MW Builders, Inc. et al v. Safeco Insurance Company of America et al
Filing
244
Findings & Recommendation - MW Builders' Renewed Motion for Summary Judgment Following Ninth Circuit Remand 232 should be, granted, in part, and denied, in part. Further, SAFECO's Motion for Summary Judgment Pursuant to July 9, 2008 Order[ 228] should be denied. These findings will be referred to a US District Judge for review. Objections to the court's findings, if any, are due by 2/11/09. If objections are filed, a response to those objections may be filed within fourteen days of the filing date of the objections. Signed 1/28/09, Judge John V. Acosta. (peg)
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IN THE UNITED STATES DISTRICT COURT F O R T H E DISTRICT OF OREGON
M W B U I L D E R S , INC., a M i s s o u r i corporation; and GREAT AMERICAN ALLIANCE INSURANCE COMPANY, a n O h i o corporation, Plaintiffs,
v.
SAFECO INSURANCE COMPANY OF A M E R I C A , a W a s h i n g t o n corporation; S A F E C O INSURANCE C O M P A N Y OF OREGON, an Oregon corporation; A M E R I C A N STATES I N S U R A N C E COMPANY, an Indiana corporation; ELLIOTT, POWELL, B A D E N & BAKER, INC., a n Oregon c o r p o r a t i o n ; R E X & COMPANY, an Oregon company; L A W R E N C E R E X ESTATE, d b a R E X & COMPANY (by and through its personal representative, L.V. Rex); and LAWRENCE REX T R U S T (by and through its Trustee, L.V. R e x ) , Defendants. CV 0 2 - l 5 7 8 - A C F I N D I N G S AND R E C O M M E N D A T I O N
P a g e 1 - FINDINGS A N D R E C O M M E N D A T I O N
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ACOSTA, Magistrate Judge: This dispute between M W Builders Inc. ( " M W Builders") and SAFECO Insurance Company o f A m e r i c a ( " S A F E C O " ) r e t u m s to t h e d i s t r i c t c o m t f r o m t h e N i n t h C i r c u i t b y w a y o f a r e m a n d .
See ,\lfWBuilders, Inc., et at. v. SAFECO Insurance Company o fAmerica, et at., 267 Fed. Appx. 552
(9th Cir. 2008). In an unpublished Memorandum, the N i n t h Circuit remanded the following issues for t h i s c o u r t ' s c o n s i d e r a t i o n :
(l)
Detelmine what pOltion o f the $620,000 award s h o u l d b e attributed to the Hotel damage claim as distinguished from the exterior insulation and f i n i s h i n g system ( " E I F S " ) r e p a i r claim. Detelmine w h e t h e r M W Builders, Inc. is entitled to coverage under the c o m m e r c i a l g e n e r a l l i a b i l i t y ( " C G L " ) p o l i c i e s a s a n " a d d i t i o n a l i n s u r e d " for damages caused by Portland P l a s t e r i n g ' s "ongoing operations." D e t e r m i n e w h e t h e r c o v e r a g e is l i m i t e d u n d e r t h e C G L p o l i c i e s to a s i n g l e $500,000 occurrence.
(2)
(3)
Id. at 555.
O n April 15, 2008, this c o m t h e l d a status conference and, among other things, ordered the p a t t i e s to s u b m i t m e m o r a n d u m s setting fOlth their respective positions conceming what, i f any, i s s u e s r e m a i n f o r the c o u r t ' s d e t e r m i n a t i o n . I n a c c o r d a n c e w i t h t h e c o m t ' s o r d e r , M W B u i l d e r s a n d SAFECO submitted separate memorandums and suppOlting documents. A f t e r a c a r e f u l r e v i e w o f b o t h p a r t i e s ' s u b m i s s i o n s , and i n a c c o r d a n c e w i t h t h e N i n t h C i r c u i t ' s ruling, o n July 9, 2008, the court directed the patties to conduct discovery, as necessaty, o n the questions of: (1) what portion o f t h e $620,000 award should be attributed to the Hotel damage claim as distinguished from the EIFS repair claim; (2) the cause o f damage t o t h e Hotel for p u r p o s e s o f d e t e l m i n i n g w h e t h e r M W B u i l d e r s i s e n t i t l e d t o c o v e r a g e for " o n g o i n g o p e r a t i o n s "
P a g e 2 - FINDINGS A N D R E C O M M E N D A T I O N
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under the 1997-98, 1998-99, and 1999-2000 CGL policies. The court further ordered the parties to submit dispositive cross-motions after discovery closed o n the issues of: (1) what portion o f the $620,000 award is attributed to the Hotel damage claim as distinguished from the EIFS repair claim; (2) whether M W Builders i s entitled to coverage under the CGL policies as an "additional insured" for damages caused by Portland Plastering's "ongoing operations;" and (c) whether coverage i s limited under the CGL policies t o a single $500,000 occurrence. I n accordance with the c o u r t ' s July 9 Order, the patiies filed cross-motions for summary j u d g m e n t . Oral argument was heard o n the cross-motions and, for the reasons that follow, M W B u i l d e r s ' Renewed M o t i o n for Summary J u d g m e n t F o l l o w i n g N i n t h Circuit R e m a n d s h o u l d be, granted, i n part, and denied, in part. Further, S A F E C O ' s Motion for Summary Judgment Pursuant to J u l y 9 , 2 0 0 8 O r d e r s h o u l d b e d e n i e d .
Legal Standard
Summary judgment is appropriate " i f the pleadings, depositions, answers to intelTogatories, and admissions on file, together w i t h the affidavits, i f any, show that there is no genuine issue as to any material fact and that the moving party is entitled t o a j u d g m e n t as a matter o f l a w . " Fed. R. Civ. P. 56(c). Summary j u d g m e n t is n o t proper i f material factual issues exist for trial. Warren v. City
o fCarlsbad, 58 F J d 439, 441 (9 th Cir. 1995).
The moving party has the burden o f establishing the absence o f a genuine issue o f material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). I f the moving p a t i y shows the absence o f a genuine issue o f material fact, the nonmoving p a t i y m u s t go beyond the pleadings and identify facts which s h o w a genuine issue for trial. Id. a t 324. Assuming that there has been sufficient time for discovety, summary j u d g m e n t should be entered against " a party who fails to make a showing P a g e 3 - F I N D I N G S AND R E C O M M E N D A T I O N [LB]
sufficient to establish the existence o f a n element essential to that p a r t y ' s case, and o n w h i c h that party will bear the burden o f p r o o f at trial." Id. a t 322. Discussion The facts o f this dispute are well known to the parties and the court, and have been recited o n numerous occasions. As such, only facts that pertain to the legal analysis o f t h e issues presented for the court will be set fOlih below. Because there are no disputed material facts, the c o u l i c a n decide the cross-motions as a matter o f law.
I.
Arbitrator K n o l l ' s $620,000 A w a r d I n June 2003, M W Builders proceeded to arbitration against Portland Plastering seeking
reimbursement for the $2 million paid out to Larkspur i n settlement o f L a r k s p u r ' s claims against M W B u i l d e r s . J a m e s K n o l l , t h e a r b i t r a t o r a p p o i n t e d to r e s o l v e t h e d i s p u t e , d e t e l m i n e d t h a t t h e f a u l t o f Portland Plastering caused 31 % o f the damages sustained by the Hotel owned by Larkspur. In accordance w i t h that detelmination, Knoll awarded $620,000 in settlement damages (31 % o f the $2,000,000 Larkspur settlement) to M W Builders. This award was for reimbursement o f the money p a i d by M W Builders to Larkspur for damage to the Hotel caused b y Portland Plastering. T h i s c o u r t found t h a t t h e C G L p o l i c i e s S A F E C O i s s u e d t o P o r t l a n d P l a s t e r i n g o b l i g a t e d SAFECO to pay POliland Plastering's p o r t i o n o f K n o l l ' s award. See
},1JW Builders,
Inc., e t al. v.
