United States District Court, E.D. Pennsylvania
F. KENNEY, J.
case arises from a demand for arbitration with the American
Arbitration Association filed by Pine Run Retirement
Community ("Pine Run") against Defendant McDonald
Building Company ("McDonald") regarding a
remodeling project that Pine Run alleged McDonald defectively
performed. McDonald sought to join its subcontractor Voegele
Mechanical, Inc. ("Voegele") as a party to the
arbitration asserting that McDonald qualified as an
additional insured under Voegele's commercial general
liability policy with Plaintiff Utica Mutual Insurance
Company ("Utica"). Utica subsequently filed this
declaratory action seeking a declaration from this Court that
it owes no obligation to defend or indemnify its named
insured, Voegele, or alleged additional insured, McDonald.
See ECF No. 1.
matter comes before the Court on Utica and McDonald's
cross motions for summary judgment (ECF Nos. 30 &
For the following reasons, Utica's Motion for Summary
Judgment will be granted, and McDonald's Motion for
Summary Judgment will be denied.
Run contracted with McDonald to complete renovations at its
facilities that included the replacement and installation of
new packaged terminal air conditioner ("PTAC")
units and the integration of new construction and replacement
components with existing construction. Under the construction
agreement, McDonald assumed the duties of a construction
manager. McDonald subsequently subcontracted the replacement
and installation of the PTAC units to Voegele. The agreement
between McDonald and Voegele (the "subcontract")
delimitated the scope of Voegele's work. Pursuant to the
subcontract, Voegele was obligated to obtain broad form
commercial general liability coverage. Accordingly, Utica
insured Voegele under a commercial general liability policy
that provided coverage and contained additional insured
provisions for contractors' completed operations.
29, 2018, Pine Run commenced an AAA arbitration action (the
"AAA Complaint") against McDonald pursuant to the
construction agreement wherein Pine Run alleged, among other
things, that McDonald negligently and/or defectively
supervised and performed the replacement and installation of
the PTAC units at Pine Run resulting in "substantial and
widespread water infiltration and mold in patient rooms at
the Health Center."
the AAA arbitration statement of claims alleges the
June 28, 2013, Pine Run and McDonald entered into the
American Institute of Architect's Agreement Between Owner
and Construction Manager as Constructor ALAI Document A133 -
2009 ("the Construction Agreement"), (See Exhibit
Under the Construction Agreement, McDonald was required to
serve as construction manager and constructor for a project
that included extensive renovations to Pine Run's
existing five-story Health Center.
part of the project, McDonald undertook extensive renovations
to the facility.
a. Enclosing the original fourth-floor balconies with facades
b. Replacing facade cladding on portions of the fifth-floor
c. Installing new and replacing original window systems;
d. Replacing storefronts and entrances;
e. Installing and replacing all original PTAC2 units and
sleeve penetrating the existing and new perimeter walls; and
f. Integrating the new construction and replacement
components with the original construction.
McDonald also "warrant[ed] that the Work will conform to
the requirements of the Contract Documents and will be free
from defects, except for those inherent in the quality of the
Work the Contract Documents require or permit. Work,
materials, or equipment not conforming to these requirements
may be considered defective." (See id, at
§3.5; Exhibit A).
An Independent Third Party - TBS - Determined that
McDonald's Negligent Installation of the PTAC Units Cause
Water Damage to Patient Rooms
After installation of the PTAC units, a Pine Run housekeeper
noticed water damage in three patient rooms (Rooms 413, 415,
Pine Run found similar damage in other rooms that have PTAC
units installed by McDonald.
November 2016, the ongoing problem was evidenced by the PTAC
unit in Room 531 leaking into Room 426.
Pine Run engaged an independent third party, TBS to
investigate and determine the cause of the water damage
observed in patient rooms.
determined that McDonald improperly installed the packing,
fabricated pans, flashing and related material during the
installation of the new PTAC units:
The water testing included testing of the metal PTAC sleeve
(Test Location #1) and the exterior louver (Test Location
#2). We tested to the metal PTAC sleeve first to determine if
the metal sleeve had any deficiencies that may be
contributing to the water infiltration noted on the interior.
We noted water was able to flow through the metal PTAC sleeve
when the weeps were sealed. This water discharged to the
exterior, at various points and the space below, through a
gap in the floor system. 'There may be water infiltration
occurring behind the original louver, We believe that water
collected in the pan does not drain continuously to the
exterior due to the lack of the 2" end dam at the metal
flashing pan and sealant at the leading edge of the metal
We note that the new GE PTAC unit was installed in the rough
opening of the previous PTAC unit. We believe that the
previous PTAC unit was larger than the new GE PTAC unit. In
order to install the new GE PTAC unit, wood blocking, sealant
and metal flashing was installed at the exterior wall behind
the original louver. However, we are not able to confirm the
installation of exterior sheathing and the tie-in of the
weather resistive barrier. We were able to observe daylight
within the wood blocking assembly. We also were able to note
daylight below the PTAC unit from the interior.
