Starline Windows Inc. v. Ins. Co. of the Pa.

1

STARLINE WINDOWS INC., a Washington corporation, Plaintiff, v. INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, an Illinois corporation, Defendant.

No. 3:21-cv-00578-RBM-DEB

United States District Court, S.D. California

March 17, 2023

ORDER GRANTING INSURANCE ' COMPANY OF THE STATE OF

PENNSYLVANIA'S MOTION FOR SUMMARY JUDGMENT

[DOC. 39]

HON RUTH BERMUDEZ MONTENEGRO, UNITED STATES DISTRICT JUDGE

On July 13, 2022, Defendant Insurance Company of the State of Pennsylvania (“Defendant” or “ICSOP”) filed a Motion for Summary Judgment (“MSJ”). (Doc. 39.) Plaintiff Starline Windows Inc. (“Plaintiff” or “Starline”) filed a response in opposition to Defendant's MSJ on August 15, 2022 (Doc. 41), and Defendant filed a reply on August 22, 2022 (Doc. 42). Plaintiff and Defendant (collectively, the “Parties”) filed a Joint Statement of Undisputed Facts as an attachment to Defendant's reply brief. (See Doc. 42-1.)

For the reasons discussed below, Defendant's MSJ is GRANTED.

I. BACKGROUND

A. Factual Background

The following facts are not reasonably in dispute. (See Doc. 42-1, Joint Statement of Undisputed Facts ¶ 3-6.) The Grande at Santa Fe Place, located at 1205 Pacific Coast Highway, San Diego, California 92101 (“Grande North”), is a 39-story condominium tower and was substantially completed on June 30, 2005. (Id. at 3.) Bosa Development California, Inc. (“Bosa”) was the developer and general contractor for Grande North. (Id.) In June 2003, Starline subcontracted with Bosa to furnish and install a window-wall system at Grande North, which included insulated-glass units (“IGUs”), and Starline issued a 10-year limited warranty for the windows at Grande North (“Starline Warranty”). (Id.) Starline subcontracted with Star Team Installations Inc. (“Star Team”) for installation of the window-wall system at Grande North. (Id.) The IGUs consist of three panes of tempered glass, which are separated by perforated aluminum spacer bars filled with desiccant used to absorb moisture within the IGU. (Id.) The IGUs were sealed with gray polyisobutylene (“PIB”) as a primary sealant. (Id.)

Beginning in March 2014, Starline became aware that numerous homeowners at Grande North served Notices of Claims under Civil Code § 895, et seq., and under the Starline Warranty concerning the IGUs located in their condominium units (“Window Claims”). (Id. at 3-4.) Specifically, the homeowners alleged failure and migration of PIB sealant within the IGUs. (Id. at 4.) In some instances, the PIB migrated onto the glass panes of the IGUs, resulting in visual obstructions. (Id.) Some units experienced the PIB migrating onto the perforated spacer bars, which can impair the desiccant's ability to absorb moisture and prevent fogging inside the IGUs. (Id.) The claims by the homeowners did not involve physical injury to any property other than the IGUs Starline contracted to furnish and install at Grande North. (Id.)

The affected IGUs at Grande North are primarily located on the South and West elevations of the building as these are the elevations which experience the most ultraviolet (“UV”) radiation from exposure to sunlight. (Id.) The affected PIB fundamentally changed over time, losing molecular weight due to UV radiation. (Id. at 5.) The PIB's loss of molecular weight reduced its viscosity and increased its propensity to flow. (Id.) As the PIB liquefied and lost viscosity, it migrated from its original position between the spacer bars and the glass edges, and in some instances, onto the viewing areas of the glass surfaces and the spacer bars of the IGUs. (Id.) As it moved, the PIB also changed color, becoming grayish and somewhat opaque. (Id.) Approximately half of the IGUs installed at Grande North were affected, and the remaining fifty percent of the IGUs at Grande North were unaffected and remain in place as originally installed. (Id.)

