BUCKWALTER, Senior District Judge.
Currently pending before the Court is the Motion for Summary Judgment of Plaintiff Westfield Insurance Company. For the following reasons, the Motion is granted and judgment is entered in favor of Plaintiff on the entirety of its Complaint.
This case arises out of a series of insurance policies between Plaintiff Westfield Insurance Company ("Westfield") and Defendants Bellevue Holding Company, BHC Builders, Inc., BHC Venture, Inc., and BHC Developers LP (collectively "BHC" or "Defendants"). From February 28, 2004 through February 28, 2010, Westfield issued to Bellevue Holding Company six multi-part commercial policies, each possessing a commercial general liability ("CGL") coverage part and a commercial umbrella coverage part. These policies (the "Westfield Policies" or "Policies") include: CWP 8 263 070 (2/28/04-2/28/05) (WP 0001-35); CWP 8 263 070 (2/28/05-2/28/06) (WP 00036-70); CWP 8 263 070 (2/28/06-2/28/07) (WP 00071-105); CWP 8 263 070 (2/28/07-2/28/08) (WP 00106-140); CWP 8 263 070 (2/28/08-2/28/09) (WP 00142-275); and CWP 8 263 070 (2/28/09-2/28/10) (WP 00176-211). (Pl.'s Mot. Summ. J., Ex. B.) The following entities are Named Insureds under the Westfield Policies: Bellevue Holding Company, Bellevue Contractors, LLC, Bellevue Realty Company, BHC Developers, LP, BHC Venture, and BHC Builders, Inc. (Id.)
The Insuring Agreement Portion of the CGL coverage part in each Policy states as follows:
(Id. CGL Part § 1(1)(a-b).) The Westfield Policies go on to define "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id. CGL Part § V(13).) In addition, they specifically exclude "`[b]odily injury' or `property damage' for which the insured is obligated to pay damages by reason of the assumption
The Insuring Agreement for the commercial umbrella coverage part in each Policy provides, in pertinent part, as follows:
(Id. Umbrella Part § I(1)(a-b).) The definition of "occurrence" is identical to that in the CGL coverage part. (Id. Umbrella Part § V(16)(a).)
The BHC Defendants, as property developers, built a residential community of new homes in Avondale, Pennsylvania. As a result of this construction, eight actions were commenced against BHC in the Pennsylvania Court of Common Pleas, Chester County, each alleging damage to the individual property (the "Property"). These actions include: Barto v. BHC Builders, Inc., No. 09-8287 (the "Barto Action"); Crowley v. BHC Builders, Inc., No. 11-11385 (the "Crowley Action"); Eberle v. BHC Venture, Inc., No. 09-13241 (the "Eberle Action"); Ench v. BHC Builders, Inc., No. 09-08288 (the "Ench Action"); Epstein v. BHC Builders, Inc., No. 09-08286 (the "Epstein Action"); Francois v. BHC Builders, Inc., No. 09-05168 (the "Francois Action"); McCullough v. BHC Builders, Inc., No. 11-12325 (the "McCullough Action"); and Travers v. BHC Builders, Inc., No. 09-05169 (the "Travers Action") (collectively the "Underlying Actions" or "Actions"). (Pl's Mot. Summ. J., Ex. A, Tabs 1-8.) Because the nature of these Underlying Actions governs the coverage decision in this case, the Court individually summarizes each of them.
The Barto Action alleges that, in June 2008, the plaintiffs purchased their home in Avondale, Pennsylvania from the original owners of the Property. (Pl.'s Mot. Summ. J., Ex. A, Tab 1 ("Barto Compl."), ¶ 9.) Upon hearing about potential problems in their community, the plaintiffs hired an expert to perform an invasive, external forensic review of their home. (Id. ¶ 17.) At that time, they were made aware of extensive hidden construction problems with their home, including defective stucco wall system, defective windows, and resultant damage. (Id.) The plaintiffs allege that the problems with their home were related to BHC's failure to construct the home in a workmanlike manner, failure to disclose hidden defects known to BHC, false marketing of a home to the public which was not fit for habitation, refusal to honor express and/or implied warranties, refusal to take plaintiffs' concerns seriously,
The Crowley Action is virtually identical to the Barto Action. The Complaint in Crowley alleges that the plaintiffs moved into their home in 2002, having purchased it directly from BHC, and, in January 2010, contacted BHC about water damage issues with the Property. (Pl.'s Mot. Summ. J., Ex. A, Tab 2 ("Crowley Compl.") ¶¶ 15-17.) BHC, however, failed to make workmanlike repairs, which resulted in further damage. (Id. ¶ 19.) On January 21, 2010, the plaintiffs hired an expert who first made them aware of the extensive hidden construction problems with their home. (Id. ¶ 19.) BHC, however, allegedly failed to respond to the plaintiffs' complaints other than to accuse them of causing the damage themselves. (Id. ¶ 21.) The plaintiffs allege that the problems with their Property were related to BHC's failure to construct the home in a workmanlike manner, failure to disclose hidden defects known to BHC, false marketing of a home not fit for habitation, refusal to honor all warranties (including express and/or implied warranties) failure to construct a home in a non-negligent manner, and failure to construct a home in accordance with accepted industry standards. (Id. ¶ 23.) The complaint contains eight causes of action: (1) negligence; (2) breach of warranty; (3) breach of express warranty; (4) negligent misrepresentation; (5) fraud/intentional misrepresentation; (6) punitive damages; (7) violation of unfair trade practices and consumer protection law; and (8) product liability. (Id. ¶¶ 24-71.)
