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National Fire Insurance Co. of Hartford v. Gabe's Construction Co., Inc.

United States District Court, M.D. Pennsylvania

March 25, 2015

NATIONAL FIRE INSURANCE COMPANY OF HARTFORD and CONTINENTAL CASUALTY COMPANY, (JUDGE CAPUTO Plaintiffs,
v.
GABE'S CONSTRUCTION COMPANY, INC. Defendant. GABE'S CONSTRUCTION COMPANY, INC. Counterclaim Plaintiff,
v.
NATIONAL FIRE INSURANCE COMPANY OF HARTFORD and CONTINENTAL CASUALTY COMPANY, Counterclaim Defendants.

MEMORANDUM

A. RICHARD CAPUTO, District Judge.

Presently before the Court are a Motion for Summary Judgment filed by Plaintiffs and Counterclaim Defendants Continental Casualty Company and National Fire Insurance Company of Hartford (collectively, the "insurance companies") (Doc. 17) and a Cross-Motion for Summary Judgment filed by Defendant and Counterclaim Plaintiff Gabe's Construction Company, Inc. ("Gabe's") (Doc. 22). The parties seek a judicial determination as to the parties' rights and obligations under policies issued by the insurance companies to Gabe's with respect to pending Pennsylvania state court litigation in which Gabe's is a cross-claim defendant. Because the underlying cross-claim does not allege that the claimed damage was caused by an "occurrence" as defined in the policies, the insurance companies do not have a duty to defend Gabe's. National and Continental's Motion for Summary Judgment (Doc. 17) will be granted. Gabe's Cross-Motion for Summary Judgment (Doc. 22) will be denied.

I. Background

Plaintiffs National and Continental are insurance companies that each issued an insurance policy to Defendant Gabe's, a construction company. Gabe's has sought defense and/or indemnity for litigation currently pending in Pennsylvania state court. National and Continental assert that the policies they issued do not cover this underlying litigation. The parties seek a judicial determination as to the parties' rights and obligations under the policies issued by National and Continental with respect to this underlying litigation.

A. The Underlying Suit

The instant action arises out of a lawsuit presently pending in Pennsylvania State Court in Monroe County: Linde Corporation v. RKR Hess Associates, Inc., et al., No. 4254-cv-2012, in which Pocono Township has asserted a cross-claim against Gabe's ("Pocono Township litigation, " "underlying litigation"). (Doc. 19; ¶ 2.) A copy of Pocono Township's most recent cross-claim against Gabe's is attached as Exhibit 1 to an Affidavit by Gabe's counsel in support of its Motion for Summary Judgment (Doc. 22-3). Pocono's cross-claim against Gabe's was filed in January, 2014, and amended in March 2014. (Doc. 23, ¶¶ 3-4.)

The cross-claim arises from Gabe's work as a drilling subcontractor installing sewer pipes. (Doc. 22-3, ¶¶ 323-37.) Linde Corporation ("Linde") had a construction contract with Pocono Township. (Doc. 23, ¶ 2.) Linde contracted with Gabe's for the installation of a portion of sewer pipe associated with this contract. ( Id. ) Pocono Township asserts a number of claims against Gabe's for breach of warranty, indemnification, and promissory estoppel, and requests millions of dollars in damages and court costs. (Doc. 24, ¶ 3)

The parties characterize the cross-claim differently. The insurance companies assert that Gabe's is being sued for its faulty workmanship. (Doc. 19, ¶ 12.) Because faulty workmanship does not constitute an occurrence as defined in the policies, they have no obligation to defend or indemnify Gabe's in the underlying litigation. ( Id. at ¶ 13.) Gabe's asserts that the cross-claim "alleges more than simply faulty workmanship, " and is a claim based on an "occurrence" as defined by the two policies. (Doc. 24, ¶¶ 12-13.) Additionally, Gabe's notes that in the insurance companies' Motion for Summary Judgment and Statement of Facts, Plaintiffs rely on an outdated version of the cross-claim. ( Id. at ¶ 12.)

B. The Policies

Seeking defense and potentially indemnification in the underlying suit, Gabe's made a claim for insurance coverage under a General Liability policy issued by National, Policy U4015485914, which provided coverage from January 1, 2012 to January 1, 2013. (Doc. 19, ¶ 6.) National agreed to participate in Gabe's defense subject to a reservation of rights. ( Id. ) Continental issued Gabe's a commercial umbrella policy, Policy U4015485878, which provided coverage from January 1, 2012 to January 1, 2013. ( Id. at ¶ 9.)

1. National Policy

The National policy is a Commercial General Liability policy. The parties agree that the policy covers "property damage" caused by an "occurrence." (Doc. 23, ¶ 11.) Gabe's asserts that it is entitled to coverage under this section. "Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Doc. 22-5, 3.) "Property damage" is defined as:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the occurrence that caused it.

Id. The policy has a "your work" exclusion, stating that it "does not apply to":

J. Damage to Property
"Property damage" to:...
(6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it....
I. Damage to Your Work
"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard." This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

(Doc. 17-4, 24; Napierkowski Aff. Ex. 2 (bold ...


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