Peter A. Rotella Corp. v Selective Ins. Co. of Am.
Annotate this CaseDecided on May 22, 2006
Supreme Court, Ontario County
Peter A. Rotella Corporation, Plaintiff,
against
Selective Insurance Company Of America, Defendant.
97065
Craig J. Doran, J.
This is an action for a declaration of rights under a commercial general liability insurance policy and an accompanying umbrella policy. The plaintiff, Peter A. Rotella Corporation ("Rotella"), has brought a motion for summary judgment seeking a declaration that the defendant herein is required to provide insurance coverage for the claims asserted in an underlying action against Rotella and/or to provide a duty of defense for the claims asserted in the underlying action against Rotella. The defendant Selective Insurance Company of America ("Selective") has moved for an order granting summary judgment dismissing the complaint in the above captioned action.
Oral arguments were heard before this Court on May 10, 2006. The Court reserved on both parties' motions.
In the underlying action, Ecovation Wastewater Treatment Company Inc. has sued Rotella for breach of contract and breach of warranty involving the failure and leaking of a new concrete reactor tank that Ecovation had hired Rotella to build. It is undisputed that Rotella did not itself perform the actual concrete work on the reactor tank out of which the alleged property damage to Ecovation occurred, but hired D&J Concrete, its subcontractor, to do so. The alleged deficient concrete work which led to the alleged failure of the tank was performed exclusively by D&J Concrete as a subcontractor of Rotella, and not by Rotella itself.
Rotella asserts herein that there is no factual issue that it has insurance coverage under its Selective insurance policy with respect to any damage arising out of work performed by its subcontractor in connection with the failed concrete reactor tank. Rotella concedes that it does not have insurance coverage for damage to its own work, but argues that it does have insurance coverage for damages arising out of the work of its subcontractor, D&J Concrete.
Rotella further asserts that it has insurance coverage under the Selective policy for damages to Ecovation's property which is not part of Rotella's work product. In the underlying claim, Ecovation had other work performed in the nature of piping and mechanical work on the reactor tank which had to be replaced and/or repaired due to the failure of the reactor tank.
Selective contends that the subject commercial policy and umbrella policy do not provide coverage for the underlying action. These policies provide coverage for damages because of "property damage" only if the "property damage" is caused by an "occurrence". "Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions". Selective asserts herein that the leaking of the concrete reactor tank was not an "occurrence" which triggers coverage under the subject insurance policies.
Selective argues that case law uniformly holds that damages to a contractor's work product, [*2]arising out of defects in the work, are not the result of an "occurrence", whether the work was performed by the contractor itself or a subcontractor. To hold otherwise would convert a general liability policy into a surety contract guaranteeing the performance of the work. This is not the intent or the purpose of general liability coverage.
Initially, this Court must determine whether or not the failure of the concrete reactor tank constitutes an "occurrence" triggering insurance coverage herein. The plaintiff argues that it was an occurrence because a structural failure in the concrete tank occurred. This Court does not find this argument persuasive. The underlying action alleges a breach of contract and breach of warranty, rather than an "occurrence" resulting in "property damage" as contemplated by the insurance policies at issue herein. The subject insurance policies do not insure against faulty workmanship in the work product itself but rather faulty workmanship in the work product which creates a legal liability by causing bodily injury or property damage to something other than the work product. As the Court held in George A. Fuller Company v. United States Fidelity and Guaranty Company, 200 AD2d 255, "The policy was never intended to provide contractual indemnification for economic loss to a contracting party because the work product contracted for is defectively produced" (George A. Fuller Company v. United States Fidelity and Guaranty Company, supra at 259).
Similarly, the Second Department held in Mid-Hudson Castle, Ltd., v. P.J. Exteriors, Inc., 292 AD2d 355, "The general rule is that a commercial general liability insurance policy does not afford coverage for breach of contract, but rather for bodily injury and property damage".