The Eberle Action also involves a suit by the purchasers of a BHC-constructed home in Avondale, Pennsylvania. (Pl.'s Mot. Summ. J., Ex. A, Tab 3 ("Eberle Compl.") ¶ 30.) In that case, the plaintiffs became aware, in November 2008, of significant building and structural defects to other stucco homes in their neighborhood. (Id. ¶ 36.) Subsequently, they had an inspection of the Property performed to determine whether their Property had any water/mold/stucco or other structural damage. (Id. ¶ 37.) That inspection revealed substantial damage, for which they received remediation quotes in the range from $71,729.50 to $127,992.41. (Id. ¶¶ 40-41.) The plaintiffs sued multiple entities involved with the construction of their home. With respect to BHC, the plaintiffs alleged negligence for failure to follow pertinent codes, failure to ensure that its subcontractors followed pertinent codes, and failure to timely notify the Township of certain phases of construction to allow it to perform regular inspections. (Id. ¶¶ 43-62.) The complaint also alleged breach of contract (unworkmanlike performance) due to its construction of the Property in a "poor, improper, and unworkmanlike manner" and its failure to cure its breaches. (Id. ¶¶ 70-77.) Finally, plaintiffs claimed breach of express and implied warranties, based on the One Year Warranty and Ten Year Warranty covering various aspects of the Property. (Id. ¶¶ 78-86.)
The plaintiffs in the Ench Action purchased their Property in January 1999 from Defendants. (Pl.'s Mot. Summ. J., Ex. A, Tab 4 ("Ench Compl.") ¶ 9.) In
In the Epstein Action, the plaintiffs purchased the Property in March of 2007, unaware of any defects in the home. (Pl's Mot. Summ. J., Ex. A, Tab 5 ("Epstein Compl.") ¶ 9.) As in the other actions, BHC was the builder of the property and had indicated to the original buyers that it was "fit for habitation, built with good workmanship, and free from defects." (Id. ¶ 10.) In April 2009, the plaintiffs first discovered water stains in their family room and a "soft spot" on the floor of the laundry room. (Id. ¶ 15.) After making inquiries in the neighborhood, they learned that many homes in the community were experiencing serious water penetration issues within their homes. (Id.) In May 2009, the plaintiffs hired an expert who performed a forensic review of their home and discovered extensive hidden construction problems. (Id. ¶ 17.) The plaintiffs allege that the problems were related to the failure of BHC to construct the home in a workmanlike manner, failure to disclose hidden defects, causing of the plaintiffs to rely on the defendants, false marketing of a home not fit for habitation, refusal to honor implied and/or express warranties, failure to construct a home in a non-negligent manner, and failure to construct a home in accordance with industry standards. (Id. ¶ 20.) Like many of the aforementioned complaints, the Epstein complaint sets forth the following causes of action: (1) negligence; (2) breach of warranty; (3) breach of express warranty; (4) negligent misrepresentation; (5) fraudulent misrepresentation; (6) punitive damages; (7) violation of unfair trade practices and consumer protection law; and (8) product liability. (Id. ¶¶ 21-68.)
