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HomeMy WebLinkAbout2008-3684 Civil PENNSYLVANIA NATIONAL : IN THE COURT OF COMMON PLEAS OF MUTUAL INSURANCE COMPANY, : CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFF : : V. : : WITMER & McCOY, INC., and : PENNSYLVANIA MANUFACTURERS’ : ASSOCIATION INSURANCE : COMPANY, : DEFENDANTS : 08-3684 CIVIL TERM IN RE: MOTION OF PLAINTIFF, PENNSYLVANIA NATIONAL MUTUAL INSURANCE COMPANY FOR SUMMARY JUDGMENT AGAINST DEFENDANTS, WITMER & McCOY, INC., AND PENNSYLVANIA MANUFACTURERS’ ASSOCIATION INSURANCE COMPANY BEFORE BAYLEY, J. AND EBERT, J. OPINION AND ORDER OF COURT Bayley, J., July 7, 2009:-- On November 4, 1998, Wagman Construction Company entered into a general contract to construct a building for Rossmoyne Condominium Partners. Defendant herein, Witmer & McCoy, Inc., entered into a subcontract with Wagman to perform part of that construction. On September 12, 2005, Rossmoyne filed a complaint against Wagman in this court seeking damages for alleged breach of contract, breach of 1 warranty and fraud. Rossmoyne alleged that the building fails to prevent rainwater from penetrating into the interior of the premises at numerous locations. In October, 08-3684 CIVIL TERM 1999, Wagman represented that the problem was related to the window installation or the glass contained in the windows, and that it would continue to investigate the situation. In May, 2000, Wagman represented that the water infiltration problem was corrected by caulking the windows at the headers. Rossmoyne alleges that this representation was an attempt to conceal the nature and extent of the problem. In fact, caulking the window headers only made the water infiltration worse because it obstructed the weep holes contained in the wall drainage system. Leaks into the building continued when it rained. Rossmoyne later became aware of the true defective nature of the common cavity wall drainage system which caused the water infiltration to continue. On November 14, 2005, Wagman joined Witmer, and four other companies who worked as subcontractors on the building, as additional defendants. Based on allegations that any faulty workmanship that caused water infiltration into Rossmoyne’s building was performed by Witmer, it averred causes of action against Witmer for breach of contract, contractual indemnification and common law contribution- indemnification. Plaintiff herein, Pennsylvania National Mutual Insurance Company, insured Witmer under a commercial general liability insurance policy from April 1, 2001 to April 1, 2006. Defendant herein, Pennsylvania Manufacturers’ Association Insurance Company, insured Witmer under a commercial general liability insurance policy from 1 No. 03-5938. The suit was instituted by a writ of summons on November 12, 2003. -2- 08-3684 CIVIL TERM April 1, 1999 to April 1, 2000, which was during the period that Witmer performed its subcontract for Wagman. Penn National undertook a defense of Witmer in the Rossmoyne suit under a reservation of rights. In this suit against Witmer and PMA, Penn National seeks a declaratory judgment: (1) that it has no obligation to defend Witmer nor indemnify Witmer for any claims asserted in the underlying action by Rossmoyne in which Witmer was joined by Wagman, and (2) that PMA’s policy provides coverage for Witmer that obligates it to provide a defense and indemnity to 2 Witmer in the underlying action. Penn National filed a motion for summary judgment against both defendants which has been briefed and argued. Kvaerner Metals Division of Kvaerner, U.S., Inc. v. All parties, citing Commercial Union Insurance Company, 908 A.2d 888 (Pa. 2006), agree that an insured’s duties under an insurance policy are triggered by language of the complaint against the insured. Rossmoyne’s complaint against Wagman alleges damages caused by water infiltration into its building. Wagman’s joinder complaint against Witmer avers causes of action for breach of contract, contractual indemnification and common law contribution-indemnification, upon allegations that the rainwater that penetrated into the interior of the Rossmoyne building was the fault of faulty workmanship by Witmer. The commercial liability insurance policy issued by PMA to Witmer for the period April 1, 1999 to April 1, 2000, provides: __________ 2 The suit also seeks damages against PMA for the costs of Penn National’s defense already provided to Witmer. -3- 08-3684 CIVIL TERM 1. Insuring Agreement a. We will pay those sums that the Insured becomes legally because of obligated to pay as damages “bodily injury” or “property damage” to which the Insurance applies. We will have the right and duty to defend the Insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any ”suit” seeking damages for “bodily injury” and “property damage” to which this insurance does not apply. We may at our discretion investigate any “occurrence” and settle any claim or “suit” that may result. . . (Emphasis added.) * * * This insurance applies to“property b. “bodily injury” and damage” only if : The “property damage” is caused (1) “bodily injury” or by an “occurrence” that takes place in the”coverage territory”; and The“property damage” occurs (2) ”bodily injury” or during the policy period. (Emphasis added.) * * * Occurrencemeans an accident, including continuous or repeated exposure to substantially the same general harmful conditions. (Emphasis added.) 