Having found that the allegations contained in the underlying action do not constitute an "occurrence" under the applicable insurance policies, this Court must next turn to Rotella's assertion that Evocation is also seeking recovery for damages to other property that it owned aside from the work that Rotella contracted to perform, i.e. piping and mechanical work to the tank performed by third parties. Selective concedes that if this assertion was supported by competent evidence, then those particular damages "might be covered under the insurance agreement of the CGL and CUL Coverage Forms" (see, Answering Memorandum of Law in Opposition to Plaintiff's Motion for Summary Judgment, dated March 29, 2006, page 12). This Court notes that Rotella has submitted a copy of Evocation's Bill of Particulars wherein there is a list of costs to correct or repair damages. One of the cost items expended by Evocation contained therein is for mechanicals. Selective further argues that losses associated with this property damage may be excluded by Exclusions m and 4 of the CGL and CUL Coverage Forms. This Court simply does not have sufficient evidence before it to determine whether or not these stated exclusions apply. Therefore, with respect to these particular alleged damages, both motions for summary judgment are denied.
Finally, given this Court's determination that the alleged damage to piping and mechanical work on the concrete reactor tank could lead to a finding that Selective indemnify Rotella for damages sustained by Evocation for this property damage, the issue of Selective's duty to defend Rotella in the underlying action must be addressed.
It is recognized in this State that the duty to defend is much broader than the duty to indemnify (see, Fitzpatrick v. American Honda Motor Co., 78 NY2d 61). Further, an insurer's obligation to defend arises whenever the complaint alleges facts and circumstances, some of which, if proved, would fall within the policy coverage (see, Sturges Mfg. Co. V. Utica Mut. Ins. Co., 37 NY2d 69). To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegations are wholly with that exclusion, that the [*3]exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis on which the insurer may eventually be held obligated to indemnify the insured under any policy provision (see, Frontier Insulation Contractors, Inc. V. Merchants Mutual Insurance Company, 91 NY2d 169)Based upon the foregoing, this Court finds that Selective has a duty to defend Rotella in the underlying action. As Selective concedes in its Answering Memorandum of Law in Opposition to Plaintiff's Motion for Summary Judgment, dated March 29, 2006, "If the facts establish as a matter of law that coverage for some part of the relief sought in the underlying action is only potentially available under the insuring agreement of a Coverage Part, or that an exclusion potentially excludes coverage, then Rotella is entitled to a defense...". Given this Court's finding that the facts establish herein that coverage for some part of the relief sought in the underlying action is potentially available under the insuring agreement (i.e. damage to property other than Rotella's or its subcontractor's work product), Selective has a duty to defend. If any of the claims against the insured arguable arise from covered events, the insurer is required to defend the entire action (see, Frontier Insulation Contractors, Inc. V. Merchants Mutual Insurance Company, supra, citing Seaboard Sur. Co. V. Gillette Co., 64 NY2d 304).
This Court hereby grants in part and denies in part the plaintiff's motion for summary judgment. With respect to that portion of plaintiff's motion for summary judgment seeking a declaration that Selective has a duty to defend the plaintiff in the underlying action, said motion is granted. With respect to that portion of plaintiff's motion for summary judgment seeking indemnification in the underlying action, said motion is denied.
Based upon the foregoing, this Court hereby grants in part and denies in part the defendant's motion for summary judgment. With respect to that portion of defendant's motion for summary judgment dismissing the complaint alleging a duty to defend the plaintiff in the underlying action, said motion is denied. With respect to that portion of defendant's motion seeking dismissal of the complaint with respect to indemnification for damages to the work product of the plaintiff or its subcontractor, said motion is granted. With respect to that portion of defendant's motion seeking dismissal of the complaint with respect to indemnification for damages to the work product of third parties, said motion is denied. With respect to that portion of defendant's motion seeking dismissal of the complaint seeking punitive damages, said motion is denied.
This constitutes the Decision of the Court. Submit Order accordingly.
________________________________________
CRAIG J. DORAN
Acting Supreme Court Justice
Dated at Canandaigua, New York
this _____ day of May, 2006.
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