The Francois Action bears striking similarity to the Epstein Action. In that case, the plaintiffs purchased their Property
The plaintiffs in the McCullough Action purchased their home from the previous owners on December 17, 2006, and were under the belief that the Property was, in all respects, fit for habitation, built with good workmanship, and free from defects. (Pl.'s Mot. Summ. J., Ex. A, Tab 7 ("McCullough Compl."), ¶¶ 11, 13.) Over the course of time, the plaintiffs saw signs of water penetration problems on their home — a problem experienced by several neighboring homes in the community. (Id. ¶ 18.) They hired an expert in December 2009, who confirmed that there were water penetration issues and extensive hidden construction problems with their home, including a defective stucco wall system, defective windows, and resultant damage. (Id. ¶ 19.) The plaintiffs claim that these problems resulted from BHC's failure to construct the home in a workmanlike manner, failure to disclose hidden defects, false marketing of a home not fit for habitation, refusal to honor all warranties, failure to construct the home in a non-negligent manner, and failure to construct the home in accordance with accepted industry standards. (Id. ¶ 21.) The McCullough Complaint also has eight causes of action: (1) negligence; (2) breach of warranty; (3) breach of express warranty; (4) negligent misrepresentation; (5) fraud/intentional misrepresentation; (6) punitive damages; (7) violation of unfair trade practices and consumer protection law; and (8) product liability. (Id. ¶¶ 22-69.)
Finally, in the Travers Action, the plaintiffs purchased the Property from the original owners in April 2001, under the belief that the Property was fit for habitation, built with good workmanship, and free from defects. (Pl.'s Mot. Summ. J., Ex. A, Tab 8 ("Travers Compl."), ¶¶ 10-12.) In 2002, the plaintiffs contacted BHC about water damage issues, and BHC, through its selected roofer, made inadequate repairs. (Id. ¶¶ 17-18.) Over the course of time, however, the plaintiffs lodged repeated requests related to the minor surface leakage of water into the home, but were not aware of the massive hidden damage occurring between the exterior stucco wall system and the external drywall. (Id. ¶ 19.) Ultimately, in March
Following BHC's demands for defense and indemnification from Westfield under the Policies, Plaintiff Westfield initiated the present action on July 28, 2010. In its Complaint, it indicated that it had been providing a defense to BHC in the Underlying Actions subject to a reservation of rights in which Westfield reserved all rights to deny coverage for the Underlying Actions. (Compl. ¶ 53.) By virtue of the federal litigation, it now seeks a declaration from this Court that it has no duty to either defend or indemnify the Defendants in the Underlying Actions. (Id. ¶¶ 59-65.) Plaintiff moved for summary judgment on its Complaint in December 2011, and the parties continued to brief the Motion through January 26, 2012. Having considered the record and legal arguments presented by the parties, the Court now turns to the merits of the Motion.
Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)(2). 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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (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. Id.
On summary judgment, the moving party has the initial burden of identifying evidence that it believes shows an absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145-46 (3d Cir.2004). It is not the court's role to weigh the disputed evidence and decide which is more probative, or to make credibility determinations. Boyle v. Cnty. of Allegheny, 139 F.3d 386, 393 (3d Cir.1998) (citing Petruzzi's IGA Supermkts., Inc. v. Darling-Del. Co. Inc., 998 F.2d 1224, 1230 (3d Cir.1993)). Rather, the court must consider the evidence, and all reasonable inferences which may be drawn from it, in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir. 1987). If a conflict arises between the evidence presented by both sides, the court must accept as true the allegations of
Although the moving party must establish an absence of a genuine issue of material fact, it need not "support its motion with affidavits or other similar materials negating the opponent's claim." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). It can meet its burden by "pointing out ... that there is an absence of evidence to support the nonmoving party's claims." Id. at 325, 106 S.Ct. 2548. Once the movant has carried its initial burden, the opposing party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec., 475 U.S. at 586, 106 S.Ct. 1348. "[T]he non-moving party must rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument." Berckeley Inv. Group. Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir.2006). If the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden at trial," summary judgment is appropriate. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. Moreover, the mere existence of some evidence in support of the non-movant will not be adequate to support a denial of a motion for summary judgment; there must be enough evidence to enable a jury to reasonably find for the non-movant on that issue. Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505.
Plaintiff's Motion is premised on the notion that, under the language of the Westfield Policies, it has no obligation to either defend or indemnify. Because these legal duties have differing standards, the Court discusses each individually.
"Pennsylvania's courts
Under these standards, a court must engage in two separate steps to determine whether Westfield has a duty to defend BHC in the Underlying Actions: (1) interpretation of the language of the Westfield Policies; and (2) analysis of whether the complaints in the Underlying Actions potentially fall within the bounds of coverage of the Policies. The Court takes each step individually.