2. Exclusions This insurance does not apply to: b. Contractual Liability -4- 08-3684 CIVIL TERM “property damage” for which the “Bodily injury” or insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. . . . (Emphasis added.) D’Auria v. Curich Insurance Co., Penn National, citing 352 Pa. Super. 231 (Pa. 1986), maintains that the coverage in the PMA policy in effect when damage from rainwater manifested in Rossmoyne’s building discovered no later than 1999 is triggered regardless of whether the real cause of that damage was known at that time. Since Penn National’s coverage did not begin until April 1, 2001, approximately a year and a half after the damage was first manifest, Penn National maintains it has no duty either to defend or indemnify Witmer for the claims made against it. PMA maintains that even if Penn National is correct that it is the timing of the property damage that constitutes the occurrence that triggers coverage under the commercial general liability insurance policy it issued to Witmer, it still has no duty to provide representation to Witmer because its policy in effect from April 1, 1999 to April 1, 2000 does not provide coverage for the damages alleged to have been caused by Witmer’s conduct. The basis of its argument is that there was no “occurrence” alleged in the underlying lawsuit that would trigger coverage. The damages for which Rossmoyne seeks recovery against Wagman on claims of breach of contract, breach of warranty and fraud, and Wagman seeks recovery against Witmer on claims of breach of contract, contractual indemnification and common law contribution-indemnification, include the cost of repairing and replacing -5- 08-3684 CIVIL TERM Witmer’s allegedly faulty and defective work. Faulty workmanship does not constitute Kvaerner Metals an “occurrence” triggering liability under the PMA’s policy. See Division of Kvaerner, U.S., Inc. v. Commercial Union Insurance Company, supra. We must still look beyond the legal theories asserted and examine the facts alleged in Rossmoyne’s complaint against Wagman and Wagman’s joinder complaint against Mutual Benefit Insurance Co. v. Hayer, Witmer. 725 A.2d 743 (Pa. 1999). Those claims go beyond the cost of repairing allegedly defective work as Rossmoyne seek damages alleged to have occurred to other parts of its building caused by the allegedly defective work. Witmer cites a treatise for the proposition that although a commercial general liability policy does not provide coverage for faulty workmanship that damages only the resulting work product, the policy does provide coverage if the faulty 3 workmanship causes property damages other than the insured’s work product. Millers Capital Insurance Company v. Gambone Brothers However, in Development Co., Inc., 941 A.2d 706, 713 (Pa. Super. 2007), Gambone Development planned and built a development of houses. After construction was complete, several of the homeowners noticed leaks in their homes and attributed the leaks to defective materials or construction. The insurance policy at issue had the same definition of “occurrence” as the policy in the present case. The Superior Court of Pennsylvania noted: . . . Gambone contends that the nature of the damage at issue in this case __________ 3 Couch on Insurance § 129:4. -6- 08-3684 CIVIL TERM varies from the nature of the damage at issue to the coke oven battery in Kvaerner. Gambone concedes Kvaerner stands for the broad principle that an insurance claim under an occurrence based CGL policy that defines the term “occurrence” as an accident cannot be premised on a claim of faulty workmanship. Gambone argues that Coloian and Caputo actions do not merely involve claims for faulty workmanship that led to the failure of the stucco exteriors but also involve claims for ancillary and accidental damage caused by the resulting water leaks to non-defective work inside the home interiors. Gambone argues the resulting water damage constitutes an “occurrence” even though the damage to the faulty stucco exteriors does not. We do not see any merit in the distinction Gambone attempts to create. In Kvaerner, the plaintiff’s complaint alleged Kvaerner had built and warranted a defective coke battery. Kvaerner contended the damage complained of had occurred after one of its subcontractors had allowed the roof of the battery to be grouted too early. Kvaerner further contended the defective grouting was unable to stand up to unexpected “monsoon rains,” which lead to the “longitudinal movement of the roof” and resulted in internal damage to the coke oven battery. Kvaerner contended these monsoon rains, and the resulting internal damage to the battery, constituted an “occurrence” for purpose of the underlying CGL policy. The Court rejected Kvaerner’s rationale. In the instant matter, the factual sequences underlying the Coloian and Caputo actions are identical. Both complaints aver Gambone and/or its subcontractors built homes with defective stucco exteriors, windows, and other artificial seals intended to