Bosa had purchased a primary Owner Controlled Insurance Program (“OCIP”) policy underwritten by Liberty Mutual Fire Insurance Company (policy number RG2- 691004303-023, effective July 1, 2003) “to cover itself and its subcontractors for course of construction and completed operations liability regarding Grande North” (“Liberty Policy”). (Id. at 6.) Bosa also purchased a first layer of “Follow Form Excess Liability” coverage from ICSOP (policy number 4203-4877, effective July 1, 2003) which incorporated the coverage provided by the Liberty Policy (“ICSOP Policy”). (Id.) The Liberty Policy and the ICSOP Policy (collectively, the “OCIP Policy”) form the OCIP Policy purchased by Bosa. (Doc. 39-1 at 12.)

On July 22, 2014, Starline executed a Repair Agreement with Bosa under which Starline agreed to replace certain IGUs at Grande North in accordance with the Starline Warranty. (Doc. 42-1 at 4.) Starline tendered defense and indemnity of the claims by the homeowners to ICSOP in March 2014, September 2015, and December 2015, but ICSOP did not respond to Starline's tenders. (Id.) Starline's claimed damages are costs it alleges it incurred to remove and replace IGUs at Grande North. (Id. at 5.) Starline has not yet paid its vendors, Starline Windows, Ltd. (f/k/a Starline Architectural Windows, Ltd.) (“Limited”) and Starline Windows USA, LLC (“USA”), for the replacement IGUs or the labor to remove and replace the affected IGUs.^[1] (Id.) Starline is an entirely separate company from its vendors, Limited, USA, and Star Team. (Id.; Doc. 39-1 at 10.) On April 2, 2021, Starline filed the instant action against ICSOP alleging causes of action for: (1) declaratory relief, and (2) breach of contract for failure to defend and indemnify Starline. (See Doc. 1)

On July 13, 2022, ICSOP filed the instant MSJ. (See Doc. 39.) ICSOP contends it does not owe a duty to indemnify Starline for the amounts Starline alleges it incurred to replace IGUs at Grande North because: (1) “the window claims indisputably do not involve covered ‘property damage' and are otherwise excluded by the business-risk exclusions” in the OCIP Policy; (2) as a supplier of the window-wall system, Starline does not qualify as an Additional Named Insured under the OCIP Policy, but rather is considered an additional insured for faulty installation work performed by its subcontractor (Star Team), and there are no allegations that faulty installation was the cause of the window claims; and (3) “Starline is no longer legally obligated to pay the damages it allegedly incurred to replace the defective IGUs at Grande North.” (Doc. 39-1 at 17.)

B. OCIP Policy

Bosa purchased the OCIP Policy for the Grande North project which names the Liberty Policy as the primary policy and the ICSOP Policy as the excess policy. (Doc. 391 at 12.) The ICSOP Policy follows form to the Liberty Policy and expressly incorporates the terms and conditions of the Liberty Policy, unless otherwise provided in the ICSOP Policy. (Id.) The OCIP Policy provides commercial general liability coverage. (Doc. 41 at 11; see Doc. 1-2.)

The relevant policy language is as follows:

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. 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. ... 2. Exclusions

This insurance does not apply to:

...

k. Damage To Your Product

“Property damage” to “your product” arising out of it or any part of it.

...

m. Damage To Impaired Property Or Property Not Physically Injured

“Property damage” to “impaired property” or property that has not been physically injured, arising out of:

(1) A defect, deficiency, inadequacy or dangerous condition in “your product” or “your work”; or

(2) A delay or failure by you or anyone else acting on your behalf to perform a contract or agreement in accordance with its terms.

This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to “your product” or “your work” after it has been put to its intended use.

n. Recall Of Products, Work Or Impaired Property

Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:

(1) “Your product”;

(2) “Your work”;

(3) “Impaired property”;

if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.

...

17. “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.

...

21. “Your Product”:

a. Means:

(1) Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:

(a) You;

(b) Others trading under your name; or

(c) A person or organization whose business or assets you have acquired; and

(2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.

b. Includes:

(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your product”; and

(2) The providing of or failure to provide warnings or instructions.

22. “Your work”:

a. Means:

(1) Work or operations performed by you or on your behalf; and

(2) Materials, parts or equipment furnished in connection with such work or operations. b. Includes:

(3) Warranties or representations made at any time with

...