S A F E C O Insurance Company o fAmerica, e t al., C V No. 02-1578-AC (J. Haggerty's Order dated M a y 18, 2005). The N i n t h Circuit determined, however, that K n o l l ' s findings did n o t patiition the $620,000 award into "those costs associated w i t h the damage to the Hotel and those costs associated with the replacement o f the faulty EIFS." J1;JW Builders Inc., 267 Fed. Appx. at 555. Because only
P a g e 4 - FINDINGS A N D R E C O M M E N D A T I O N
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the costs associated with the damage t o the Hotel were recoverable under the SAFECO CGL policies, the appeals court directed this court " t o m a k e such a determination in the first instance."
Id.
S A F E C O i n s i s t s t h a t i t i s i m p o s s i b l e t o d e t e t m i n e w h a t p o r t i o n o f the s e t t l e m e n t f u n d s a r e a l l o c a b l e to t h e c o v e r e d d a m a g e s b e c a u s e t h e S e t t l e m e n t A g r e e m e n t b e t w e e n L a r k s p u r a n d M W B u i l d e r s d i d n o t p r o v i d e a n a l l o c a t i o n . ( D e f . ' s M e m . P u r s u a n t t o O r d e r 7.) S A F E C O r e l i e s o n t h e Minnesota Supreme C o u r t ' s decision in Bob Useldinger & Sons Inc. v. Hangsleben, to argue t h a t the Settlement Agreement is not enforceable. 505 N . W . 2 d 323, 331 (1993) ("No efficient m e t h o d e x i s t s h e r e to allocate l i a b i l i t y a m o n g v a r i o u s p a r t i e s w h o h a v e n o t b e e n a d j u d i c a t e d l i a b l e . " ) SAFECO maintains that M W Builders cannot CatTy its burden o f proving what portion o f t h e settlement was allocated t o EIFS cladding repairs versus damage t o the Hotel. Fmiher, any effort t o a l l o c a t e the s e t t l e m e n t f u n d s i n a c c o r d a n c e w i t h t h e i n t e n t i o n o f the s e t t l i n g p a r t i e s , L a r k s p u r a n d M W Builders, would required the fact finder to speculate, w h i c h is impetmissible under Oregon law. Accordingly, " M W Builders is n o t entitled to recover ally p a r t o f the $620,000 at'bitration award." ( D e f . ' s Mem. Pursuant t o Order 8.) A l t e r n a t i v e l y , S A F E C O c o n t e n d s t h a t M W B u i l d e r s ' r e q u e s t for a l l o c a t i o n b e t w e e n c o v e r e d a n d non-covered damages is a n equitable task for the comi. See, e.g., Voest Alpine Indus. v. Zurich A m e r i c a n Ins. Co., No. 2:02 c v 1 6 0 5 , 2 0 0 7 WL 1175750 (W.D. Pa. April 20, 2007) ("Where a n i n s u r e d s e t t l e s l i a b i l i t y t h a t is b a s e d o n c o v e r e d a n d n o n - c o v e r e d c l a i m s w i t h o u t a c o n t e m p o r a n e o u s a p p O l i i o n m e n t b e t w e e n t h e t w o , t h e n t h e p r o p e r p r o c e d u r e i s f o r the c o m i t o m a k e a n e q u i t a b l e a p p o r t i o n m e n t o f t h e s e t t l e m e n t . "). S A F E C O a s s e r t s t h a t b e c a u s e t h i s is a n a c t i o n a t l a w - b r e a c h o f all insurance contract - M W Builders is n o t entitled to a n equitable remedy. According to [LB]
P a g e 5 - FINDINGS A N D R E C O M M E N D A T I O N
SAFECO, " M W Builders m u s t prove the p r o p e r allocation o n the l a w side o f t h e court." (Def. ' s M e m . P u r s u a n t to O r d e r 10.) Finally, S A F E C O s u b m i t s t h a t i f t h e court d e t e n n i n e s a n e q u i t a b l e a p p o r t i o n m e n t is r e q u i r e d , the apportionment should b e based " o n the actual repair costs inculTed by Larkspur." Larkspur hired M e g a Pacific C o n s t m c t i o n Company ( " M e g a Pacific") to repair the Hotel. (Baran Decl. App. 58-75, S e p t e m b e r 2 9 , 2 0 0 8 . ) W h e n t h e r e p a i r p r o j e c t w a s c o m p l e t e d , M e g a P a c i f i c i t e m i z e d the r e p a i r s i n the f i n a l c o s t a n a l y s i s a n d c o s t s u m m m y . ( B a r a n D e c l . App. 7 6 - 7 8 . ) S A F E C O c o n t e n d s t h a t t h e c o s t s u n r e l a t e d t o e i t h e r t h e r e c l a d d i n g w o r k / w a t e r d a m a g e r e p a i r , a n d the c o s t s r e l a t e d p a r t l y t o t h e r e c l a d d i n g w o r k / w a t e r d a m a g e r e p a i r s h o u l d b o t h be e x c l u d e d f r o m t h e a l l o c a t i o n c a l c u l a t i o n , l e a v i n g o n l y r e p a i r e x p e n s e s i n c u r r e d s o l e l y t o r e p a i r c o n s e q u e n t i a l w a t e r d a m a g e and t h o s e r e q u i r e d t o r e p l a c e t h e EIFS c l a d d i n g . According to SAFECO, the total o f the EIFS cladding replacement costs ($862,424) a n d the c o n s e q u e n t i a l w a t e r d a m a g e r e p a i r c o s t s ( $ 2 5 2 , 4 6 6 ) is $ 1 , 1 1 4 , 8 9 0 , w i t h t h e c l a d d i n g r e p l a c e m e n t costs being 77 % and the consequential w a t e r damage repair costs being 23 % o f the total. S AFECO a p p l i e s t h e p e r c e n t a g e s to t h e $ 6 2 0 , 0 0 0 s e t t l e m e n t a w a r d to m a i n t a i n t h a t o n l y $ 1 4 2 , 6 0 0 r e l a t e d t o t h e c o n s e q u e n t i a l w a t e r d a m a g e r e p a i r s is c o v e r e d u n d e r an e q u i t a b l e allocation. Conversely, M W Builders requests the c o m t to appOltion the entire $620,000 s e t t l e m e n t awm'd as costs to repair consequential water damage to the Hotel. According to M W Builders, such a n a w a r d is r e q u i r e d because p r o p e r t y d a m a g e s s u s t a i n e d b y L a r k s p u r i n t h e a m o u n t o f $ 1 , 4 0 3 , 7 2 7 , well exceeded the $620,000 award. Further, Larkspur never pursued claims for damages to the EIFS i n the Settlement Agreement. M W Builders requests the court to "evaluate L a r k s p u r ' s damages by e x a m i n i n g t h o s e d a m a g e s a c t u a l l y i n c u r r e d b y L a r k s p u r a t t h e t i m e o f t h e s e t t l e m e n t as w e l l as t h e
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estimated costs to r e p a i r the property damages t o the Hotel a t the time o f the settlement." (Pl.s'