The interpretation of an insurance policy is a question of law. 401 Fourth Street v. Investors Ins. Group, 583 Pa. 445, 879 A.2d 166, 170 (2005). The primary goal in interpreting a policy is to ascertain the parties' intentions as manifested in the policy's terms. Id. at 171. "When the language of the policy is clear and unambiguous, a court is required to give effect to that language." Id. On the other hand, where a policy provision is ambiguous, "the policy is to be construed in favor of the insured to further the contract's prime purpose of indemnification and against the insurer, as the insurer drafts the policy, and controls coverage." Id.
As set forth above, the Westfield Policies define "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Pl.'s Mot. Summ. J., Ex. B, CGL Part § V(13); Umbrella Part § V(16)(a).) The Supreme Court of Pennsylvania, in the case of Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins., 589 Pa. 317, 908 A.2d 888 (2006), undertook to give precise meaning to an CGL insurance policy's use of the word "occurrence." Id. at 897-88. Consulting Webster's II New College Dictionary, the court remarked that an "accident" constituted "[a]n unexpected and undesirable event," or "something that occurs unexpectedly or unintentionally." Id. at 898-99 (citing Webster's II New College Dictionary 6 (2001).) It noted that the key term in this ordinary definition was "unexpected," and that "[t]his implies a degree of fortuity that is not present in a claim for faulty workmanship." Id. at 899. Upon engaging in an extensive survey of jurisprudence from other jurisdictions, the court concluded:
Id. at 899 (internal footnotes omitted). Likewise, the court rejected the argument
The Superior Court of Pennsylvania reached a similar conclusion in a case factually analogous to the one at bar. In Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., 941 A.2d 706 (Pa.Super.Ct.2008), the insured was a housing developer, and the plaintiffs in the underlying action alleged that faulty construction resulted in severe leaking which damaged the interiors of their homes. Id. at 713. While the insured conceded Kvaerner's principle that an insurance claim on an "occurrence" based CGL policy cannot be premised on faulty workmanship, it asserted that the underlying action "involve[d] claims for ancillary and accidental damages caused by the resulting water leaks to non-defective work inside the home interiors," and that those claims alleged "an `occurrence' even though the damage to the faulty stucco exteriors [did] not." Id. On review, the Pennsylvania Superior Court found no distinction from Kvaerner and held that "natural and foreseeable acts ... which tend to exacerbate the damage, effect, or consequences caused ab initio by faulty workmanship also cannot be considered sufficiently fortuitous to constitute an `occurrence' or `accident' for the purposes of an occurrence based CGL policy." Id.
The United States Court of Appeals for the Third Circuit has likewise adopted these principles as established Pennsylvania law. In Nationwide Mut. Ins. Co. v. CPB Int'l, 562 F.3d 591 (3d Cir.2009), the question involved an insurance company's defense and indemnification obligations in an action, which both alleged that the insured breached a contract for the delivery of goods by providing a defective product and sought consequential damages for that breach. Id. at 593. As in the present case, the policy covered "occurrences" which were defined as "accidents." Id. at 594. The insured argued that because the underlying complaint alleged consequential damages, as opposed to just property damage to the work product itself, it came within the ambit of the policy. Id. at 596. The Third Circuit, however, disagreed finding that the foundation of the holding in Kvaerner was that "it is largely within the insured's control whether it supplies the agreed-upon product, and the fact that contractual liability flows from the failure to provide that product is too foreseeable to be considered an accident." Id. It went on to reaffirm that "`the purpose and intent of a general liability insurance policy is to protect the insured from essentially accidental injury to the person or property of another rather than coverage for disputes between parties to a contractual undertaking.'" Id. at 598 (quoting Pa. Mfrs' Ass'n Ins. Co. v. L.B. Smith, Inc., 831 A.2d 1178, 1181 (Pa.Super.Ct.2003)).
