Gonsalves & Santucci v. Greenwich Ins. Co.

634 F.Supp.3d 830

GONSALVES & SANTUCCI v. GREENWICH INSURANCE COMPANY

Case No. 2:22-cv-03757-SVW-MAA

United States District Court, C.D. California

Filed October 11, 2022

Miles C. Holden, Kamran Khakbaz, Hanson Bridgett LLP, San Francisco, CA, for Gonsalves & Santucci.

Ronald D. Kent, Sabrina E. Chow, Dentons U.S. LLP, Los Angeles, CA, Samantha J. Wenger, Pro Hac Vice, Dentons U.S. LLP, Kansas City, MO, for Greenwich Insurance Company.

Proceedings: ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [35]

STEPHEN V. WILSON, UNITED STATES DISTRICT JUDGE

I. Introduction

Before the Court are motions for summary judgment filed by Plaintiff Gonsalves & Santucci Inc. d.b.a. Conco ("Conco") and Defendant Greenwich Insurance Co. ("Greenwich"). For the forthcoming reasons, Greenwich's motion is GRANTED and Conco's motion is DENIED.

II. Factual and Procedural Background¹

1. The LAX Project

The underlying arbitration and litigation, and the instant insurance-coverage action, are related to the construction of a new airport concourse and related improvements at Los Angeles International Airport ("LAX") called Midfield Satellite Concourse North ("Project") for which Turner Construction/PCL Joint Venture a.k.a. Turner - PCL, a Joint Venhue ("TPJV") served as the Project's prime contractor. Plaintiff's Statement of Uncontroverted Facts ("UF") 1. TPJV subcontracted with Conco to provide construction services for the Project's foundation system, and Conco in turn subcontracted with Shoring Engineers to provide services related to the Project's foundation system, which involved the installation of the Torque Down Pile units at issue in this case. Id. ¶ 2.

Conco's subcontract with TPJV incorporated the requirements of the prime contract, including an express warranty that all work performed, including design work, would be free from defects. Shoring's subcontract, in turn, expressly incorporated the requirements of the Conco Subcontract.

2. Greenwich's Insurance Policy

In connection with the Project, Greenwich issued commercial general liability insurance policy no. GDR7445521 ("Policy") for the policy period from September 7, 2016 to November 7, 2020, the period in which the TDP units were to be installed. Id. 3. Greenwich issued the Policy as part of the Contractor Controlled Insurance Program for the Project, and Conco is enrolled as an insured under the Policy. Id.

The Policy contains an insuring agreement that provides in relevant part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this 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" or "property damage" to which this insurance does not apply.

Id. ¶¶ 4-5; Defendant's Motion for Summary Judgment ("Defendant's MSJ") at 10-11.

The Policy includes the following definitions:

"Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions. In the event of continuous, progressive or deteriorating damage or injury, which exists over any length of time, such damage or injury shall be deemed one "Occurrence."

"Property damage" means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it . . . .

"Suit" means a civil proceeding in which damages because of "bodily injury," "property damage" or "personal and advertising injury" to which this insurance applies are alleged. "Suit" includes:

a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent; or

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent.

UF ¶¶ 12-13. As discussed further below, the policy also contains several exclusions of coverage.

3. The Trouble with the TDPs

In October 2017, the Project began to encounter delays arising from the installation of the foundation system using "Torque Down Pile" ("TDP") units, which consist of concrete-filled steel pipe piles with conical tips that are driven into the ground. Id. ¶ 4.

More specifically, TPJV, the prime contractor, hired Conco as a subcontractor. In turn, Conco engaged another firm, Shoring, as a pile subcontractor. TPJV's Project specifications required the pile subcontractor to have "successfully completed three projects minimum with piles of similar ultimate and allowable resistance, installed in similar soil conditions, similar pile dimensions and volume required for this Project." Conco apparently represented to TPJV that this was the case, stating that Shoring "has many years of experience with all types of pile and caisson systems and was the premier expert in the field." In fact, Shoring had performed only one other TDP project, conducted in "wholly dissimilar geotechnical conditions." Plaintiff's Mot. for Summary Judgment ("Plaintiff's MSJ"), ECF No. 32, Ex. E, at 65-70. Conco disputes these facts, asserting that "no one has established that Conco's work was incorrectly performed or constituted faulty workmanship." Id. at 17. Nevertheless, this is TPJV's basis for suing Conco in the underlying disputes.

