-TEM Dragas Management Corporation v. The Hanover Insurance Company et al, No. 2:2010cv00547 - Document 92 (E.D. Va. 2011)
Court Description: MEMORANDUM OPINION GRANTING IN PART and DENING IN PART 11 MOTION for Partial Summary Judgment by Dragas Management Corporation, determining that the damage caused by the defective Chinese drywall constituted a separate occurrence for each affected home. Signed by District Judge Rebecca Beach Smith and filed on 7/21/2011. (rsim)
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FILED UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA JUL 2 1 2011 Norfolk Division DRAGAS MANAGEMENT Ci.L»-K. US C-S'r'ICT COURT CORPORATION, Plaintiff, v. CIVIL ACTION NO: HANOVER INSURANCE COMPANY, CITIZENS 2:10cv547 and INSURANCE COMPANY OF AMERICA, Defendants. MEMORANDUM OPINION This case comes Corporation's {"Motion"), reasons before ("DMC") Motion filed December which the follow, for 31, the court Dragas Partial 2010. court on See GRANTS Summary Docket IN Management # PART Judgment 11. and For DENIES the IN PART DMC's Motion. I.1 DMC is a developments are The in 1 For court the Hampshires Chesapeake, Park"), company at Greenbriar and on the of Final 2 More information particularly Hampshires, as is 3, on regards available in area. such ("The Beach, Park at facts Order, of the opinion court's hired, via case, the to by the 86. underlying development in ("Cromwell this agreed See Docket # facts located DMC in housing developments Salem Virginia.2 Pretrial 2011. Two and Hampshires") , undisputed the the homes Cromwell the parties and filed on June residential Roads in Virginia recitation relies builds Hampton Virginia, located its that Cromwell this Park case, and The in a predecessor subcontract agreement, supply and install and Cromwell Some the of the in drywall China. sixty-eight Cromwell drywall had Chinese drywall was sulfur approximately greater than result, it or of installed {"Porter-Blaine") homes at The caused by Chinese at The to Hampshires three seventy-four (74) of six (6) Hampshires and and installed contained pitting, of domestic to the coils, damaging and causing a tarnishing, and the at of The elemental (375) times drywall. homes bad was them. seventy-five damage objects, in levels samples HVAC corrosion, developments hundred property metal the drywall defective corroding at total, representative corroding the the In (68) Park, installed for Corp. Park. manufactured homes, Porter-Blaine where wiring, As it a was tarnishing odor. The blackening source of the electronics and metal components was reduced sulfur gases.3 DMC discovered and requested at the drywall and Blaine refused. moving the case W.L. 3 Mut. 2473263 Reduced disulfide, that fix problem time the that other Therefore, affected involving Builders the (E.D. sulfur Co., damage DMC Va. June gases and carbonyl drywall to out of early remove and replace homes, but homes, Dragas F. 2009 itself by tearing Mgmt. Supp. Porter- 2d out Corp. , v. 2011 2011). include sulfide. in the problem their See 2:09cvl85, 13, the remediated parties. No. the Porter-Blaine homeowners different Ins. with hydrogen disulfide, carbon the defective drywall, replacing it, and repairing or replacing the other property damaged by the drywall, all at its own cost.4 B. During commercial liability policy, the relevant general Insurance Co. liability number policy becomes 'bodily injury' or The that place in continuous general $1,000,000 harmful per Porter-Blaine obligated was to only 'coverage pay as by defined limit The and "an . to that the of insurance 'occurrence' . as general because this . during "an policy $2,000,000 the accident, substantially Citizens a Citizens sums which exposure by damages excess liability commercial "those to is umbrella general territory' conditions." occurrence The triggered repeated an carried both provided for damage' occurrence or was ("Citizens").5 the An and commercial 7905525, 'property coverage period." including same insured legally applies." takes ZBR Porter-Blaine insurance Porter-Blaine's of America insured policy liability policy. policy time period, the had a aggregate limit.6 4 The parties agree that summaries damage 5 Porter-Blaine the coverage 2008-2009, the Trial carried years but each of of a costs separate 2005-2006, of Exhibits 72 policy with 2006-2007, the policies has 6 The policy did not carry a deductible. 