Finally, in Specialty Surfaces Int'l, Inc. v. Cont'l Cas. Co., 609 F.3d 223 (3d Cir. 2010), the insured manufactured synthetic turf fields for installation at several schools, which ultimately failed and caused extensive damage. Id. at 227-28. The question at issue was whether the insurance company had a duty to defend its insured in a lawsuit filed by the schools, which alleged both breach of contract and negligent design, manufacture, and installation. Id. at 229, 238. On review, the Third Circuit recognized that, based on Kvaerner, Gambone, and CPB International, "Pennsylvania law interprets `occurrence' based coverage like that provided
Numerous district court cases have similarly adopted Kvaerner's definition of "occurrence" to exclude faulty workmanship, even when cast as a negligence claim. See, e.g., Bomgardner v. State Farm Fire & Cas., No. Civ.A. 10-1287, 2010 WL 3657084, at *4 (E.D.Pa. Sept. 14, 2010) (citing Kvaerner and CPB to find that "[c]laims based on defective workmanship and claims arising out of a breach of contract do not allege an `occurrence,' and therefore do not trigger coverage under a commercial liability policy such as this one"; the court rejected the argument that unexpected and unintentional problems resulting from the defective workmanship fell within the definition of "occurrence"); Meridian Mut. Ins. Co. v. James Gilligan Builders, No. Civ.A. 08-1995, 2009 WL 1704474, at *5 n. 10, *6 (E.D.Pa. June 18, 2009) (finding that claims of defective workmanship do not fall within the definition of "occurrence" and do not trigger coverage under a CGL policy where the underlying complaint, while premised largely on a negligence theory, really sounds in a breach of contract); Bituminous Cas. Corp. v. John W. Gleim, Jr., Inc., No. Civ.A. 07-2287, 2009 WL 473034, at *4 (M.D.Pa. Feb. 24, 2009) (finding that claims of property damage based on intentional concealment, intentional misrepresentation, and fraud are not "occurrences" under a general liability insurance policy); Peerless Ins. Co. v. Brooks Sys. Corp., 617 F.Supp.2d 348, 356-57 (E.D.Pa.2008) (finding that insured was not entitled to coverage or defense in underlying complaint of breach of contract, breach of warranty, and professional negligence because the allegations of the underlying complaint clearly allege faulty workmanship within the parameters of Kvaerner).
In light of the controlling jurisprudence from the Pennsylvania Supreme Court and the Third Circuit, together with the wealth of case law hailing from lower state and federal courts, this Court interprets the term "occurrence" in the Westfield Policies to exclude contractual claims for faulty workmanship. In addition, the Court finds that negligence claims based on and alleging foreseeable damages from faulty workmanship likewise fall outside the ambit of the Policies.
"Once the policy's coverage has been determined, the court must examine the underlying complaint to ascertain whether its factual allegations trigger coverage." Bituminous Cas. Corp., 2009 WL 473034, at *4. Given the broad nature of the duty to defend, the court must construe the factual allegations of the underlying complaint liberally and resolve all doubts as to coverage in favor of the insured.... This analysis must focus upon the substance of the allegations rather than on `the particular cause of action that a complainant pleads.'" Id. (quoting Erie Ins. Exch. v. Muff, 851 A.2d 919, 926 (Pa.Super.Ct.2004)).
As set forth above, Pennsylvania law holds that a general liability policy protects against "essentially accidental injury," and not merely contract disputes. Nationwide Mut. Ins., 562 F.3d at 598 (quoting Pa. Mfrs.' Ass'n Ins. Co., 831 A.2d at 1181). Nonetheless, "just as the term `negligence' cannot per se convert a
Notably, in the context of faulty workmanship cases, there is "substantial case law in Pennsylvania and the Third Circuit stating that breach of contract, breach of warranty, and even negligence claims do not give rise to an `occurrence' when it means `accident' as it does here." L.R. Costanzo Co. Inc. v. Am. Fire & Cas. Ins. Co., No. Civ.A. 10-774, 2012 WL 37081, at *4 (M.D.Pa. Jan. 6, 2012) (emphasis added). The Third Circuit, in Specialty Surfaces, offered significant guidance on this issue. As indicated above, that case involved occurrence-based coverage for a suit alleging that a subcontractor was to construct and install synthetic turf fields made by a separate manufacturer, and to install drainage systems. 609 F.3d at 227. The underlying complaint alleged breach of contract/breach of warranty claims against the manufacturer, as well as a negligence claim, based on the insured's faulty workmanship at a job site. Id. at 238. Specifically, the negligence claim asserted that the contractor and subcontractor, but not the manufacturer, were "negligent in designing, manufacturing, and installing a suitable and compatible subdrain system and impermeable liner in compliance with the contract documents," thus resulting in damage to the synthetic turf at the site, as well as the impermeable liner, the subdrain system and the subgrade. Id. (emphasis added). On review, the Third Circuit found that the insurer "was not required to defend ... because the allegations in the amended complaint do not support a determination that any damage was caused by an `occurrence.'" Id. It reasoned that "[a]ny damages to [the insured's] own work product based on [the insured's] alleged negligence are claims of damage based on faulty workmanship. Because they [were] not caused by an accident, under Kvaerner, they [were] not a covered `occurrence' under the insurance policy." Id. As such, the faulty design claims were asserted under the parties' contract, as an alleged failure to perform pursuant to the standards in that contract, and any damage to the subgrade caused by that workmanship was entirely foreseeable. Id. at 239.