TPJV alleges that, as a result of this inexperience, the TDPs were improperly installed after Shoring used an M-Pile tip for installation of the piles, rather than the original TDP pile tip, which is apparently customary to use when, as here, they will be driven into dense sand. Id. at 67. The tips could not be driven deeply enough into the ground and many piles were overheated during installation, with the "tips shearing off or being pushed into the pile." Id. at 68.

Some of the TDPs were deformed or broken during installation, leading some of them to be abandoned in the foundation soils. UF ¶ 4. Ultimately, 28 piles needed to be replaced and 127 piles needed to be retorqued to achieve the minimum pile embedment depth into the native soils. Plaintiff's MSJ, Ex. E, at 69. These issues caused the installation to take approximately nine months instead of the estimated one month. Id. TPJV also incurred a number of additional costs. Id.

4. The Underlying Arbitration and Litigation

As a result of these TDP issues, TPJV commenced the Underlying Arbitration, raising claims against Conco, as well as against other parties. UF ¶¶ 6, 10. TPJV's arbitration demand alleges that, due to Conco's acts or omissions, that

TDP were broken and deformed during installation: placement operations were interrupted as numerous TDP were replaced and retorqued in an attempt to meet minimum embedment depths; numerous broken TDP were abandoned in place when required depths could not be achieved; numerous TDP were installed at shallower than required embedment depths resulting in changes to grade beams and pile caps; work was slowed or stopped to allow for various changes during construction that were implemented to address the problems; because the TDP are a critical element of the foundation for the structure itself, the Project was damaged and all aspects of project scheduling, sequencing, and performance were disrupted and negatively impacted; the follow-on subcontractors and their work were damaged, substantially impacted, delayed, accelerated, and had to be completed on a piecemeal basis out of sequence at substantially greater cost; overall use and access to the facility was limited and impaired; and that subcontractors responsible for performing work such as structural steel, mechanical and electrical work, etc. have presented substantial claims totaling tens of millions of dollars.

Id. ¶ 14.

In short, TPJV seeks the following damages in the Underlying Arbitration:

• Direct Costs - TDP, $2,353,102

• Direct Impact - Gateway, $915,916

• Ensuing Impacts on Trades - Global TDP Analysis, $5,688,828

• Ensuing Impacts on Trades - Individual Sub Analysis, $66,385,148

• TPJV Markups, $19,012,298

• Total With Markups, $94,355,292

• Professional and Expert Fees, $3,513,228

Turner's Statement of Claims and Defenses, ECF No. 32-5 at 17.

Conco filed the Underlying Litigation in the Los Angeles Superior Court in connection with a payment dispute with TPJV. UF ¶ 7. TPJV crossclaimed, alleging, like in the Underlying Arbitration, that "problems arose with regard to the installation of concrete-filled rotary-installed displacement piles (the 'CFRID piles,' also referred to as 'Torque Down Pile' or 'TDP'). Following is a partial list of problems: (1) installation of the CFRID piles took significantly longer than accounted for in the schedule due to significant difficulties installing the piles to meet the project requirements, (2) numerous CFRID piles had to be replaced and/or retorqued due to piles not meeting the recommended minimum embedment depth and piles shearing off near the pile tip during installation, and (3) follow-on subcontractors were impacted by the delays and piecemeal completion of the foundation system and the resulting unavailability of work areas resulting in substantial delays, inefficiencies, and corresponding losses." Id. ¶ 15.

Conco informed Greenwich, the provider of its commercial general liability ("CGL") policy, of the Underlying Arbitration and Litigation, arguing that there was property damage via injury to the soils, other subcontractors' work, and the TDP units themselves, loss of use of physically injured tangible property, and loss of use of the surrounding soils, the entire concourse foundation area, and other subcontractors' materials. Plaintiff's MSJ at 13. Greenwich refused to defend Conco against any of the...