3 remediating and the the 89 are both developments. at of DMC's accurate Citizens drywall during 2007-2008, and same policy number. Porter-Blaine's number UHR umbrella 7917898, ("Hanover").7 was The Porter-Blaine for provided umbrella "the which this liability by The excess 'ultimate 'retained limit'8 because of to excess Hanover liability net loss' 'bodily injury' insurance policy, applies," Insurance policy in or which is caused "an or substantially in bodily excess and a the continuous same general or property injury liability policy $10,000,000 had aggregate harmful a $10,000,000 which Hanover per by an exposure conditions, The the is defined as repeated damage." of 'property damage' "Occurrence" including Co. insured excess occurrence during the policy period.9 accident, policy to results umbrella occurrence limit limit. C. Because and of remediate Porter-Blaine's the other refusal damage and to the 7 Similar to its policies with Citizens, with Hanover 2005-2006, the 8 "Retained The of *3, subsequent drywall costs DMC Porter-Blaine's policies individual policies 2007-2008, and for the 2008-2009, policy which years all had n. defined umbrella excess insuring underlying insurance to pay by an policy. 8. as "the available limits of insurance.'" difference the is differently, of obligated "caused limit" 2005-2006 slightly excess the all the same policy number. 'underlying 9 were 2006-2007, replace as damages" occurrence." in wording See Porter-Blaine that during The has Dragas, liability no No. any the court policy for insured is "those becomes worded sums policy period which has previously material effect on 2:09cvl85, 2011 W.L. held the in legally are that content 2473263 at incurred in doing so itself, against Porter-Blaine hearing was held on where DMC June filed 26, witnesses Porter-Blaine and plus post-judgment exercised with its the November interest, right to convert for 2010. The DMC the the arbitration lawyers and of the in expenses. arbitration of for both the arbitrator found $4,900,000 City entirety arbitration and 2010, costs, Court Circuit 12, awarded for five-day A testified On October 7, fault demand 2009. sides made arguments.10 at a DMC into Virginia judgment damages, is a then judgment Beach on currently outstanding. Because of Porter-Blaine, its DMC filed suit to enforce Porter-Blaine's Motion on to seeking jurisdiction November 3, inability insurers, 2010. Before December 31, January 14, 2011, and collect in this the court 2010. DMC under on DMC Hanover January against Hanover, begun, and from diversity award and had Citizens replied judgment arbitration Citizens discovery the 21, on filed this responded 2011.X1 on The motion is now ripe for consideration.12 10 Citizens and Hanover defended Porter-Blaine at the arbitration. 11 On June 8, Record in Docket 2011, Support this court granted DMC's Motion to Supplement of #89. Motion for Partial Summary Judgment. See 12 There is another Motion for Partial Summary Judgment filed by Citizens The and court Opinion. Hanover does not pending consider in this that case. motion See in Docket this # 31. Memorandum II. Summary record as a nonmoving material as a judgment party, fact matter Liberty whole Lobby, that (4th Cir. 1985). not rest "specific, triable 623-24 on be presented M Supplies Med. 981 F.2d 160, may not not be Fed. 477 U.S. a is R. is facts a v. in P. In [trier the 163 of 477 U.S. Inc. (4th Cir. sufficiently probative.'" instead rise show to a 62 F.3d must and 252. 619, present find" Such sworn that genuine for facts affidavits. 324 (1986); see Pleasant v. 1993) defeated by evidence 317, 610 summary judgment at exhibits v. Floor 604, reasonably U.S. of judgment F.2d non-movant could 477 form Serv., give the fact] Anderson, must issue Terry's (In re McNallen), essence, of but for the Anderson (1986); 763 the to to 56{c); Inc., that McNallen Catrett, & exist genuine entitled 248-50 alone, viewing favorable no Civ. Indus., court, most party 242, pleadings party. Corp. there moving 1995). which Celotex light the Hagan v. non-moving must that Burlington the Cir. "on the when A party opposing a motion issue." evidence the v. material (4th in See Inc., Inc. may and law. Fashions, appropriate finds and of is also M Valley Hosp., & Inc., ("A motion for summary judgment that is 'merely (quoting Anderson, colorable1 477 U.S. or at 'is 24 9- 50)) . On summary judgment, and determine the truth the of court the is not matter." to "weigh the Anderson, 477 evidence U.S. at 249. Instead, from court will underlying the the facts in nonmoving Zenith by a party. Radio evidence 475 U.S. rebut result in " [T]he plain language of judgment . sufficient that of . to party's proof . at case, and trial." a courts 'factually 818 that 477 of F.2d at 1126, when the 1128 claims 477 failure summary a showing essential the also (4th burden Cir. 1987) ... defenses' U.S. at to Felty v. obligation and v. appropriate. bear see the sufficient make will 322; a entry of to have an "affirmative (citing Celotex, with to Ltd. But an element party U.S. unsupported proceeding to trial." motion fails existence Celotex, (finding district who Co., (1986). judgment inference favorable Indus. mandates party on which