Along these same lines is the case of Bomgardner v. State Farm Fire and Cas., No. Civ.A. 10-1287, 2010 WL 3657084 (E.D.Pa. Sept. 14, 2010). In that matter, the insured installed a concrete floor at a residence under construction, which subsequently resulted in damage to the property. Id. at *1. The general contractor demanded reimbursement for repairs it made on the insured's behalf. Id. The insured then notified his insurance company, which investigated and determined that the defects in the floor were considered "improper workmanship" and not an "occurrence," as required by the policy. Id. at *2. In the subsequent coverage case, the insured argued that the blame lay with the concrete manufacturer and not with its
Id. at *4. Accordingly, the court granted the insurer's motion to dismiss.
As a final example, Meridian Mut. Ins. Co. v. James Gilligan Builders, No. Civ.A. 08-1995, 2009 WL 1704474 (E.D.Pa. June 18, 2009) involved an underlying complaint brought by homeowners against the builders of their home alleging that the home leaked at several locations and continued to leak despite repeated efforts to repair. Id. at *1. The underlying complaint claimed breach of contract, breach of express and implied warranties, negligence, and violations of the Unfair Trade Practices and Consumer Protection Law. Id. The builders impleaded the insured, who installed the windows, and alleged that the insured was liability for contribution and indemnification. Id. The insured sought defense from its insurer under an "occurrence" based policy and the insurer declined coverage on the grounds that the underlying complaint did not allege an "occurrence." Id. On review of the coverage dispute, the court remarked that the underlying complaint alleged defects in "stucco application, sealing at the windows, doors, and other penetration points through the stucco, missing flashings, and other defects in the windows and roofing." Id. at *6. It went on to note that, notwithstanding the underlying complaints' characterization of the causes of action, "[i]t is evident that [the homeowners'] claims are based on faulty workmanship.... The resulting damage is typical of poor workmanship." Id. Because it found that the Pennsylvania Supreme Court made clear that "commercial general liability insurance policies are not work product guarantees," the court held that the insurer did not have a duty to defend the faulty workmanship claim. Id.
On the opposite end of the spectrum, however, is a series of cases where claims of negligence in the context of faulty workmanship have been deemed to potentially rise to the level of an occurrence. Nonetheless, these cases have noticeable distinctions. For example, in Schuylkill Stone Corp. v. State Auto. Mut. Ins. Co., 735 F.Supp.2d 150 (D.N.J.2010), thirty-nine homeowners filed a complaint alleging that the developer and its affiliates and subcontractors defectively designed and constructed their homes in an unworkmanlike and unsatisfactory manner, and also failed to comply with building codes and laws, industry standards, design documents, and the requirements in written contracts and implied and express warranties. Id. at 153. The homeowners claimed that their homes sustained water damage due to the construction problems, and that they suffered "not only property damage, but also injury to their health through mold and mildew exposure." Id. Distinguishing Kvaerner and its progeny, the court, applying Pennsylvania law, found that the underlying complaint alleged that the contractor negligently failed to comply with industry standards in the construction of their homes and that part of that negligence was allegedly perpetrated by the insured, which installed the stone facade to
Id. at 158. Moreover, the court noted that "[t]o further support the fortuitous nature of the [underlying] plaintiffs' claims are their claims for not only property damage as a result of [the insured's] negligence, but also for their personal injuries" due to their exposure to mold and mildew." 735 F.Supp.2d at 158-59 (emphasis added). Such personal injury claims took the case "well beyond Kvaerner" into the realm of a fortuitous event covered by the policy. Id. at 159.
