Main St. Am. Assurance Co. v. Connolly Contractors, Inc.

587 F.Supp.3d 256

MAIN STREET AMERICA ASSURANCE COMPANY, Plaintiff,

v.CONNOLLY CONTRACTORS, INC., et al., Defendants.

CIVIL ACTION NO. 19-4241

United States District Court, E.D. Pennsylvania.

Filed February 28, 2022

Bryan M. Shay, Post & Schell PC, Philadelphia, PA, for Plaintiff.

Patrick T. Henigan, Eckell Sparks Levy Auerbach Monte Rainer Sloane Matthews & Auslander, P.C., Media, PA, for Defendant Connolly Contractors, Inc.

James C. Dalton, Nancy J. Glidden, Unruh, Turner, Burke & Frees, P.C., West Chester, PA, for Defendant Glenn M. White Builders, Inc.

OPINION

Slomsky, District Judge

TABLE OF CONTENTS

I. INTRODUCTION...259

II. BACKGROUND...260

A. Underlying Actions...260

1. Galarneau Claims...260

2. Joinder Action...260

3. Campbell Claim...261

4. Plick Claim...262

5. Subsequent Claims and Joinder Actions...262

B. Insurance Policies...262

1. Businessowners Policies...262

2. Umbrella Policies...264

C. Claims for Coverage...265

D. Present Action...266

III. STANDARDS OF REVIEW...266

A. Judgment on the Pleadings...266

B. Insurance Policy Interpretation...267

C. Insurer's Duty to Defend...267

D. Insurer's Duty to Indemnify...267

IV. ANALYSIS...268

A. Main Street Has No Duty to Defend Connolly Contractors or Glenn White...268

1. Definition of "Occurrence"...268

2. Underlying Actions Do Not Allege an "Occurrence"...271

3. There is No Duty to Defend Under the Insurance Policies...273

4. Glenn White Does Not Qualify as an Additional Insured...275

B. Main Street Has No Duty to Indemnify Either Party...277

C. Main Street's Defense Costs...277

V. CONCLUSION...277

I. INTRODUCTION

This case is a declaratory judgment action filed by an insurer, Plaintiff Main Street America Assurance Company ("Main Street"), to determine if it has a duty under certain commercial insurance policies to defend or indemnify Defendants Connolly Contractors, Inc. ("Connolly Contractors") and Glenn M. White Builders, Inc. ("Glenn White"). The case arises from a series of actions filed against Glenn White by homeowners who claimed their houses were defectively built. Glenn White was the general contractor for the Brickhouse Farms homes project (the "Project"). Connolly Contractors is the named successor-in-interest to a subcontractor retained by Glenn White to install stucco on the houses. After the claims were filed against Glenn White, it filed joinder actions against Connolly Contractors seeking to impose a contractually required defense, contribution, and indemnification in the event that Glenn White was liable. Thereafter, both Glenn White and Connolly Contractors requested Main Street to defend and indemnify them in these actions under the insurance policies. Main Street then brought the instant case pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking a declaration that it has no duty to defend or indemnify Defendants under the insurance policies.

Before the Court is Plaintiff's Motion for Judgment on the Pleadings. In the Motion, Plaintiff seeks a declaratory judgment that it is not obligated to provide defense or indemnity coverage under the insurance policies to Defendants. For reasons discussed infra, Plaintiff's claim has merit and the Motion for Judgment on the Pleadings will be granted.

II. BACKGROUND

A. Underlying Actions

This case arises from damage to houses caused by moisture penetration due to faulty construction and involves (1) claims filed by homeowners against Defendant Glenn White, alleging damage to their individual properties; and (2) Joinder Actions filed by Defendant Glenn White against Defendant Connolly Contractors. Because the claims in these underlying actions determine whether coverage exists under the relevant insurance policies, the Court will summarize each action in turn.

1. Galarneau Claims

On September 4, 2018, five homeowners in the Brickhouse Farms development in Newtown Square, Pennsylvania, filed arbitration proceedings (the "Galarneau Claims") with the American Arbitration Association ("AAA") against Defendant Glenn White.¹ (See Doc. No. 25-1 at 24.) In the AAA proceeding, the homeowners identified Glenn White as "the general contractor for the project" to build their homes. (Id.; see also Doc. No. 25-11.) The homeowners "alleged that they purchased their respective properties ... ‘as a direct result of [Glenn White's] marketing materials and other representations related to the quality of the Property.’ " (Doc. No. 25-1 at 24; Doc. No. 25-11.)