Mem. Summ. J. 17 (emphasis in original).) N e x t , M W B u i l d e r s i n s i s t s t h a t t h e c o s t o f i n s t a l l i n g t h e EIFS w a s r e q u i r e d i n o r d e r t o r e p l a c e t h e m o i s t u r e d a m a g e d a n d d e c a y e d e x t e r i o r s h e a t h i n g a n d w o o d r e p a i r o f the H o t e l . A c c o r d i n g t o M W B u i l d e r s , t h e M e g a P a c i f i c r e p a i r p r o j e c t r e q u i r e d r e m o v a l o f t h e EIFS c l a d d i n g . H a d t h e p r o b l e m s w i t h t h e H o t e l i n v o l v e d o n l y t h e i n s t a l l a t i o n errors i n t h e EIFS a n d c a u l k i n g system, w i t h no r e s u l t i n g p r o p e r t y d a m a g e s , t h e EIFS p r o b l e m s c o u l d h a v e b e e n r e s o l v e d w i t h s p o t r e p a i r s a n d applying a skim c o a t over the existing EIFS system. (PI. ' s Mem. Summ. J. 20.) Simply put, removal o f a l l o f t h e EIFS c l a d d i n g s o t h a t r o t t e d f r a m i n g a n d s t r u c t u r a l c o m p o n e n t s c o u l d b e i d e n t i f i e d a n d r e p l a c e d w a s r e q u i r e d to r e p a i r t h e e x t e n s i v e damage t o t h e H o t e l c a u s e d b y P o r t l a n d P l a s t e r i n g ' s faulty w o r k . N e v e r t h e l e s s , e v e n i f t h e c o m t w e r e t o d e d u c t t h e c o s t t o i n s t a l l t h e r e p l a c e m e n t c l a d d i n g ($618,634), t h e p o s t - s e t t l e m e n t actual p r o p e l t y d a m a g e s i n c u n e d w a s $785,093 ( $ 1 , 4 0 3 , 7 2 7 m i n u s $ 6 1 8 , 6 3 4 ) . A c c o r d i n g l y , M W B u i l d e r s r e q u e s t s t h e c o m t t o a w a r d the e n t i r e a m o u n t , $620,000, a s c o s t s to r e p a i r t h e Hotel. A s a t h r e s h o l d m a t t e r , t h e c o u r t rejects S A F E C O ' s a r g u m e n t t h a t M W B u i l d e r s i s n o t e n t i t l e d t o a n y pOltion o f the $ 6 2 0 , 0 0 0 a w a r d b e c a u s e i t i s u n a b l e t o p r o v e w h a t a m o u n t o f t h e s e t t l e m e n t w a s allocated to EIFS c l a d d i n g repairs versus damage to the Hotel and, thus, an award b y the c o m t w o u l d b e speculative. W e r e t h e c o m t to a d o p t t h i s argument, M W B u i l d e r s w o u l d receive n o d a m a g e s d e s p i t e h a v i n g p r o v e d a l o s s c o v e r e d u n d e r the S A F E C O C G L p o l i c i e s , a l o s s w h i c h S A F E C O r e f u s e d t o d e f e n d . F u r t h e r , a s a p o l i c y m a t t e r , a d e f e n d a n t , s u c h as S A F E C O , s h o u l d n o t p r o f i t f r o m its i n s u r e d ' s d i f f i c u l t y i n p r o v i n g e x a c t d a m a g e s , p m t i c u l a r l y i f d e f e n d a n t ' s b r e a c h
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contributed to that difficulty. See, e.g., Milgard Tempering, Inc. v. Selas Corp. o fAmerica, 902 F.2d 703, 71 0 (9th Cir. 1990). E a r l i e r i n t h e s e p r o c e e d i n g s , M W B u i l d e r s p r o v e d a c o v e r e d loss u n d e r t h e CGL p o l i c i e s . Indeed, the Ninth Circuit affirmed this c o u r t ' s detelIDination that the SAFECO CGL policies provided coverage for M W Builders' claim. See A l W Builders Inc., 267 Fed. Appx. at 554. Under Oregon law, once a breach o f contract has been established, a p l a i n t i f f is required only to submit evidence that provides the COUlt a sufficient basis for estimating the damage amount with reasonable celtainty. See generally Douglas Construction Corp. v. ,v!azama Timber Products, Inc., 256 Or. 107, 111-12,471 P.2d 768 (1970); see also Restatement (First) o f Contracts § 331 (2008) ("Damages are recoverable for losses caused . . . by the breach only to the extent that the evidence affords a sufficient basis for estimating their amount in money w i t h reasonable certainty.") For the reasons set fOlth below, the court finds that M W Builders has met that burden here and, thus, it is for the COUlt t o determine what portion o f the $620,000 award is covered "property damage" to the Hotel. The insuring agreement set fOlth in the four SAFECO CGL policies provides, i n part, that SAFECO "will pay those sums that the insured [POltland Plastering] becomes legally obligated to pay as damages because o f 'bodily injury' or ' p r o p e l t y damage' to which this insurance applies." (Murphy Aff. Ex. C a t 4, Sept. 29, 2008.) The CGL "insurance applies to . . . 'property damage' only if: [t]he . . . 'property damage' is caused by a n ' o c c u r r e n c e . ' ' ' The CGL policies define "property damage," in part, as " [ p]hysical injury to tangible property, including all resulting loss o f use o f that propelty." (Murphy Aff. Ex. C a t 15.) The telID "occurrence" is defined as " a n accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Murphy Aff. Ex. C a t 14.) P a g e 8 - FINDINGS AND R E C O M M E N D A T I O N
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Turning first to the repair costs for the faulty EIFS installation, the O r e g o n Supreme Court h a s h e l d t h a t p o o r w o r k m a n s h i p i s n o t a n "occulTence" a n d t h e r e f o r e , n o c o v e r a g e e x i s t s w h e r e t h e o n l y d a m a g e s u f f e r e d w a s t o t h e i n s u r e d ' s p r o p e r t y a n d n o t t h a t o f a t h i r d - p a r t y . See O a k C r e s t
Construction Co. v. Austin ,HutualInsurance Co., 329 Or. 6 2 0 , 6 2 6 - 2 7 , 9 9 8 P . 2 d 1254 (2000) (Costs
inculTed by general contractor to remove and replace s u b c o n t r a c t o r ' s painting w o r k o n cabinets and w o o d w o r k w a s n o t c o v e r e d u n d e r a C G L p o l i c y as t h e d a m a g e s d i d n o t a r i s e f r o m a n " a c c i d e n t . " ) ;
see also California Insurance Co. v. Stimson Lumber Co., No. 0 1 - 5 l 4 - H A , 2004 W L 1173185, a t
*6 (D. Or. M a y 26, 2004). Generally, courts are unwilling to transform a CGL policy into a walTanty o r perfolTilance bond for a c o n t r a c t o r ' s workmanship. See Stimson Lumber, 2004 W L 1173185, at *6. The N i n t h Circuit explained: General liability policies . . . are n o t designed to provide contractors and developers w i t h c o v e r a g e a g a i n s t c l a i m s t h e i r w o r k is i n f e r i o r o r defective. T h e r i s k o f r e p l a c i n g a n d repairing d e f e c t i v e m a t e r i a l s o r p o o r workmanship has generally b e e n c o n s i d e r e d a commercial risk w h i c h is n o t p a s s e d o n to the liability insurer. Rather liability c o v e r a g e c o m e s i n t o p l a y w h e n t h e i n s u r e d ' s d e f e c t i v e m a t e r i a l s o r w o r k cause i n j w y to p r o p e r t y o t h e r than t h e i n s u r e d ' s o w n w o r k o r p r o d u c t s .