Co., prevent summary the Grave s-Humphreys Elec. 587-88 56{c) permissible most defendant's Rule against establish 574, a any light Matsushita to will the See Corp., plaintiff draw to from 323-24)). III. DMC Citizens of has for commercial 2005-2006 seeks moved and judgment that: and (2) installation separate general 2006-2007. drywall the partial ensuing occurrence the damage was the under liability With (1) of summary policies respect to an occurrence at policy; each and only for those installation drywall the judgment of (3) the to the the periods policies, under house as DMC defective the policy; constituted the "your a work" exclusion does not considers each of bars coverage these issues under these facts. The court individually. A. With regard installation of constitutes Citizens to an the occurrence damage insured's proven first damage Hanover that policies. the and an and contest to caused as it appear caused to by non-defective a summary judgment is defective occurrence condition and DMC damage to has in is in the drywall shown non-defective the work policies. do defective that this DMC itself separate not work under the has juncture, cost the drywall They occurrence argue at that defective part. an Hanover the not the defined proper of argues subcontractor's and that is work Citizens DMC by agree However, remedying issue, not because is an accrued in the of it not from cost replacing the drywall itself.13 Under itself v. within Cole, it Virginia 158 meets policies the in an insured bears policy coverage. insurance S.E. all law, 873, the 876 (Va. 1931). conditions question burden Thus DMC to "occurrence" as 13 Citizens and Hanover make a similar argument replace the the not an defective policy. take Because "occurrence" up this drywall the pursuant additional Citizens' and Hanover's workmanship exclusion. was court to not finds the argument. argument policy, The must bringing Cas. show Co. that attach. "an The accident, that any cost to "property that of Maryland coverage for define the such damage" the court same is concerning under replacement the need true is not for faulty including same continuous general The harmful policies Black's Law or do repeated exposure conditions." not define Dictionary E.g., what defines is injurious meant occurrence." (7th ed. (emphasis added); Co., S.E. Mut. Life Mut. Ins. Thus, Ins. Co. v. under 139 Am. the Girl, 801, Inc., policy, an also 673 Ex. by as an N.W. at 20. unintended Law Dictionary (Va. John 1965); 2d 65, is occurrence the "accident." Wooden v. 804 B. "[a]n Black's see 2d substantially Compl. "accident" and unforeseen 1999) to 76 an 15 Hancock Am. (Wis. Fam. 2004). unforeseen and unintended consequence. The Fourth caused by under v. a the defective commercial Assurance Fourth Circuit Co. Circuit outside otherwise a line The court the a of the resulting initially subcontractor necessity unforeseen, of home 488 of walls was to held that therefore moisture the because to the not an whether the the occurrence. to the court drew stucco of contractor the stucco damage The areas install replacing the to defective French 2006), synthetic an occurrence. of in Cir. law, defective non-defective specifically or (4th damage an occurrence First, Maryland allowed replacement damage 693 whether is policy. F.3d under that discussed subcontractor liability America, repairing and a subcontractor a between the work of general non-defective and previously determined, installation by the of has itself the home. had hired stucco, stucco id. was at the not 703. However, the the damage allowed court drew done seep to liability to the in. the rest The of policy "provides and contractor's otherwise conclusion with the house court unexpected remedy opposite held where moisture that liability court nondefective opinion, Fed. Stanley Appx. case, a 609 trusses "was "was not an Id. replacement repair of of the This and the the accident, 614. defective sees no French should Therefore, under the holds the that Thus, an law. replace under the not the by the Group, The but to to unpublished in a the the that court held defective terms of its damage which of parts court In 313 number of the occurrence again work was an Casualty non-defective or in grow. unforeseen cost 706. trusses to to the caused Virginia townhouses," to other damage court mold obligation or at Ohio applying caused trusses at v. installed defective for the Id. general damage work-product conclusion Inc. 2009) , unexpected unintended coverage." Martin Cir. trusses contracts beyond same Cos., contractor's building spread {4th which the the Martin subcontractor townhouses, that reached for to had been commercial property subcontractor's defective workmanship." The the coverage unintended relation homes the that triggered held that an occurrence but the that