Tred R. Eyerly | Insurance Law Hawaii
The court determined the insurer had no duty to defend construction defect claims asserted against the insured. Pa. Nat’l Mut. Cas. Ins. Co. v. River City Roofing, 2022 U.S. Dist. LEXIS 38226 (E.D. Va. March 3, 2022).
Branch Builds, Inc, was the general contractor for Shock Valley View Genesis, LLC (“Genesis”) in charge of constructing apartments. River City Roofing was a subcontractor for all roofing, aluminum and composition siding at the project. River City contracted and warranted its materials and work, agreed to indemnify Branch, and agreed to make Branch an additional insured under its CGL policy.
After completion of the project, Genesis reported defects in the construction. The roof, aluminum and composition siding allowed water intrusion and property damage to the apartments. Branch repaired and compensated Genesis for all damage done to the apartments. Branch then sued River City and another subcontractor and demanded judgment of $3,000,000.
River City’s CGL policy was issued by plaintiff insurer. River City failed to pay premiums and the policy was cancelled while construction was ongoing. The insurer filed suit seeking a declaratory judgment that it had no duty to defend or indemnify River City. Branch answered the complaint, but River City never made an appearance or filed an answer.
The insurer argued there was no duty to defend because the policy was cancelled. The underlying complaint, however, did not say that the policy was cancelled before the end of the policy period. Consequently, the policy cancellation did not guide the court’s determination on the duty to defend.
The court looked to the exclusions. The “Your Work” exclusion barred coverage for “property damage to your work arising out of it or any part of it.” The alleged damage to the apartments was River City’s own work. River City was hired to handle the roofing, which Genesis alleged was faulty and led to water intrusion. Any resulting damage to the portion of the property not built by River City, but which was caused by River City’s defective job performance, would be property damage “arising out of” River City’s work.
The “impaired property’ exclusion barred coverage for damage to certain portions of the property other than River City’s work. Branch argued the work by River City was defective in workmanship and materials and that defective work caused damage to the roof itself, and other parts of the property. Further, Branch repaired the roofing deficiencies. Therefore, the exclusion applied.
Every allegation Branch alleged against River City was excluded by on the the exclusion. No accident occurred, and the alleged damage was entirely attributable to River City’s own work, or arose out of River City’s work, and was able to be repaired. Therefore, summary judgment was granted to plaintiff on the duty to defend.
The motion was denied, however, on the duty to indemnify. A ruling on the duty to indemnify had to be deferred until after a final ruling in the underlying case.
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