Anthem Elec., Inc. v. Pac. Employers Ins. Co., 302 F J d 1049, 1057 (9th Cir. 2002) (emphasis i n
original); accord Burlington Insurance Co. v. Oceanic Design & Construction, Inc., 383 F J d 940, 948-49 (9th Cir. 2004). A p p l y i n g Oregon l a w , t h e N i n t h C i r c u i t a f f i r m e d this c o u r t ' s e a r l i e r ruling a n d h e l d t h a t " [f j o r a claim o f faulty w o r k m a n s h i p to give rise to ' p r o p e r t y d a m a g e , ' a claimant m u s t demonstrate that there is damage to property separate f r o m the defective property itself." ,V/W Builders, Inc., 276 Fed. Appx. at 554. Accordingly, the N i n t h Circuit held t h a t "the d a m a g e s that occulTed to the [Hotel] a s a result o f the faulty installation o f . . . [the EIFS] by Portland Plastering - rather than any
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damages associated w i t h the actual replacement o f the EIFS - satisfy this criteria." [d. Pursuant to t h i s c o u r t ' s e a r l i e r r u l i n g , a f f i t m e d b y t h e N i n t h C i r c u i t , a n d i n a c c o r d a n c e w i t h O r e g o n c a s e law, t h e c o u r t f i n d s t h a t t h e c o s t t o r e m o v e a n d r e p l a c e t h e EIFS i s n o t c o v e r e d p r o p e r t y d a m a g e u n d e r t h e C G L policies. T h e p a r t i e s a g r e e t h a t the H o t e l s u f f e r e d c o n s e q u e n t i a l w a t e r i n t r u s i o n a n d d a m a g e . B e c a u s e o f t h e f a u l t y E I F S i n s t a l l a t i o n w a t e r e n t e r e d the H o t e l a n d d a m a g e d t h e f r a m i n g m e m b e r s , i n t e r i o r w a l l spaces, s h e a t h i n g , drywall, i n s u l a t i o n , j o i s t s , a n d o t h e r b u i l d i n g c o m p o n e n t s . A r b i t r a t o r K n o l l f o u n d t h a t P o r t l a n d P l a s t e r i n g ' s d e f e c t i v e and i m p r o p e r E I F S c a u s e d t h e w a t e r i n f i l t r a t i o n d a m a g e s t o t h e H o t e l b e t w e e n 1 9 9 7 a n d 2 0 0 0 . S p e c i f i c a l l y , K n o l l stated: A significant cause o f the repair costs were attributable to the application o f the EIFS a n d t h e c a u l k i n g o f t h e EIFS a r o u n d t h e penetrations[.]
P o r t l a n d P l a s t e r i n g d i d p r o c e e d a n d apply t h e EIFS, despite k n o w i n g i n m a n y c a s e s its i n s t a l l a t i o n o f t h e E I F S w a s w r o n g and w o u l d c a u s e p r o b l e m s d o w n t h e r o a d a n d d e s p i t e its r e s p o n s i b i l i t i e s u n d e r i t s c o n t r a c t w i t h M W B u i l d e r s . . . . A d d i t i o n a l l y , i t c u t the v-grooves to [sic] deeply, failed to install properly the mesh, base c o a t and finish coat i n some areas and failed to properly c a u l k t h e penetrations contraty t o the S T O i n s t a l l a t i o n specifications. . . . I n p a r t i c u l a r w h e n c a u l k i n g t h e P TA C u n i t s , P o r t l a n d P l a s t e r i n g ' s s u b c o n t r a c t o r f a i l e d t o i n s t a l l t h e c o n e c t o r any c a u l k j o i n t s .
F i n a l l y , t h e f a i l u r e o f P o r t l a n d P l a s t e r i n g t o i n s t a l l p r o p e r l y t h e EIFS a n d c a u l k i n g a n d i t s f a i l u r e t o s u b m i t w r i t t e n c o n c e r n s as r e q u i r e d b y i t s c o n t r a c t a l s o c o n t r i b u t e d t o the d a m a g e . ( B a r a n Decl. A p p . 2 5 3 - 5 6 . ) M W B u i l d e r s h a s o f f e r e d e v i d e n c e t h a t " r e m o v a l o f t h e o f t h e e n t i r e EIFS c l a d d i n g w a s t h e o n l y w a y for the [ H o t e l ] o w n e r s t o r e m o v e a n d r e p l a c e t h e w i d e s p r e a d p r o p e r t y d a m a g e ( r o t t e d a n d
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decayed framing, sheathing, and structural components) caused by Portland Plastering's faulty work . . . . " ( P l . ' s Mem. Summ. J. 8, Bredal Aff~~ 22-23.). And that "but, for" the water intrusion, the faulty EIFS could have been repaired b y skim coat and patch work. (Hansen Aff.
~
5 . ) W h i l e i t is
undisputed that the cost to repair the Hotel, excluding the EIFS removal and replacement, exceeded $620,000, the court declines to award M W Builders the full amount o f K n o l l ' s award. M W Builders' request for the court to do so ignores the risk inherent in settlement, M W B u i l d e r ' s own culpability for the damages, and the Ninth C i r c u i t ' s directive that this cOUli make a detennination o f what p011ion o f the 620,000 was attributable t o damages to the Hotel and n o t the faulty installation o f the EIFS. Despite some evidence that the EIFS could have b e e n skim coated and patched b u t for water intrusion, the case l a w bars recovelY for faulty work; i n fact, the l a w is clear that a CGL policy i s n o t i n t e n d e d to c o v e r b a d w o r k m a n s h i p . T h e l i m i t e d e x c e p t i o n f o r f a u l t y w o r k m a n s h i p t h a t causes property damage t o a third party should not be expanded i n this instance to cover the inferior w o r k b y P011land Plastering. An argument that "but, for" the extensive water intrusion caused b y the faulty work the EIFS would n o t have needed to be replaced and, therefore, the removal and replacement o f the EIFS should be covered, is circular and would ignore well established l a w that recovelY under a CGL policy for faulty workmanship is not pel1llitted. A s set f o r t h a b o v e , i t w a s p r e v i o u s l y d e t e l m i n e d b y t h e c o u r t t h a t t h e c o n s e q u e n t i a l w a t e r damage t o the Hotel caused b y Portland Plastering's faulty installation is covered propeliy damage under the SAFECO CGL policy. S e e NIW Builders, Inc., 267- Fed. Appx. at 554-55. M W Builders alleged here that SAFECO must indemnify it because the damages arose from moisture and water intrusion into the Hotel, i.e., propeliy damage, caused by P011land Plastering; its insured. For example, M W Builders alleged i n its First Amended Complaint, i n part, that: Page 11 - FINDINGS AND RECOMMENDATION [LB]
After the hotel was built, Larkspur made claims against M W Builders, alleging that the Candlewood Suites had been and was being damaged by moisture and water intrusion into the hotel. [MW Builders] tendered defense and indemnity o f the claims to responsible third parties, including POliland Plastering, based o n the telIDS o f the subcontract. [MW Builders] also specifically demanded that POliland Plastering immediately notifY its insurer o f the claim o n its own b e h a l f and o n b e h a l f o f M W Builders as an additional insured.
[MW Builders] paid monies to defend and to settle the claims asselied by Larkspur based upon work performed by Portland Plastering. [MW Builders] seek[ s] to recover those damages i n this case. ( F i t · s t A r n . Compl.
~~3.8,
3.15.)