protect the home interiors from the elements. Both complaints are based on claims for faulty workmanship. Both complaints allege that when the defects manifested themselves, water damage resulted to the interior of the larger product—in this case, the home interiors. Furthermore, the weight of common sense collapses the distinction Gambone attempts to create. The Kvaerner Court held the terms “occurrence” and “accident” in the CGL policy at issue contemplated a degree of fortuity that does not accompany faulty workmanship. (“We hold that the definition of ‘accident’ required to establish an ‘occurrence’ under the policies cannot be satisfied by claims based upon faulty workmanship. Such claims simply do not present the degree of fortuity contemplated by the ordinary definition of ‘accident’ or its common judicial construction in this context.”). In reaching this holding, the Court suggested that natural and foreseeable acts, such as rainfall, which tend to exacerbate the damage, effect, or consequences caused ab initio by -7- 08-3684 CIVIL TERM faulty workmanship also cannot be considered sufficiently fortuitous to constitute an “occurrence” or “accident” for the purposes of an occurrence based CGL policy. This suggestion is consistent with this Commonwealth’s longstanding notion of legal and proximate causation in tort law. See generally, Powell v. Drumheller, 539 Pa. 484, 493, 653 A.2d 619, 623 (1995) (“In determining whether an intervening force is a superseding cause, the test is whether the intervening conduct was so extraordinary as not to have been reasonably foreseeable.)” (citations omitted). Gambone’s next argument is merely a re-characterization of its initial argument. Gambone points out that the definition of occurrence in the CGL and PL policies includes the phrase “continuous or repeated exposure to substantially the same general harmful conditions.” Gambone maintains “the continued and repeated presence of water within” the home interiors fits within the literal language of this phrase and, as such, constitutes an “occurrence” for purposes of coverage. Gambone’s re-characterized analysis fails to account for the fact that the phrase “continuous or repeated exposure to substantially the same general harmful conditions” is directly preceded by the words “accident, including” in both the CGL and PL policy definitions of “occurrence.” The premise of the definition when read in the entirety, therefore, is that coverage is triggered for an “occurrence,” which is an “accident” that can include a series of fortuitous exposures to harmful conditions. To reiterate, damage caused by rainfall that seeps through faulty home exterior work to damage the interior of a home is not a fortuitous event that would trigger coverage. (Footnote omitted.) Gambone Based on , we are satisfied in the present case that the commercial general liability insurance policy issued by PMA to Witmer in effect from April 1, 1999 to April 1, 2000 does not provide coverage for either type of damages alleged to have been caused by Witmer’s conduct. An insurer owes a duty to defend if the complaint against the insured alleges facts which would bring the claim within the policy’s D’Auria v. Zurich Insurance Company, supra. coverage if they were true. Accordingly, PMA owes no duty of coverage to Witmer for the damages alleged to have -8- 08-3684 CIVIL TERM been caused by Witmer’s conduct. Therefore, the motion for summary judgment by -9- 08-3684 CIVIL TERM 4 Penn National against PMA will be denied. Penn National’s sole basis for disclaiming representation and coverage to Witmer in the underlying action is that the water infiltration into the Rossmoyne property manifested before its insurance coverage became effective on April 1, 2001. D’Auria v. Zurich Insurance Company,supra In , the Superior Court stated that an “occurrence” policy protects the policy holder from liability for any act done while the policy is in effect. In contrast, a “claims made” policy protects the holder only against Id. claims during the life of the policy. A court must ascertain what occurrence is Id. alleged, and when it happened. An occurrence happens when the injurious effects of an act first manifest themselves in a way that would put a reasonable person on Id. notice of injury. The court stated: We hold that the determination of when an occurrence happens must be made by reference to the time when the injurious effects of the occurrence took place. An occurrence during a policy period takes place when both the accident and the Id. resulting injury occur in the policy period. The injury alleged in Rossmoyne’s complaint is that “the building fails to prevent rainwater from penetrating into the interior of the premises at numerous locations.” __________ 4 The fraud claim in Rossmoyne’s complaint is based on the allegation that Wagman represented that the water infiltration problem was corrected by caulking the windows and the headers of its building when in fact this was an attempt to conceal the nature and extent of the problem which was the defective nature of the common cavity wall drainage system. The facts as alleged in this cause of action for fraud do not trigger coverage under a commercial