Tred R. Eyerly | Insurance Law Hawaii | July 23, 2018
The Third Circuit upheld the district court’s order granting summary judgment in favor of the insurer on a claim seeking coverage for construction defects. Lenick Constr. v. Selective Way Ins. Co., 2018 U.S. App. LEXIS 15197 (3d Cir. June 6, 2018).
Westrum was the general contractor for a 92 unit development, and it subcontracted with Lenick to perform rough and finish carpentry and to install paneling, windows, and doors provided by the developer. After the project was completed, it was discovered that some units experienced water infiltration, leaks and cracked drywall.
The condominium development sued Westrum, alleging contract and warranty claims. Westrum impleaded Lenick, asserting claims for breach of contract and indemnification. Lenick sought a defense from its insurer, Selective. Selective defended under a reservation of rights.
Lenick then sued for a declaratory judgment that Selective was obligated to defend and indemnify. The parties filed cross-motions for summary judgment. The district court found that the allegations in the underlying case against Lenick were not covered and Selective had no duty to defend or indemnify.
On appeal, Lenick argued that under Pennsylvania law, the damage occurred to areas of the property on which Lenick did not work, invoking coverage. The court disagreed. Damages that were a reasonably foreseeable result of faulty workmanship were not covered, even when damages occurred to areas outside the work provided by the insured.
Lenick also argued that the property damage was caused by defects in the materials provided to it by the developer. But this theory was not supported by the underlying pleadings, only by extrinsic evidence. Because the pleadings did not contain allegations sufficient to support a claim that the windows, doors, and/or panels used by Lenick malfunctioned, causing the property damage to the project, the argument for coverage failed.
The district court’s granting of summary judgment to Selective was affirmed.