caused by the defective work was. reason not Fourth replacement of why the control the Circuit's the 10 decisions results in precedent, defective drywall in Stanley this this is case. court not an occurrence of under non-defective Cromwell the policy; however, components Park or personal of the any repair homes property of at the or The replacement Hampshires homeowners an occurrence under the Citizens policies at and constituted issue. B. As of to the second defective because the resulting that the drywall introduction damage. the defective Chinese Virginia Co. of of Pa. Thus, v. case Salmonsen, that in the occurrence giving this in number from the 622 court question v. must 2d distribution to "the finds only that Hanover each installation separate was the argue, cause, "cause" the an test occurrence cause to the of the contrary, purchase of the determining 432 look F. to Carolina 525 of the case each the 11 997 (E.D. of the injury Citizens where goods, Id. because defective no at Hanover Owners that there taken sale." and Court, 2005), inapposite distributed Am. cause Supreme (S.C. E.g., 995, Supp. the defective for for insurance policy. distributor has liability a drywall occurrences. South that by Porter-Blaine. Heary, of argues single the S.E. because rise the and under court the a follows occurrences deciding of drywall Reading, 1977) . on a had DMC constitutes Citizens damage number issue, Ins. court was only distinct 526. there product; Cas. Va. in rely Co. held one action However, the it insured did not install or otherwise involve itself with the product post- distribution. DMC, by decision 450 in (Va. from a contrast, S.F. v. 1995). of occurrences there the word 452. a each and were that time conduct. was that number but the of court In Lennar Corp. In the court construed there policy was a child molested was the policy, though App. of court finds v. 2006), parts the definition one was policy recovery manager's how many that Id. at favor in occurrence the 2d found court separate given S.E. ambiguous. the a sought determining the Court's 463 resident separate not of law both applied in a the decision Court which house. in The the from of for each occurrence ongoing "cause" Texas Insurance Appeals case stucco "occurrence" uses a of the construction Great American occurrences stucco, of has occurrences defective Texas for under that Co., plaintiffs children. the Supreme for pattern of Id. the number Virginia Insurance the molested, No Virginia (Tex. under the found the company of "occurrence" coverage case, number Therefore, child that management molestation on Western American In property relies of test case to policy as the "cause" in the test 12 and has in 3d 651 determined S.W. the application damage question policies informative. 200 Texas allowed moisture determine specifically, be Co., involving to had this defined of to other the same case, and "accident" under the policy contended the that 682. same was stucco. in "Lennar was Rather, it and one the disagreed designer with [the stucco] , and particular home." Looking and the to occurrence.14 what the of cause type focus in the and Hanover's 14 This its causation caused as from if that of the Id. the fact Thus, any, test at [the that Lennar's application to his injury, the cause the causation or her does did the not, court decision on the plain 200 in of begins however, S.F. language of 13 a a to the too a find proximate the at in proper policy rise 682. drywall, early this the policies. is to By Citizens' the process "occurrence" Instead, each separate and give 3d S.F. to determine liability S.W. in that analysis, injuries purchase argument court akin under Lennar, initial the more the holds constituted * cause' 'occurrence' reasoning court directs the that Court's drywall "Under events on court ambiguous, held stemmed from the this defective liability." only provision manufacturer of stucco]. Supreme Lennar, interpreting insured's focusing in analysis. on the number of and stemmed resulting damage, Virginia the The ultimately the Lennar occurrence. the [the law. Id. decision installation the an or liability homes Virginia occurrence, liability to a particular homeowner of has constituted Lennar's sold as court home not way only The each stucco]. built the there defective installation in court to be bases and limits "occurrence" to this one action. While it is true that the initial purchase of the Chinese drywall was certainly a but-for cause drywall in in of the each the damage damage, home to which that it set home. was Thus, act chain the the of there of installing events were the culminating seventy-four (74) occurrences in this case, one for each affected home.15 The amount court does requested. "property period, between no not as extend the mention the of of the case that but DMC has not for coverage the the for from drywall itself. drywall to presented DMC provided but it had to has be specific would drywall, been some removed the damaged components any has occurred.16 defective There the policy "occurrence" the the that has damage an for relevant remediation, resultant the for DMC proving 2006-2007. when replaced anyway to allow access it, of during and costs above, damage replacement this its judgment burden occurred proof noted to in of enter the 2005-2006 such Furthermore, bears alleged accounting provided however, DMC damage" here accurate only not, proof as and behind to that 15 But see infra note 16. 