general liability insurance policy. -10- 08-3684 CIVIL TERM Clearly, this injury occurred not later than October 1999 because Rossmoyne avers in its complaint that Wagman represented to it that month that the problem was related to the window installation or the glass contained in the windows. Rossmoyne avers that after repairs were made to the windows the water infiltration continued and it was later discovered that the cause was a defective wall drainage system. PMA argued in its brief, citing Paragraphs 34-37 of Rossmoyne’s complaint against Wagman, that “it was not until 2003 that new potential causes for the water infiltration problem began to be the subject of inquiry,” which was during the insurance coverage period when Penn 5 National issued its commercial general liability insurance policy to Witmer. Whether that is a fair reading of the allegations in Paragraphs 34-37 is of no legal import because it is the date the injurious effect of the injury manifested itself in a way that could be ascertained by reasonable due diligence which triggers coverage in an occurrence policy. The injury alleged to Rossmoyne’s property is the infiltration of water. Clearly, Rossmoyne knew of that injury in 1999. That is the time that 5 These paragraphs are: 34. Plaintiffs remained unaware of the true defective nature of the common cavity wall/drainage system until they hired additional experts to inspect Defendant’s work and purported repairs and investigate the water infiltration problem. 35. Plaintiffs provided the preliminary results of their investigation to Defendant in an attempt to assist Defendant in the repair of the premises. 36. Defendant responded to Plaintiff’s information with further attempts to conceal the nature and extent of the water infiltration problem. 37. Defendant wrote to Plaintiffs, in 2003, that the flashing (a major component of the common cavity wall/drainage system) had been -11- 08-3684 CIVIL TERM “installed pursuant to then applicable industry standards.” -12- 08-3684 CIVIL TERM coverage was triggered under the occurrence policy notwithstanding what the allegations in Rossmoyne’s complaint are as to when it determined the true cause of the injury. Accordingly, Penn National’s policy which did not commence until 2001 does not provide coverage for an occurrence that happened before that date. Penn National has no duty to defend Witmer because its coverage does not apply. D’Auria v. Zurich Insurance Company, supra. For the foregoing reasons, the following order is entered. ORDER OF COURT IT IS ORDERED: AND NOW, this day of July, 2009, (1) The motion of Penn National Mutual Insurance Company for summary IS judgment against Pennsylvania Manufacturers’ Association Insurance Company, DENIED. (2) The motion of Penn National Mutual Insurance Company for summary IS GRANTED. judgment against Witmer & McCoy, Inc., Penn National Mutual Insurance Company does not provide coverage under its commercial general liability insurance policy issued to Witmer & McCoy, Inc., for the period between April 1, 2001 to April 1, 2006, for the claims made in the suit by Rossmoyne Condominium Partners against Wagman Construction Company and the additional defendant complaint against Witmer & McCoy, Inc., at No. 03-5938 Cumberland County. Penn National Mutual Insurance Company has no duty to defend Witmer & McCoy, Inc. for the claims made in that litigation. -13- 08-3684 CIVIL TERM By the Court, Edgar B. Bayley, J. Kenneth M. Portner, Esquire For Pennsylvania National Mutual Insurance Company Charles E. Wasileski, Esquire For PMA Theodore A. Adler, Esquire For Witmer & McCoy, Inc. :sal -14- PENNSYLVANIA NATIONAL : IN THE COURT OF COMMON PLEAS OF MUTUAL INSURANCE COMPANY, : CUMBERLAND COUNTY, PENNSYLVANIA PLAINTIFF : : V. : : WITMER & McCOY, INC., and : PENNSYLVANIA MANUFACTURERS’ : ASSOCIATION INSURANCE : COMPANY, : DEFENDANTS : 08-3684 CIVIL TERM IN RE: MOTION OF PLAINTIFF, PENNSYLVANIA NATIONAL MUTUAL INSURANCE COMPANY FOR SUMMARY JUDGMENT AGAINST DEFENDANTS, WITMER & McCOY, INC., AND PENNSYLVANIA MANUFACTURERS’ ASSOCIATION INSURANCE COMPANY BEFORE BAYLEY, J. AND EBERT, J. ORDER OF COURT IT IS ORDERED: AND NOW, this day of July, 2009, (1) The motion of Penn National Mutual Insurance Company for summary IS judgment against Pennsylvania Manufacturers’ Association Insurance Company, DENIED. (2) The motion of Penn National Mutual Insurance Company for summary IS GRANTED. judgment against Witmer & McCoy, Inc., Penn National Mutual Insurance Company does not provide coverage under its commercial general liability insurance policy issued to Witmer & McCoy, Inc., for the period between April 1, 2001 to April 1, 2006, for the claims made in the suit by Rossmoyne Condominium Partners 08-3684 CIVIL TERM against Wagman Construction Company and the additional defendant complaint against Witmer & McCoy, Inc., at No. 03-5938 Cumberland County. Penn National Mutual Insurance Company has no duty to defend Witmer & McCoy, Inc. for the claims made in that litigation. By the Court, Edgar B. Bayley, J. Kenneth M. Portner, Esquire For Pennsylvania National Mutual Insurance Company Charles E. Wasileski, Esquire For PMA Theodore A. Adler, Esquire For Witmer & McCoy, Inc. :sal -2-