Likewise, in Nat'l Fire Ins. Co. of Hartford v. Robinson Fans Holdings, Inc., a dispute arose out of the alleged failure of three industrial fans that the insured allegedly designed, manufactured, and sold to Archer-Daniel-Midlands Co. ("ADM"). 2011 WL 1327435, at *1. In the underlying suit, ADM alleged that the insured, pursuant to a contract, provided it with certain equipment which "failed catastrophically" and that the equipment "contained design defects causing the failures." Id. The underlying complaint asserted claims for breach of contract, breach of express warranty, breach of implied warranties of fitness for a particular purpose and merchantability, and negligence in design. Id. The court considered whether the insurer had a duty to defend under an "occurrence" based policy and determined that it lacked a sufficient basis to determine whether the underlying complaint alleged an occurrence:
Id. at *5 (emphasis added). Ultimately, the court held that "[a]lthough it may ultimately prove otherwise, the four corners of the complaint — to which the relevant inquiry is bound — potentially point to a breach of duty imposed by law via social policy, and independent of the contract, which caused the catastrophic failure, I cannot rule out the possibility that something other than faulty workmanship is blamed for the equipment failure." Id. (footnote omitted).
Faced with this plethora of jurisprudence, this Court is now left with the formidable task of examining the complaints in the Underlying Actions to determine
Defendants, however, argue that damages resulting from alleged negligence, breach of implied warranty, and negligent misrepresentation "arguably constitute damages caused by an `occurrence', as defined by the policies at issue, as thus defense of such claims are covered." (Defs.' Resp. Opp'n Mot. Summ. J. 6.) In other words, Defendants assert that these allegations are necessarily "extra-contractual" in that they go to BHC's negligence in concealing the full extent of the leaking problems long after construction, in failing to test products post-construction, in failing to properly advise the local municipality of certain events, and in making its subcontractor employment decisions. "Thus, on their face, each underlying complaint — at least potentially — avers an `occurrence.'" (Id. (emphasis in original).)
Upon independent review of the allegations of the Underlying Actions, however, the Court must disagree with Defendants and find that this case is more akin to Specialty Surfaces, Bomgardner, and Meridian Mutual. First and foremost, each of the Underlying Actions has an explicit basis in contract. Each complaint specifically alleges that the defective nature of the work at the properties, together with the resultant water damage, are covered by an express warranty prepared by the Defendants. (Barto Compl. ¶ 35; Crowley Compl. ¶ 38; Eberle Compl. ¶¶ 71, 74, 79-81; Ench Compl. ¶ 45; Epstein Compl. ¶ 35; Francois Compl. ¶ 39; McCullough Compl. ¶ 36; Travers Compl. ¶ 39.) Undoubtedly, any claims arising out of this contractual duty cannot, pursuant to well-established Pennsylvania law, constitute "occurrences" for purposes of coverage under the Westfield Policies.
The more difficult inquiry is whether the negligence, breach of implied warranty, and negligent misrepresentation claims potentially aver an "occurrence" under the policy. Considering the factual allegations of the Underlying Actions, it is unquestionable that "[w]ithout an agreement, the work would not have been performed and thus the damages would not have occurred." Transp. Ins. Co. v. C.F. Bordo, Inc., No. Civ.A. 06-2386, 2009 WL 839366, at *9 (M.D.Pa. Mar. 30, 2009). Each of the Underlying Actions explicitly alleges,
In a last-ditch attempt to sidestep this finding, Defendants argue that the Travers, Epstein, Barto, and McCullough Actions involve parties who are not the original purchasers of the homes manufactured by BHC. Thus, in these instances, Defendants argue that there is no direct contract between the underlying plaintiffs and BHC, creating more than the mere potential that the alleged tort claims are actually based in tort rather than contract. (Defs.' Resp. Opp'n Mot. Summ. J. 15.) This Court, however, must disagree on several grounds. As a primary matter, it is not the existence of the contract per se that causes the claims at issue to not be "occurrences," but rather the fact that they all stem from faulty workmanship and allege damages solely to the work product of the insured. See Meridian Mut., 2009 WL 1704474, at *5 n. 10 (finding that the absence of a contract in the underlying action irrelevant where the faulty workmanship was in breach of a mutual understanding and not of some duty imposed by social policy). Pennsylvania law explicitly declines to recognize this type of claim as accidental in nature, regardless of the framework in which it is cast. Second, all four of the complaints in those actions unequivocally alleged the existence of an express warranty — a fact that, for purposes of determining coverage, this Court must accept. Finally, as noted above, in
(Pl.'s Reply Br., Ex. J (emphasis added).) The judge followed the same course in the Barto complaint, (id., Ex. K), and would presumably do so in Epstein and McCullough given the identical nature of the causes of actions.
