United States District Court, E.D. Pennsylvania
an insurance coverage dispute between the plaintiff, Quality
Stone Veneer, Inc. (“QSV”) and its insurance
company, Selective Insurance Company of America
(“defendant”). Both parties filed motions for
summary judgment disputing whether the defendant has a duty
to defend QSV in an underlying state-court action in which
QSV has been sued. For the following reasons, I find that the
defendant has no duty to defend QSV.
a company that installs and manufactures stone veneer. (Dec.
Judg. Compl., Doc. No. 1 at 19 ¶ 16) [hereinafter
“DJ Compl.”]. In 2003, QSV entered into a
subcontract with Mignatti Construction for the development of
an apartment complex called Heritage Creek Condominium in
Warwick Township, Pennsylvania. (Id. ¶ 17).
Under this subcontract, QSV agreed to provide all the
materials and labor related to the installation of stone
veneer at the condominium construction project. (Def.'s
Concise Statement Undisputed Material Facts, Doc. No. 11-4
¶ 19) [hereinafter “DSUMF”].
2006, after construction had begun, the Heritage Creek
Condominium Association filed a complaint against Mignatti
Construction in Pennsylvania state court. (Id.
¶ 21). It alleged claims against Mignatti for
“serious fire, life and safety deficiencies in the
construction of the furnace, ventilation, roofing, alarms,
sprinklers, electrical and water systems” at Heritage
Creek Condominium. (Underlying Compl., Doc. No. 1-4 at ¶
29). Mignatti thereafter filed a joinder complaint against
QSV for “contribution and/or indemnity breach of
warranty/negligence.” (Am. Joinder Compl., Doc. No.
12-7 at 11).
defendant has refused to defend QSV in the underlying action.
Defendant's refusal to defend QSV prompted QSV to file
the instant declaratory judgment action in the Court of
Common Pleas of Lancaster County. (Doc. No. 1 at
I must now decide whether defendant has a duty to defend QSV.
This requires consideration of the underlying action, the
terms of QSV's commercial general liability policy with
defendant, and the present action.
The Underlying Action
the work was completed at Heritage Creek Condominium, the
Heritage Creek Condominium Association hired an engineering
company to perform an inspection of the condominium. (Doc.
No. 1-4 at 23 ¶ 28). The purpose of this inspection was
to determine whether the condominium “was constructed
in accordance with the architectural drawings and all
applicable zoning and building regulations and other
requirements.” (Id.) The engineering company
performed the inspection and then made a report documenting
its findings on February 16, 2005. (Id. ¶ 29).
The report listed deficiencies in how the ventilation,
roofing, alarms, furnace, sprinklers, electrical, and water
systems were constructed. (Id.)
engineering company performed a second inspection on January
26, 2006. (Id. ¶ 37). The report for this
inspection stated that many of the above deficiencies had not
been corrected by Mignatti. (Id.) Thereafter, the
Heritage Creek Condominium Association filed a complaint
against Mignatti in the Court of Common Pleas of Bucks
County. Heritage Creek Condominium Association amended its
complaint on June 5, 2006. (Id. ¶ 1). This
amended complaint alleged “deficiencies . . . in the
construction” of certain parts of the condominium.
(Id. ¶ 29). Specifically, it claimed Mignatti
had failed to construct the condominium as required by
contract specifications, bylaws, building codes, and zoning
ordinances. (Id. ¶ 46).
case against Mignatti proceeded through discovery, Heritage
Creek Condominium Association had several more inspections
done on the property. One of these inspections resulted in a
report, which opined that Mignatti had failed to properly
install: (i) flashing in and around the condominium's
balconies; (ii) weather resistant barriers; (iii) windows;
and (iv) balcony base plates. (Doc. No. 12-7 at 7 ¶ 16).
According to the report, this caused water infiltration in
the condominiums. (Id. ¶¶ 14, 17). A
different report claimed that Mignatti “failed to
properly install the adhered masonry concrete veneer and
windows on the Project, which has caused water to infiltrate
and damage the Condominium.” (Id. ¶ 22).
