, he explains that the flash patching and
new tiles which apparently had been provided by Hough-Loew only provided
a temporary solution.*fn3 (Id.).
During the Spring of 1994, the "settling problem" began causing cracks
to appear not just in the floors but also the walls. (Fireman's Fund
App. at Tab 30). On June 9, 1994, Ambrose reported to Hough-Loew that the
brick facade of one of the stores was separating from the walls around
the window and door areas. (Id. at Tabs 32). Also, in one of the stores
the sink was separating from the wall. (Id.).
By July 27, 1994, Hough-Loew had identified the cause of the "problem"
at the Caln Village Shopping Center. An internal memo attributes the
"problem" to expansive fill beneath the floor slabs. (Id. at Tab 33).
According to the memo, the uncured slag was drawing in moisture and
changing chemically which can cause uncured slag to expand up to 10% of
its volume. (Id.). Although the memo stated that it is "impossible to
determine" how long the expansion process takes, it also stated that it
is possible to determine, by means of core drilling and x-ray diffraction
analysis, if the chemical reaction is complete. (Id.).
On July 28, 1994, Mr. Thompson, President of Hough-Loew, wrote to Jack
Loew, a principle in Caln Village, stating:
I spoke with Dave Davis regarding the apparent
expansive slag problem at Caln Village. He did not see
the necessity of getting an expert in at this time. He
did however feel that it was extremely important to
put the various subcontractors and insurance company
[sic] on notice of the problem.
He also felt it was very important to level (no pun
intended) with Yentis as to the problem and probable
cause. To this end, I wrote you the attached memo with
may be suitable to forward to them.
(Id. at Tab 34). Attached to the letter from Thompson was the July 27,
1994, memo in which Hough-Loew states that the damage at Caln Village is
consistent with expansive fill beneath the floor slab, resulting in
cracked and raised door thresholds, drywall ...