Each homeowner attributed the common issue with their homes—moisture penetration—to "pervasive defects in the construction of the Property," and alleged that these construction failures had damaged their homes. (Doc. No. 25-1 at 24.) The Galarneau claimants based this conclusion on the findings of an expert who examined their homes and found construction defects. The expert "discovered that the labor and materials provided by [Glenn White] and [its] subcontractors did not comply with federal, state, and local building codes, industry standards, the aforementioned marketing materials, written contracts, and warranties." (Doc. No. 25-11 at 5, 10, 16, 22, 28.) The Galarneau Claims asserted against Glenn White are: (1) breach of contract; (2) violation of the Pennsylvania Real Estate Disclosure Law, 68 PA. CONS. STAT. § 7308 ; (3) breach of the implied warranties of habitability and workmanlike construction; (4) negligence; (5) misrepresentation; and (6) violation of the Unfair Trade Practices Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-1, et seq.

2. Joinder Action

After the Galarneau Claims were brought by the homeowners, Defendant Glenn White filed a Joinder Arbitration Demand against Defendant Connolly Contractors ("the Joinder Action") (Doc. No. 25-12). (See id. at 25.) Connolly Stucco & Plastering, Inc. ("Connolly Stucco") "was allegedly the company that did the work on the Project pursuant to a subcontract with Glenn White." (See id. ) Because Connolly Stucco & Plastering ceased to exist in 2014, Glenn White named Defendant Connolly Contractors, Inc. as the successor or assignee to Connolly Stucco.² (See Doc. No. 1 ¶ 15, 282.)

In the Joinder Action, Glenn White alleges that the homes’ "stucco, stone, roof, windows, doors, decks, electrical systems, HVAC, heating, and plumbing systems, were improperly constructed or installed ..." (Doc. No. 25-12 at 11–12.) Regarding Connolly Contractors, the Joinder Action alleges:

Connolly Stucco's Work performed at Brickhouse Farms is directly implicated by the Claimants’ allegations in their Demands for Arbitration as Claimants’ experts alleged that the stucco systems suffered from construction defects, including but not limited to, overly thin stucco, over stuccoing of weep screeds, lack of expansion or control joints, lack of corner reinforcement, and improperly attached lath.

(Doc. No. 25-12 ¶ 36.) The Joinder Action further states that the Galarneau Claims implicate Connolly Contractors because the claims "alleged that the improper construction of the stucco systems led to property damages to the claimants’ respective properties." (Id. ¶ 37.)

In the Joinder Action, Glenn White alleges three claims against Connolly Contractors and several other subcontractors for: (1) contribution for any award in favor of the Galarneau claimants and against Glenn White because Connolly Contractors and the other subcontractors are jointly and severally liable for the damage suffered by the Galarneau claimants; (2) "common law indemnification" from Connolly Contractors and the other subcontractors due to their "primary and active" negligence; and (3) "contractual defense and indemnification" from Connolly Contractors and the other subcontractors arising from their duty to defend and indemnify Glenn White under the subcontracts. (Id. at 23–25.)

To support these claims, the Joinder Action alleges that Connolly Stucco had two subcontracts with Glenn White. On July 30, 2005, the parties signed the first subcontract (the "2005 subcontract"), in which Connolly Stucco agreed to "undertake certain obligations," including purchasing general liability insurance.³ (Doc. No. 25-1 at 26.) Additionally, the subcontract included a clause that Connolly Stucco would indemnify and hold harmless Glenn White in the event of loss or damage arising out of Connolly Stucco's work. (See Doc. No. 25-13 at 5.) Notably, however, the 2005 subcontract does not require that Glenn White be named as an additional insured on Connolly Stucco's insurance policy with Main Street. (Doc. No. 25-1 at 6; see also Doc. No. 25-13.)

On February 26, 2007, the parties signed the second subcontract (the "2007 subcontract"), which had "the same insurance and indemnity requirements as did the July 30, 2005 subcontract." (Doc. No. 25-1 at 6; see also Doc. No. 25-14.) Like the 2005 subcontract, the 2007 subcontract did not require that Glenn White be named as an additional insured on the relevant Main Street policies. (See Doc. No. 25-14.)

3. Campbell Claim

On August 9, 2019, Main Street was notified that another AAA arbitration claim was filed against Glenn White. Timothy and Paula Campbell, who owned another home in the Brickhouse Farms development, filed a claim⁴ (the "Campbell Claim"), "assert[ing] negligence in construction resulting in property damage to their property." (Doc. No. 25-15 at 2.)

4. Plick Claim

On August 13, 2019, Main Street learned that another action was filed against Glenn White by Robert and Barbara Plick, who also owned a home in the Brickhouse Farms community (the "Plick Claim"). The Plick Claim, filed with the AAA, states that "[t]he [h]omeowners are experiencing moisture penetration and water infiltration events as a result of construction defects." (Doc. No. 25-16 at 4.) The Plicks hired an expert to inspect their home and perform "invasive moisture probe tests." (Id. ) As a result, "the [h]omeowners became aware of systemic and latent construction defects in their [h]ome" and cracks in the stucco. (Id. at 5.) The Plicks allege these defects and cracks caused damage, including water...