SAFECO declined to defend or indemnifY M W Builders in the Larkspur action pursuant to the CGL policies issued to Portland Plastering. Subsequently, the Larkspur dispute was settled and M W Builders sought recovelY o f Portland Plastering's share o f liability through arbitration. I t is undisputed that Portland Plastering was liable for some o f the damages to the Hotel caused by the w a t e r intmsion resulting from its defective work. SAFECO cannot now argue as a result o f the Larkspur settlement and subsequent arbitration that M W Builders is not entitled to recover some o f t h a t amount because i t is too speculative. Because the First Arnended Complaint alleged that Portland Plastering's faulty installation o f EIFS caused damage to the entire Hotel, thereby diminishing its value, the cOUli concludes that M W Builders' claims, excluding the faulty work, seek d a m a g e s a r i s i n g f r o m c o v e r e d p r o p e l i y damage. In sum, the court has determined that M W Builders established a loss covered by the SAFECO CGL policies, i.e., "sums that the insured [was] legally obligated to pay because o f . . . 'property damage;'" that there is no coverage under the CGL policies for the cost o f removing and replacing the EIFS; and, that Knoll awarded MW Builders $620,000, 31 % o f t h e Larkspur settlement Page 12 - FINDINGS AND RECOMMENDATION [LB]
amount, against Portland Plastering for the h a n l l caused to the Hotel by Portland Plastering (Knoll found that M W Builders and its architect m u s t bear liability for the remainder o f the Larkspur settlement). Additionally, as detailed below, the Larkspur settlement comprised four categories o f e x p e n s e s t h a t were c o n s i d e r e d i n r e a c h i n g t h e s e t t l e m e n t w i t h M W Builders: M e g a P a c i f i c ' s estimate to repair the damage to the Hotel, including removing and replacing the EIFS; investigation and repair costs; professional design and consultant costs; and lost use. Thus, to calculate what portion o f t h e $620,000 award is attributed to the Hotel damage claim, excluding the EIFS repair claim, the court will determine what percent o f the total $2 million settlement award was covered p r o p e l i y d a m a g e a n d a p p l y t h a t p e r c e n t a g e a m o u n t to t h e $ 6 2 0 , 0 0 0 a w a r d b y K n o l l . T h i s a p p r o a c h to appOliionmentfinds suppOli i n comparable contexts. See, e.g., Milenbach v. C . I R . , 318 F.3d 924, 932 (9th Cit'. 2003) ( " W h e n a claim is resolved by settlement, the relevant question for determining the tax treatment o f a settlement award is: ' I n lieu o f what were the damages awarded?'" (quoting
Getty v. Commissioner, 913 F.2d 1486, 1490 (9th Cir. 1990)); see also Francisco v. United States,
267 F.3d 303, 319 (3d Cir. 2001) ("To maintain tax equality between settlements and court awards, w e determine the tax implications o f a settlement b y asceliaining the obligation or claim initially resolved b y j u d g m e n t i n lieu o f which the settlement was made.") Thus, the cOUli must look first to t h e s e t t l e m e n t w i t h L a r k s p u r . I n its Demand for Arbitration, Larkspur alleged claims against M W Builders, Inc. for negligence, breach o f contract, breach ofwal1'anty/guaranty, indemnification, and products liability arising out o f damages caused b y moisture and water intrusion into the Hotel. (Murphy Aff. Ex. 20, filed Nov. 17, 2003.) Larkspur identified the sources o f the water i n t m s i o n to include EIFS
i n s t a l l a t i o n a n d p r o d u c t defects, a n d s o u g h t r e p a i r costs, l o s t r e v e n u e s , i n v e s t i g a t i o n a n d c o n s u l t a n t Page 13 - FINDINGS AND RECOMMENDATION [LB]
costs, and attorneys fees. (Murphy Aff. Ex. 20.) Similarly, in its Demand for Arbitration, M W Builders alleged identical claims against Portland Plastering, and included a claim for contribution. ( M m p h y Aff. Ex. 25.) D u r i n g t h e a r b i t r a t i o n p r o c e e d i n g s a g a i n s t M W B u i l d e r s , L a r k s p m d e t e l m i n e d its d a m a g e s were in the range o f $ 2 . 3 to $2.8 million. (Hansen Aff. ~ 7, Ex. A.) The damages estimate included a b i d f r o m M e g a P a c i f i c i n t h e a m o u n t o f $ 1 , 5 4 3 , 4 2 1 f o r r e p a i r to t h e e x t e r i o r w a l l s o f t h e H o t e l . (Hansen Aff. ~ 9, Ex. B.) The record reveals that $629,960 o f that amount was expended to remove and replace the faulty EIFS. (Miller Dep. Ex. 3 at 2.) Accordingly, the repair to the Hotel, excluding t h e EIFS portion, w a s $913,461. Additionally, L a r k s p u r ' s p r o p e r t y damages i n c l u d e d p a s t
~ 7,
investigation and repair costs i n the amount o f $96,205 .69 (Hansen Aff.
Ex. A a t Lns. 102-06,
201-02, 303, 402-03 and 501); professional design and consultant work by Larkspur's architect, Jan Bredal, in the amount of$90,042.61 (Hansen Aff. ~ 7, Ex. A a t L n s . l 011-12; Bredal Aff. ~~ 13-15); and L a r k s p u r ' s lost use during the repairs in the amount o f $ 1 0 0 , 0 0 0 (Hansen Aff. ~ 11, Ex. A at Ln . . 505). A t the time o f settlement, the estimated property damages totaled $1,829,669.30. B a s e d o n t h e r e c o m m e n d a t i o n s o f i t s c o u n s e l , G r e g o r y 1 . B a i r d , a n d e x p e l i s r e t a i n e d to v a l u e the damages to the Hotel, M W Builders offered $2 million in full settlement o f Larkspur's claims. (Baran Decl. App. 240 at ~ 21.) O n Februaty 2 2 , 2 0 0 2 , counsel for Larkspur, Eric A. Grasberger, advised that Larkspur would accept the offer o f $ 2 million to settle all claims against M W Builders. (Baran Decl. App. 240 at ~ 22.) The percent o f the total settlement amount for each o f t h e four categories is as follows: M e g a P a c i f i c ' s estimate t o repair the damage to the Hotel, minus the EIFS costs, was $913,461, or 45.7% o f the $2 million total; the investigation and repair costs were $96,205, or 4.8%; the professional Page 14 - FINDINGS AND RECOMMENDATION
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design and consultant costs were $90,042, or 4.5%; and the lost use was $100,000 or 5%. Based o n this partitioning o f M W Builders' settlement w i t h Larkspur, the percent amount that may be applied as covered property damage to K n o l l ' s $620,000 award is 60%. Accordingly, the court finds that M W Builders should be entitled to recover $372,000 (60% o f $620,000), under the SAFECO CGL policies for the consequential water damage caused b y POliland Plastering.
II.
Coverage L i m i t e d t o a Single $ 5 0 0 , 0 0 0 O c c u r r e n c e Next, the N i n t h Circuit directed the district cOUli "to conduct fmiher factual development"
on the question o f whether coverage is limited under the CGL policies to a single $500,000 o c c u n e n c e . S i m p l y p u t , d o e s a s i n g l e $ 5 0 0 , 0 0 0 l i m i t a p p l y to t h e c o n s e q u e n t i a l w a t e r d a m a g e c l a i m , o r w e r e there m u l t i p l e " o c c u n e n c e s " s u c h t h a t t h e s u c c e s s i v e S A F E C O C G L p o l i c i e s were implicated. The declarations for the 1996-97 CGL policy and the 1997-98 CGL policy each s e t fOiih a $500,000 limit for each occurrence. (Baran Dec!. App. 264, 279.) The declarations for the 199899 CGL policy and the 1999-00 CGL policy each set forth a $1,000,000 limit for each occurrence. (Murphy Aff. Ex. C.) The SAFECO CGL policies define the term " o c c u n e n c e " as "an accident,
including continuous or repeated exposure to substantially the same general harmful conditions." (Baran Dec!. App. 290.) According t o SAFECO, the damage to the Hotel resulted from "continuous or repeated e x p o s u r e to s u b s t a n t i a l l y t h e s a m e g e n e r a l h m m f u l c o n d i t i o n s ; " n a m e l y , f l a w e d w o r k a n d m o i s t u r e infiltration. SAFECO relies o n Bredal' s testimony t o argue that the damage started as s o o n as the Hotel w a s completed, and continued until the Hotel was repaired. (Baran Decl. App. 105 (Bredal Dep. 25:3-24).) SAFECO reasons that to the extent the loss involved an " o c c u n e n c e , " there was only one and it is subject t o a single $500,000 limit. Page 15 - FINDINGS AND RECOMMENDATION [LB]
SAFECO challenges MW Builders' contention that the water damage claim involves multiple occun'ences under successive policies based o n S t P a u l Fire & Marine Ins. Co. Inc. v. !'vfcCormick
& B a x t e r Creosoting Co., 324 Or. 1 8 4 , 2 0 0 - 2 0 2 , 9 2 3 P.2d 1200 (1996). According t o SAFECO, St.