We were able to review the GE PTAC unit installation
instructions as provided in submittal package 15740-01-01,
dated 13 September 2013. We are unaware of any other shop
drawings or other submittals for the PTAC installation, The
installation instructions recommend providing a metal pan
with 2" end dam extending the depth of the flashing pan.
The metal PTAC sleeve is to be installed on top of this pan
in a bed of sealant. We did not observe the 2" end dam
or the bed of sealant at the PTAC sleeve at Test Location #1
and #2 as recommended by the GE installation instructions.
The water test at Location #2 was conducted to test the
original louver in an event of a rainstorm. Our nozzle, held
at 60 degrees was intended to replicate a rain storm event.
Within 10 minutes of testing, we noted 2 quarts of water in a
bucket in the space below Room 415, The path of water was
similar to the Test Location # 1. We believe that the water
is traveling through the gap in the floor at the wood
blocking pack out. From our tests we conclude that the wood
blocking assembly installed to pack out and seal the reduced
rough opening at the new PTAC unit is not water tight.
(See January 19, 2016 TBS Report at pp. 4-5; Exhibit
recommended further investigation that included forensic
removal of the PTAC and associated components to understand
McDonald's installation and to generate project-specific
details to remedy the situation. (See Id.
at p. 5).
forensic removal and inspection of McDonald's work
further confirmed that McDonald had defectively installed the
PTAC unit, resulting in leakage. As TBS observed:
The forensic removal of the existing exterior finishes
demonstrated the lack of continuity of the weather resistive
barrier and connection to the metal flashing systems. In
addition, the lack of properly sealed metal flashing at the
right jamb provided areas for the water intrusion observed by
Pine Run Retirement Community. Our water testing, conducted
on January 5, 2016, showed that water traveled through the
gaps at the wood blocking and into the gap/hole at the floor.
This water traveled through the gap/hole in the floor and
appeared in space below Room 413. The forensic removal
uncovered improperly terminated flashings. We noted gaps and
a path for water to travel. In addition, there was no
connection of the weather resistive barrier into the rough
opening or the PTAC unit.
This lack of continuity of the between the weather resistive
barrier and the PTAC flashing allows for water intrusion into
the wall assembly.
(See TBS March 31, 2016 Report at p. 2; Exhibit B).
June 29, 2016, TBS returned to Pine Run to visually inspect
two additional PTAC locations on the second and third floors
of the Health Center.
determined that McDonald engaged in the same negligent
workmanship and installation of these PTAC units:
During our visit, we reviewed existing conditions of the PTAC
units at Rooms 224 and 322. In our limited visual review of
the units in these rooms, we noted similar conditions to
those noted in our report dated January 19, 2016. Such
conditions include: no sealant noted below the bottom pan
flashing, gaps in the perimeter sealant, and noted paths to
daylight from the interior. While we understand that no water
infiltration issues have been reported, our limited visual
inspection of the PTAC units in Rooms 224 and 322 revealed
similar issues to those outlined in our previous report dated
January 19, 2016 which include: no sealant at the base of the
flashing pan, no upturned leg on the metal pan flashing per
GE's recommended installation instructions, and a lack of
continuity in the weather resistive barrier. We recommend
that these issues be addressed in a similar fashion to the
remedial work detailed for the PTAC unit at Room 518, We
recommend reviewing other PTAC locations throughout the
facility to ensure a water tight condition exists at the PTA
(See TBS Report dated August 3, 2016; Exhibit B).
Despite the fact that an independent third party has
determined that McDonald defectively installed the PTAC
units, McDonald has refused to correct the defects at its
cost as required by the Construction Agreement.
Pine Run Continues to Discover Additional Water
Penetration at Multiple Other PTAC Locations
Pine Run's continued inspection of the property has
revealed water penetration at multiple other PTAC locations.
Functional drainage flashing and weather-resistive barrier
seals at the PTAC sleeve are deficient, allowing water and
weather-resistive barrier exists behind the stucco finish on
the plywood panel at the fifth floor PTAC units.
fifth floor PTAC sleeve flashing is deficient, allowing water
infiltration at the fourth floor ceiling.
Pine Run believes, and therefore alleges, that the systemic
defects in McDonald's installation of the PTACs was so
fundamentally deficient that there is water damage at all
Pine Run Discovers Other Construction
McDonald's defective installation of the PTAC units
prompted Pine Run to perform additional inspections of the
Health Center to determine if other construction work
performed by McDonald was defective.
These inspections revealed multiple, substantial construction
defects resulting in extensive damage to the facility,
a. Metal base flashing between the third floor brick wall and
the fourth floor fiber cement ...