In sum, the Court finds that all of the Underlying Actions are based entirely on claims of faulty workmanship. Under well-established Pennsylvania law, claims of and damage resulting from faulty workmanship do not have a sufficient degree of fortuity contemplated by the ordinary definition or common judicial construction of the term "accident." Because the Westfield Policies define the term "occurrence" as an "accident" and because the Policies require an "occurrence" to trigger coverage, nothing in the Underlying Actions potentially comes within the insurance coverage. Accordingly, the Court finds that Plaintiff has no duty to defend Defendants in the Underlying Action. In turn, Plaintiff's Motion for Summary Judgment on its defense count is granted.
Under Pennsylvania law, "[a]n insurer is required to indemnify only where the insured is held liable for a claim actually covered by the policy." USX Corp. v. Adriatic Ins. Co., 99 F.Supp.2d 593, 611 (W.D.Pa.2000) (citing Gen. Accident Ins. Co. of Am. v. Allen, 547 Pa. 693, 692 A.2d 1089, 1095 (1997)). "As a general rule, a court entertaining a declaratory judgment action in an insurance coverage case should refrain from determining the insurer's duty to indemnify until the insured is found liable for damages in the underlying action." Victoria Ins. Co. v. Mincin Insulation Servs., Inc., No. Civ.A. 08-909, 2009 WL 90644, at *5 (W.D.Pa. Jan. 14, 2009) (quotation omitted). It is well-established, however, that although a duty to defend can exist without a duty to indemnify, a duty to indemnify cannot exist without a duty to defend. The Frog, Switch & Mfg. Co., Inc. v. The Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir.1999). Thus, once a court finds that there is no duty to defend, it must necessarily hold that there is no duty to indemnify either. Meridian Mut., 2009 WL 1704474, at *6.
In the present matter, the Court has already found that Westfield has no duty to defend BHC in the Underlying Actions. In turn, Westfield can have no duty to indemnify BHC under the Westfield Policies. Accordingly, Westfield is entitled to a declaratory judgment on its indemnification count as well.
For all of the foregoing reasons, the Court must find in favor of Plaintiff and against Defendants on the entirety of the Complaint. Primarily, no potential exists that the Underlying Actions could fall within the ambit of the Westfield Policies. In turn, Plaintiff has no duty to defend Defendant in such Actions. Without such a duty to defend, the Court must find that Plaintiff could not be held liable for any claim actually covered by the Westfield Policies. Therefore, summary judgment is entered in favor of Plaintiff and against Defendant, a Declaratory Judgment shall be entered on Plaintiffs behalf, and this case shall be closed.
AND NOW, this 23rd day of February, 2012, upon consideration of Plaintiff Westfield Insurance Company's Motion for Summary Judgment (Docket No. 19), the Response of Defendants Bellevue Holding Company, BHC Builders, Inc., BHC Venture, Inc., and BHC Developers LP (Docket No. 20), Plaintiff's Motion for Leave to File a Reply Brief (Docket No. 21), and Defendants' Response in Opposition to Plaintiff's Motion for Leave to File a Reply Brief (Docket No. 22), it is hereby
This case is
The present case, however, involves the construction of a home pursuant to certain agreed-upon contractual standards. Unlike in Wausau where the damage-causing workmanship was completed prior to and outside of any contractual relationship, the damage-causing workmanship in this case was performed only in respect to such a contractual relationship. To hold that damages resulting from such faulty workmanship was fortuitous would directly contradict the holding of Kvaerner.
The Court finds no merit to these objections. Although Chambers' procedures suggest that counsel simply notify the Court by letter of its intention to file a reply brief, this procedure is simply to place the Court on notice that more briefing is forthcoming and it should refrain from ruling on the matter. Plaintiffs' filing of a timely motion seeking leave to file the reply — merely eight days after the response brief was docketed — accomplishes the same purpose. Moreover, the Court often finds reply briefs useful to address matters raised in the responsive brief. This case is no different. Defendants adamantly argued in their Response that the Underlying Actions raised the possibility of "occurrences" and that several of the underlying plaintiffs were not original owners and, thus, did not have a direct contract with Defendants. While Plaintiff touched on these issues in the original Motion for Summary Judgment, the Reply Brief was able to more directly address the precise arguments presented by Defendants. Accordingly, Plaintiff's Motion for Leave to File a Reply Brief is granted, and the Reply Brief attached as an exhibit to that Motion is deemed filed as of the date the Motion for Leave was docketed.
In the present matter, to the extent the trial court has already decided that the gist of the action doctrine bars certain claims, this Court will apply that finding to the insurance coverage decision. Further, the Court will extrapolate that ruling to apply to identical complaints in other Underlying Actions where the gist of the action issue has not been raised.