These inspections and reports were completed in 2012 and
one year after these reports, Mignatti filed a joinder
complaint against QSV and others, which Mignatti amended on
September 29, 2014. (Id. at 18). In the amended
joinder complaint, Mignatti alleged that “[a]ny breach
of a legal duty or negligence or breach of warranty with
respect to [QSV]'s work was that of [QSV] and not
[Mignatti].” (Id. at 11 ¶ 46). Mignatti
relied on its subcontract agreement with QSV, which required
QSV to “make good . . . any defect in material or
workmanship which may occur or develop.” (Id.
¶ 48). Mignatti also denied liability for any
“alleged construction defects and design defects and
for alleged failures in construction monitoring.”
(Id. ¶¶ 23-24). The amended joinder
complaint sought contribution and indemnity from QSV for any
damages resulting from “the work performed, materials
furnished or services provided” by QSV. (Id.
The Insurance Policy
provided an insurance policy to QSV from 2003 to 2008. The
policy contained both commercial general liability
(“CGL”) coverage as well as umbrella liability
policy provides coverage for bodily injury and property
damage as follows: “We will pay those sums that the
insured becomes legally obligated to pay as damages because
of ‘bodily injury' or ‘property damage'
to which the insurance applies.” (Doc. No. 11-3 at 21).
The CGL policy only provides coverage if the bodily injury or
property damage results from an “occurrence.”
(Id.) The CGL policy, in turn, defines an
“occurrence” as “an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions.” (Id. at 35).
umbrella policy provides QSV with excess coverage over and
above the CGL policy limits under certain circumstances. Just
like the CGL policy, the umbrella coverage is only activated
when there is bodily injury or property damage as the result
of an “occurrence.” (Id. at 56). The
umbrella policy defines an “occurrence” the same
way that the CGL policy does: “an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions.” (Id.)
policy contains numerous exclusions. (Doc. No. 12-1 at 71-74).
One of these exclusions relates specifically to damage to
QSV's own work. It states that coverage does not apply
1. 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.
(Id. at 74). The CGL policy contains an aggregate limit
of $2, 000, 000 for products-completed operations.
(Id. at 58). The CGL policy also contains an
exclusion for “impaired property.” (Id.
at 74). The impaired property exclusion precludes coverage
for certain property damage. (Id. at 74, 83).
The Present Action
QSV was sued by Mignatti in state court, it sought coverage
from defendant. Defendant denied coverage, claiming it had no
duty to defend QSV in the underlying action. (Doc. No. 1 at
22 ¶¶ 33-34). QSV then filed the instant
declaratory judgment action seeking coverage under the CGL
policy. QSV contends that defendant has a duty to defend,
while defendant argues the opposite.
judgment is proper “if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A factual dispute is “material” only if it
might affect the outcome of the case. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). For an issue to
be “genuine, ” a reasonable fact-finder must be
able to return a verdict in favor of the non-moving party.
seeking summary judgment initially bears responsibility for
informing the court of the basis for its motion and
identifying those portions of the record that it believes
demonstrate the absence of a genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A party asserting that a fact cannot be or is genuinely
disputed must support the assertion by citing relevant
portions of the record, including depositions, documents,
affidavits, or declarations, or showing that the materials
cited do not establish the absence or presence of a genuine
dispute, or showing that an adverse party cannot produce
admissible evidence to support the fact. Fed.R.Civ.P. 56(c).
Summary judgment is therefore appropriate when the non-moving
party fails to rebut the moving party's argument that
there is no genuine issue of fact by pointing to evidence
that is “sufficient to establish the existence of an
element essential to that party's case, and on which that
party will bear the burden of proof at trial.”
Celotex, 477 U.S. at 322.
Rule 56 of the Federal Rules of Civil Procedure, the court
must draw “all justifiable inferences” in favor
of the non-moving party. Anderson, 477 U.S. at 255.
The Court must decide “not whether . . . the evidence
unmistakably favors one side or the other but whether a
fair-minded jury could return a verdict for the plaintiff on
the evidence presented.” Id. at 252. It is
well established that in Pennsylvania the interpretation of
an insurance contract is a question of law. Kvaerner
Metals Div. v. Commercial Union Ins. Co., 908 A.2d 888,
897 (Pa. 2006). In determining whether an insurer has a duty
to defend, the court shall consider only the language of the
policy and the complaint against the insured. Id. at
outcome of the instant motions turns on the resolution of one
question: Was the property damage alleged in the underlying
action the result of an “occurrence” as defined
by the CGL policy? If it was, then coverage applies and
defendant must defend ...