P a u l Fire & }vlarine, holds that when a loss progresses undiscovered during the terms o f several
s u c c e s s i v e p o l i c i e s , t h e l o s s c a n t r i g g e r c o v e r a g e u n d e r e a c h s e p a r a t e policy. H e r e , b o t h t h e c a u s e o f the loss and the damage it was causing to the Hotel was discovered in 1997, and any additional loss or damage did n o t involve a n e w or separate OCCUlTence. Because the loss resulted from c o n t i n u o u s o r r e p e a t e d e x p o s u r e to s u b s t a n t i a l l y t h e s a m e g e n e r a l h a r m f u l c o n d i t i o n s , t h e l o s s implicates only one $500,000 limit, no matter h o w many years the policy was in effect. Rather, SAFECO directs the court to the decision in Cleveland B o a r d o fEducation v. R.J.
Stickle International, 76 Ohio A p p J d 4 3 2 , 6 0 2 N.E.2d 353 (1991), in which the insured installed
a r o o f that leaked whenever it rained. The first leaks were discovered shortly after the r o o f was installed, but the r o o f was n o t completely repaired until several years later. SAFECO explains that the central issue in the case was whether the loss triggered coverage under all o f the i n s u r e d ' s p o l i c i e s t h a t w e r e i n e f f e c t f r o m t h e t i m e t h e l e a k s b e g a n u n t i l t h e r o o f was r e p a i r e d . I n c o n c l u d i n g that only the policy in effect when the leaks were first discovered was triggered, the court i n Stickle stated: The rationale for this conclusion is that the r o o f began to leak in 1975, making i t a real possibility that the r o o f would continue t o leak every time it rained. Clearly, the k n o w l e d g e o f t h i s p o s s i b i l i t y increased w i t h every w a t e r e n t l y p r o b l e m a n d r e s u l t i n g damage. Therefore, the resulting damage was n o t unusual, unexpected, or unforeseen and not a n accident. The absence o f a n accident necessarily precludes the existence
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ofan occurrence under the definition contained w i t h i n the p o l i c i e s i n existence from 1976 t o 1988. 6 0 2 N . E . 2 d a t 436-437. 1 Additionally, S A F E C O asserts t h a t t h e " k n o w n l o s s " doctrine, w h i c h o p e r a t e s to b a r a n insured from obtaining coverage for a loss t h a t has occurred, o r is certain to occur, is implicated here. (Defo's Mem. Pursuant to O r d e r 19 (and cases cited therein).) S A F E C O maintains that P o r t l a n d P l a s t e r i n g k n e w i n 1997 t h a t damage w o u l d continue to o c c u r unless comprehensive r e p a i r s were made. Thus, M W B u i l d e r s , s t a n d i n g i n t h e p l a c e o f P o r t l a n d P l a s t e r i n g , c a n n o t c l a i m c o v e r a g e u n d e r a n y l a t e r i s s u e d C G L p o l i c y f o r t h e k n o w n loss. R a t h e r , t h i s c l a i m i s s u b j e c t t o t h e $ 5 0 0 , 0 0 0 p e r - o c c u r r e n c e l i m i t o f t h e s i n g l e p o l i c y t h a t w a s i n p l a c e i n 1997. F i n a l l y , in a c c o r d a n c e w i t h t h e N i n t h C i r c u i t ' s r u l i n g , S A F E C O p a i d t h e a t t o m e y f e e s a n d c o s t s a w a r d e d to M W B u i l d e r s b y K n o l l t o t a l i n g $285,544.30. T h i s c o u r t p r e v i o u s l y d e t e n n i n e d that $42,832.50 o fthis a m o u n t w a s covered under the supplementary payments p r o v i s i o n s o f the P o r t l a n d P l a s t e r i n g p o l i c y , w h i c h d o e s n o t r e d u c e t h e p o l i c y limit. S A F E C O c h a r g e s , h o w e v e r , t h a t t h e b a l a n c e o f the p a y m e n t ( $ 2 4 2 , 7 1 1 . 8 0 ) r e d u c e s t h e a v a i l a b l e c o v e r a g e l i m i t f o r a n y c o n s e q u e n t i a l w a t e r damage repairs to $257,288.20. Conversely, M W B u i l d e r s c l a i m s t h a t " S A F E C O c o n c e d e s t h a t the faulty E I F S i n s t a l l a t i o n w o r k o f P o r t l a n d P l a s t e r i n g t r i g g e r e d t h e 1 9 9 6 - 1 9 9 7 p o l i c y " and c h a l l e n g e s S A F E C O ' s a s s e r t i o n t h a t coverage is precluded u n d e r multiple policies. M W Builders asserts that the property damages to the H o t e l b e g a n i n 1997, a n d continued until the t i m e o f M e g a P a c i f i c ' s repairs i n 2000. (PIo's
M W B u i l d e r s a l l e g e s i n its r e s p o n s e b r i e f t h a t a s u b s e q u e n t , u n p u b l i s h e d d e c i s i o n o f t h e O h i o a p p e l l a t e c o u r t c a l l s t h e d e c i s i o n i n Stickle i n t o q u e s t i o n : " [ T ] h e S t i c k l e c o u r t c i t e d n o a u t h o r i t y , h o w e v e r , i n s u p p o r t o f t h i s p r o p o s i t i o n , a n d i t c h a r a c t e r i z e d t h i s s t a t e m e n t o f l a w as a n a l t e m a t i v e h o l d i n g . " (PIo's Resp. Summ. 1. 15 n.5 ( a n d case cited therein).) P a g e 17 - FINDINGS A N D R E C O M M E N D A T I O N [LB]
Resp. Summ. J. 12.) A s such, M W Builders is n o t limited to a single $500,000 p e r occurrence limit, u n d e r t h e four s u c c e s s i v e C G L p o l i c i e s i s s u e d b y S A F E C O . A c c o r d i n g t o M W B u i l d e r s , i t i s "uncontrovelied that the faulty w o r k c a u s e d p r o p e l i y damages to the [H]otel after the completion o f POliland P l a s t e r i n g ' s initial w o r k i n June 1997[,] and t h a t these damages continued until S e p t e m b e r 2000[,]" implicating t h e $500,000/$1,000,000 p e r OCCUlTence limits o n each o f t h e successive CGL policies. (PI.'s. Mem. Summ. J. 24.) C i t i n g O r e g o n law, M W B u i l d e r s c o n t e n d s t h a t w h e r e a n o c c u r r e n c e d u r i n g a p o l i c y p e r i o d causes continuing damage over several policy periods, coverage is triggered u n d e r evelY policy applicable thereafter. See St. Paul Fire & ,'larine, 324 Or. a t 2 0 7 -08. M W Builders a s s e l i s that c o u r t s h a v e a p p l i e d t h e s a m e " a c t u a l injury" o r " i n j m y i n fact" r u l e to find coverage u n d e r s u c c e s s i v e p o l i c i e s t h a t c o n t a i n e d t h e s a m e d e f i n i t i o n o f " o c c u r r e n c e " as t h e C G L p o l i c i e s h e r e a n d i n v i r t u a l l y identical circumstances. See Century Indemnity Co. v. Golden Hills Builders, Inc., 348 S.C. 559, 561 S.E.2d 255 (2002) (applying c o n t i n u o u s trigger theOlY to same policy language in S AFECO p o l i c i e s t o h o l d t h a t c o v e r a g e for h a r m for m o i s t u r e i n t r u s i o n b e h i n d s t u c c o c l a d d i n g c o n t i n u e s u n d e r e a c h p o l i c y p e r i o d that t h e h a l m manifests). A c c o r d i n g t o M W B u i l d e r s , n o o n e k n e w the c a u s e a n d e x t e n t o f t h e w a t e r i n f i l t r a t i o n a n d r e s u l t i n g p r o p e r t y d a m a g e s . P o r t l a l l d P l a s t e r i n g perfOlmed a d d i t i o n a l w o r k i n S e p t e m b e r 1 9 9 8 , a n d L a r k s p u r b e l i e v e d the w a t e r i n t r u s i o n i s s u e s h a d b e e n r e s o l v e d . I n v e s t i g a t i o n l a t e r d e t e l m i n e d t h a t this w a s n o t the case. M W Builders alleges " [ i ] t is undisputed that the September 1998 repairs were faulty a n d n o t only failed to s t o p t h e w a t e r infiltration, b u t e x a c e r b a t e d t h e p r o p e r t y d a m a g e s to t h e H o t e l and caused new, additional d a m a g e s . " (p1.'s Resp. Summ. J. 13 (and citations therein).)