16 In addition, Certificates expiration DMC's of Motion, of some of Occupancy the and the affected until policy period thus any damage thereto. the number of there This occurrences after for would court that the in question. 14 two clearly thus are homes did 2007, policies not expresses covered not 15, November by be no the at have issue coverage opinion two as the in for to policies fact, and damages the the award court cannot accurately finds seventy-four cannot court that (74) determine reflects under the occurrences determine which the this the recoverable facts under occurrences covered by the policy at whether costs. presented, the policy, and what $4,900,000 Thus, there but specific the were court amounts are juncture. C. On "your final work" because in the exclusion Porter-Blaine each of contrary there issue, the that is DMC does used not bar court is evidence to and the declare under at use the policies the argue this of that the install Hanover improper of to coverage Citizens judgment insufficient the subcontractors homes.17 summary asks drywall to stage the because subcontractors by Porter-Blaine. The 'your the at policies work' arising 11. However, "[t]his the out or your behalf work by a of cost by the of "your necessary view the of to it coverage or any operations which the work" further court's an occurrence under the damage. the policy. declare drywall because conclusion See 15 id. This that included if was in that Ex. B, the damaged performed "Your work" recovery is not is on is for barred replacement argument such to Compl. itself such damage' and apply arises E.g., to it E.g., not damage court exclusion, of hazard." the of "'property part exclusion does replacement avoid this of from sub-contractor." DMC additionally asks the in out 'products-completed work 17 exclude was unavailing replacement supra Section III.A. is not defined as ¢ [w] ork behalf; and ... or operations performed Materials, parts, to testimony Blaine used Mem. 846:12-847:3. Porter deposition second-tier the drywall. Mr. at Supp. However, meant that by Summ. the evidence Porter-Blaine to install the drywall, E.g., Sam subcontractors Mot. judgment on the or on your in id^ at 22. Porter the that DMC Porter- installation of J., Ex. 1, is far from clear whether always Sam Porter Dep. used subcontractors or whether the subcontractors were used in addition to Porter-Blaine's own employees.18 summary you or equipment furnished in connection with such work or operations." points by "your work" exclusion For that reason, is not proper at this time as a dispute concerning material facts remains.19 18 Furthermore, this issue is not clarified because of any further materials submitted to the court, as DMC argues that it is in its Memorandum in Support of Motion to Supplement Record in Support of Motion for Partial Summary Judgment. 79. DMC contends therein that Citizens See Docket # and Hanover cannot argue that there is insufficient proof as to the question of subcontractors for Porter-Blaine because Porter-Blaine did not take discovery on the issue. DMC seems to have forgotten that as the plaintiff and the summary judgment movant it bears the burden of proof. 19 Normally the See infra note 19. insurer bears an exclusion bars coverage the burden of proof under the policy. as to whether See Allstate Ins. Co. v. Gauthier, 641 S.E. 2d 101, 104 (Va. 2007) (citing Transcontinental Ins. Co. v. RBMW, Inc., 551 S.E. 2d 313, 318 "7^" 2001) ) . However, because DMC, the insured, has moved for summary judgment and a declaration that an exclusion is inapplicable, DMC bears the burden of proof in this instance. 16 IV. Accordingly, and DENIES caused by PART the occurrence forward IN a as detailed DMC's defective for copy each of Motion, Chinese affected this herein, the court determining drywall home. Memorandum The GRANTS that the constituted Clerk Opinion to is IN a PART damage separate DIRECTED counsel for to all parties. IT IS SO ORDERED. /s/ Rebecca Beach Smith Uiiited States District Judge REBECCA BEACH UNITED Norfolk, July £\ , Virginia 2011 17 SMITH DISTRICT JUDGE STATES
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