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FUliher, MW Builders challenges S A F E C O ' s known loss argument because the cause o f water infiltration and the extent o f the resulting property damages was n o t k n o w n i n 1997. I n fact, M W Builders alleges there is no evidence regarding what POliland Plastering k n e w in 1997. M W Builders points out that Knoll concluded in his Interim Decision that Portland Plastering continued to deny any responsibility for the water infiltration issues even as late as July o f 1999. FUliher, Knoll detelmined that " M W Builders was unable to determine the source o f the water infiltration damages a t the site at any point in 1999" and that "Larkspur was unable to detelmine the source o f the water infiltration damages at the [H]otel until after Jan Bredal performed his destructive testing i n the spring o f 2 0 0 0 . " ( P l . ' s Resp. Summ. J. 14 n A . ) I n sum, M W B u i l d e r s a r g u e s t h a t t h e u n d i s p u t e d e v i d e n c e e s t a b l i s h e s t h e H o t e l s u f f e r e d propeliy damages continuously from 1997, through 2000, triggering coverage under each o ft h e four SAFECO CGL policies issued to Portland Plastering (with limits totaling $3 million). Accordingly, e v e n i f t h e c o u r t d e t e r m i n e s t h a t t h e a p p l i c a b l e p o l i c y l i m i t s are r e d u c e d b y S A F E C O ' s p a y m e n t o f the $242,711.80 i n attorneys' fees and costs, there is adequate coverage for the $620,000 settlement award. Under Oregon law, actual injury must occur during the policy period in order to trigger a p o l i c y ' s coverage. See St. Paul Fire & ,1,larine, 324 Or. at 200-02. In St. 'Paul Fire & Marine, the Oregon Supreme COUli rejected the trial c o u r t ' s adoption o f the manifestation trigger, which p r o v i d e s t h a t a p o l i c y is t r i g g e r e d w h e n t h e i n j u r y o r d a m a g e b e c o m e s a p p a r e n t , a n d i n s t e a d a d o p t e d a n injury-in fact-trigger. I d In so doing, the court noted that the "operative phrase in the trigger clauses contained in the caused-by-accident policies i s 'during the policy period. " , Id. a t 201. Thus, coverage under the policies a t issue did n o t t u m o n the discovely o f property damage or o n the P a g e 19 - F I N D I N G S A N D R E C O M M E N D A T I O N [LB]
establishment o f the i n s u r e d ' s financial responsibility o r liability. I d Rather, the court held t h a t so long as there w a s property damage during the policy period, the policy w a s triggered. Id. at 20 1-02. S i m i l a r l y , t h e S A F E C O CGL p o l i c i e s c o v e r p r o p e l i y d a m a g e t h a t o c c u r r e d d u r i n g the p o l i c y period. The CGL p o l i c i e s at issue p r o v i d e t h a t S A F E C O will " p a y those s u m s t h a t t h e i n s u r e d [ P o r t l a n d P l a s t e r i n g ] b e c o m e s l e g a l l y o b l i g a t e d t o p a y as d a m a g e s b e c a u s e o f . . . ' p r o p e r t y d a m a g e ' to w h i c h this insurance applies." (Murphy Aff. Ex. C a t 4.) T h e insurance is triggered b y " p r o p e l i y d a m a g e " that "occurs during the policy period." (Murphy Aff. Ex. C a t 4.) A s set fOlih i n St. P a u l
Fire & }(larine, i f p r o p e l i y damage o c c u r s a t some p o i n t during the course o f the policy period,
c o v e r a g e is triggered. Additionally, this cOUli explained in Stimson Lumber, that the ' ' ' t r i g g e r ' theory is c o m m o n l y referred t o as the actual injury o r injury-in-fact trigger o f coverage" and "courts applying this t r i g g e r t h e o r y h a v e f o u n d c o v e r a g e e x i s t s u n d e r every p o l i c y t h a t was i n e f f e c t d u r i n g t h e t i m e p e r i o d s i n w h i c h damage to p r o p e l i y actually occurred, e v e n i f the damage w a s discovered long after it b e g a n . " 2004 W L 1173185, at *13; see also Wooddale Builders, Inc. v. l H m y l a n d Casualty Co., 722 N W . 2 d 2 8 3 , 2 9 2 (Minn. 2006) ( " a liability policy is ' t r i g g e r e d ' i f the complaining p m i y . . . is actually d a m a g e d d u r i n g t h e p o l i c y p e r i o d , r e g a r d l e s s o f w h e n the u n d e r l y i n g n e g l i g e n t a c t o c c u r r e d " ) ;
C e n t w y Indemnity Co., 348 S. C. at 564 (applying a "modified continuous trigger theory" to find that
the p o l i c y p r o v i d e d " c o v e r a g e for p r o p e r t y d a m a g e t h a t o c c u r r e d d u r i n g t h e p o l i c y p e r i o d a n d f o r any c o n t i n u i n g d a m a g e " ( e m p h a s i s i n o r i g i n a l ) ) . Here, there is no dispute that Portland P l a s t e r i n g ' s faulty w o r k caused damage to the Hotel that OCCUlTed after the original w o r k w a s substantially c o m p l e t e d i n June 1997. FUliher, evidence
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in the record supports a finding that the damage to the Hotel continued until September 2000. Bredal testified as follows: I perfOlmed investigation (including invasive testing by removing sections o f EIFS to inspect the interior wall damages) i n early 2000 and was also present during the r e p a i r s c o n d u c t e d b e t w e e n J u l y 2 0 0 2 a n d M a y 2003. B a s e d o n m y e x p e r i e n c e , training, and my observations at the site, I conclude that the property damage at the hotel occurred continuously beginning i n June 1997 through September 2000. When I observed the rot, fungal decay, and disintegration o f the structural components o f the building during the invasive testing i n 2000, I confitmed that the property damage caused by the faulty EIFS installation and sealant work had been occUlTing continuously over a period o f years. Water would periodically enter the building as a r e s u l t o f t h e i m p r o p e r w o r k o f P o r t l a n d Plastering and i t s s u b c o n t r a c t o r Spectra Caulking. Each rain and stOlm event would result in water entering the wall spaces and cause new propetty damage to framing, sheathing and other structural components o f the hote!. The water would enter the wall cavities and become trapped causing rot, growth o f mold and fungus, and general deterioration o f the interior structural components o f t h e building. I t is not possible to specifically identifY each stud, header, joist, sheet o f sheathing, or other component that rotted o n a given day. Rather, based on my experience and training I have concluded that the water damages to the hotel components o c c u n e d continuously during the June 1997 through September 2000 time frame. (Bredal Aff. ,; 18.) SAFECO neither disputes the statements i n the Bredal affidavit nor offers competent evidence to controvett Bredal' s testimony that "property damage at the hotel occurred continuously beginning i n June 1997 through September 2000." F i n a l l y , t h e a r b i t r a t o r Knoll d e t e r m i n e d t h a t " M W B u i l d e r s ' c l a i m s a g a i n s t P o r t l a n d Plastering relating to water damage caused b y the improperly installed EIFS were not discovered until after December 31, 1998." (Baran Dec!. App. 252.) In fact, Knoll found: The preponderance o f evidence established that Larkspur and M W Builders expended significant effOlts to determine the cause o f the water infiltration damages, but had not discovered the causes until after December 22, 1998.
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Jim H a n s e n o f Larkspur also testified t h a t L a r k s p u r w a s unable to determine the s o u r c e o f the w a t e r i n f i l t r a t i o n d a m a g e s a t t h e h o t e l u n t i l a f t e r J a n B r e d a l p e r f o r m e d his destructive testing i n t h e spring o f 2000. Portland Plastering p e r f o r m e d repair w o r k at the stlUcture i n S e p t e m b e r 1998. After t h a t repair w o r k was c o m p l e t e d , i t is u n d i s p u t e d t h a t b o t h M W Builders a n d L a r k s p u r b e l i e v e d t h a t n o p r o b l e m s w i t h t h e h o t e l c o n t i n u e d t o exist. . . . U n t i l t h e s p r i n g o f 1999, L a r k s p u r w a s n o t a w a r e o f a n y a d d i t i o n a l p r o b l e m s a t the h o t e l r e g a r d i n g w a t e r i n f i l t r a t i o n . . . . T i m C h a d w i c k also t e s t i f i e d t h a t h e p e r s o n a l l y s p o k e w i t h a L a r k s p u r r e p r e s e n t a t i v e . . . w h o c o n f i r m e d t h a t , a f t e r t h e S e p t e m b e r 1998 r e p a i r s w e r e completed, no further p r o b l e m s o r c o m p l a i n t s e x i s t e d w i t h Larkspur u n t i l t h e spring o f 1999. (Baran Dec!. App. 250-51.) S A F E C O has n o t challenged K n o l l ' s findings t h a t t h e c a u s e o ft h e w a t e r i n f i l t r a t i o n w e n t u n d i s c o v e r e d u n t i l a f t e r 1998. N o r h a s S A F E C O o f f e r e d e v i d e n c e t o c o n t r o v e r t K n o l l ' s f i n d i n g t h a t t h e s o u r c e o f t h e w a t e r i n f i l t r a t i o n w a s u n k n o w n i n 1 9 9 7 a n d 1998. B a s e d o n t h e u n c o n t r o v e r t e d e v i d e n c e i n the r e c o r d , t h e c o u r t finds t h a t t h e p r o p e r t y d a m a g e t o t h e H o t e l b e g a n a f t e r its s u b s t a n t i a l c o m p l e t i o n i n J u n e 1 9 9 7 , a n d c o n t i n u e d t h r o u g h 2 0 0 0 . A s c i t e d above, O r e g o n l a w finds c o v e r a g e u n d e r a C G L p o l i c y f o r p r o p e r t y d a m a g e t h a t o c c u r s d u r i n g a p o l i c y p e r i o d . A c c o r d i n g l y , c o v e r a g e u n d e r e a c h S A F E C O C G L p o l i c y i n e f f e c t f r o m J u n e 1997, u n t i l S e p t e m b e r 2 0 0 0 , h a s b e e n triggered. III. C o v e r a g e for M W B u i l d e r s a s a n " A d d i t i o n a l I n s u r e d " Previously, t h i s c o u r t d e t e t m i n e d that M W B u i l d e r s w a s n o t a n " a d d i t i o n a l i n s u r e d " u n d e r S A F E C O ' s 1996-1997 CGL Policy No. 0 1-CD-229396-5, b u t w a s a n " a d d i t i o n a l insured" under S A F E C O ' s 1 9 9 7 - 1 9 9 8 C G L P o l i c y No. 0 1 - C D - 2 2 9 3 9 6 - 6 ; 1 9 9 8 - 1 9 9 9 C G L P o l i c y No. 0 1 - C D 2 2 9 3 9 6 - 7 ; and, 1999-2000 C G L P o l i c y No. 01-CD-229396-8. See lvfW Builders, Inc., N o . 02-1578A C (J. H a g g e r t y ' s Order d a t e d M a y 1 5 , 2 0 0 5 ) . A s such, M W Builders was entitled to coverage for damages OCCUlTing during t h o s e p o l i c y periods; t h a t were c a u s e d by Portland P l a s t e r i n g ' s " o n g o i n g
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operations;" and were covered by the t erm s o f those policies. ( M W B u i l d e r s ' status as a n " a d d i t i o n a l i n s u r e d " w o u l d e n d u p o n t h e c o m p l e t i o n o f P o r t l a n d P l a s t e r i n g ' s work.) A l t h o u g h t h e N i n t h Circuit d i d n o t d i s t u r b t h i s c o i l l i ' s findings regarding M W B u i l d e r s ' status as an "additional insured" u n d e r the enumerated policies, it remanded the issue o f whether, as a n additional insured, M W Builders w a s entitled t o coverage for damages OCCUlTing during the policy periods that were caused by POliland P l a s t e r i n g ' s "ongoing operations." I n a footnote, the N i n t h C i r c u i t s t a t e d t h a t " [ I ] n l i g h t o f t h i s c o u r t ' s ruling, M W B u i l d e r s m a y n o t w i s h t o p u r s u e t h i s altemative form o f liability." ""lW Builders Inc., 267 Fed. Appx. a t 555 n.2. Additionally, in its opening brief, M W Builders stated that: " T h i s court s h o u l d conclude that all o f the damages i n c u n e d b y Larkspur are covered pursuant to [ S A F E C O ' s ] obligations to Portland Plastering as its primary insured. A n additional, independent basis f o r insurance coverage exists based on AEW
Builders' status as an additional insured." ( P l . ' s Mem. Summ. J. 23 (emphasis added).)
T h i s cOUli h a s d e t e l m i n e d t h a t m o r e t h a n o n e SAFECO C G L p o l i c y h a s b e e n triggered, thereby providing M W Builders full recovery for Portland P l a s t e r i n g ' s covered damages. T h u s , the c o u l i n e e d n o t r e a c h t h e q u e s t i o n o f w h e t h e r , as a n " a d d i t i o n a l i n s u r e d , " M W B u i l d e r s i s e n t i t l e d t o coverage for damages o c c u n i n g during the policy periods that were caused by Portland P l a s t e r i n g ' s "ongoing operations."
Conclusion
B a s e d o n the f o r e g o i n g , M W B u i l d e r s ' R e n e w e d M o t i o n for S u m m a r y J u d g m e n t F o l l o w i n g N i n t h Circuit Remand (doc. #232) should be, granted, in part, and denied, i n patio Further, S A F E C O ' s M o t i o n f o r S u m m a t y J u d g m e n t P u r s u a n t t o J u l y 9, 2 0 0 8 O r d e r ( d o c . # 2 2 8 ) s h o u l d b e denied.
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Scheduling Order
The above Findings and Recommendation will be refe11'ed to a United States District Judge for review. Objections, i f any, are due February 11, 2009. I f n o objections are filed, review o f t h e Findings and Recommendation will go under advisement on that date. I f objections are filed, a r e s p o n s e to t h e o b j e c t i o n s i s d u e f o m i e e n d a y s a f t e r t h e d a t e t h e o b j e c t i o n s are f i l e d a n d t h e r e v i e w o f the Findings and Recommendation will go under advisement on that date. D a t e d t h i s 2 8 t h d a y o f J a n u a r y 2009
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