The federal district court found no duty to defend claims of faulty workmanship under certain policies issued to the insured contractor, but rejected arguments made by the Insurers regarding various provisions of the general liability and excess policies. St. Paul Fire & Marine Ins. Co. v. Bodell Consr. Co., 2022 U.S. Dist. LEXZIS 79379 (D. Haw. May 2, 2022). (Note- our office represents the insured contractor).     In 2003, Bodell was hired by developer Sunstone Realty Partners L LLC to be the general contractor for construction work on a condominium project, "Ali`i Cove." The project consisted of approximately 37 buildings and one recreation center that were constructed over the course of four years. On August 14, 2015, the AOAO of Ali`i Cove sued Sunstone, alleging that Sunstone developed, built, and sold condominium nits using embedded straps that did not meet building codes, instead of bolting house frames to their foundations. The AOAO filed a second amended complaint alleging numerous additional defects which were referenced in an expert report. These included additional alleged construction defects such as site conditions, structural issues, building envelope, roofing, general architecture, mechanical, plumbing and electrical. In all, the report purported to find approximately 281 instances of faulty workmanship.     Sunstone then filed a third-party complaint against various entities, including Bodell. Sunstone alleged that Bodell oversaw the construction of the project, including he installation of the embedded straps in all units of the project.      Sunstone tendered the defense of the underlying litigation to the Insurers, St. Paul, Phoenix and Travelers Indemnity, as an additional insured under policies issued to Bodell. The Insurers agreed to defend under a reservation of rights. Bodell also tendered the underlying litigation to the Insurers. Two of Bodell's insurers, Phoenix and Travelers Indemnity, agreed to defend Bodell under a reservation of rights.     The underlying litigation was stayed so that two arbitrations could proceed. The first arbitration between the AOAO and Sunstone was resolved in a settlement. Sunstone and its insurer, Steadfast Insurance Company, funded the settlement. In the second arbitration between Sunstone and Bodell, the arbitrator found in favor of Sunstone. In drafting her award, the arbitrator relied upon an expert report authored by Sunstone's expert, Trinity ("Trinity Report"), which addressed the 281 instances of alleged defects. The Trinity Report was used as a framework for identifying alleged defects, but did not differentiate between work done by subcontractors versus work done by Bodell. The arbitration award listed numerous defects for which Bodell was responsible or partly responsible. Some of the alleged defects involved work done by subcontractors, but again, the arbitration award did not identify such work.      Bodell's coverage included general liability and excess policies issued from 2003 to 2016. The court broke the various policies into two sets, the "First Policies" being policies issued before  September 2012, and the "Second Policies" issued after September 2012.      The Insurers sued for a declaratory judgment that they had no duty to defend or indemnify either Bodell or Sunstone. The Insurers filed two motions for summary judgment, the first seeking a ruling that there was no duty to defend under the First Policies and the second motion seeking a determination on the interpretation of various provisions in the First and Second Policies.     The court granted the Insurers first motion, finding that under Hawaii law, faulty workmanship does not constitute an occurrence, and there was no duty to defend. The insureds argued that under Hawaii law, a building code violation was considered a negligent and therefore a tort. Consequently there was an occurrence. Further, Bodell and Sunstone argued that the Insurers had made partial payment to Sunstone, thereby conceding coverage under the First Policies. The court found that the Insurers carried their burden of showing an absence of genuine material fact with respect to the lack of coverage under the First Policies and were entitled to summary judgment on the first motion.     Turning to the Insurers' second motion, the Second Policies contained an amended definition of occurrence. The first portion of the amended definition of occurrence was the same as used in the First Policies. Therefore, the court granted summary judgment as to this portion of the Occurrence Amendment because it provided no coverage under the Second Policies.     The Occurrence Amendment went on, however, to further define "occurrence" as "[a]n act or omission, including all related acts or omissions, that causes 'subcontracted work property damage.'" The Occurrence Amendment also defined "subcontracted work property damage" as ""property damage" that "[i]s neither expected nor intended from the stand point of the insured" and "[i]s to 'your work' arising out of it or any part of it . .  if the damaged work out of which the damage arises was performed on your behalf by a subcontractor." The Insurers argued this definition only provided coverage for property damage caused by subcontractors, not work self-performed by Bodell. The court disagreed. The phrase "act or omission" was unencumbered by any of the limiting language that the Insurers appeared to believe should exist in order for the definition to not include work self-performed by Bodell. A plain and ordinary reading of the words "[an] act or omission" could include an act or omission committed by or at the direction of Bodell that then caused subcontractor work property damage. Therefore, the Insurers' argument that "occurrence" as defined under the Occurrence Amendment could not include work self-performed by Bodell was rejected.     The court next turned to the "Non-Cumulation Amendment," which the Insurers argued meant that if the same occurrence caused property damage in multiple policy years, the amount of money paid with respect to such a occurrence was limited by what was paid under prior policies. The court agreed that if property damage over multiple policy periods involved just one occurrence, the amount paid would be reduced by the amount of each payment made under prior policies because of the same occurrence.      The Insurers next argued that the underlying litigation involved a single occurrence because the damages at issued arose from a single project, at a single site, pursuant to Bodell's single construction agreement. The court could not agree, however that the myriad of alleged deficiencies in the project's construction constituted but one occurrence. It was alleged in the underlying litigation that there may be up to 281 alleged defects, including deficiencies as varied as biological growth, improper window installations and shower assemblies, cracked concrete, downspout inversions, and loose guardrails. A layperson with reasonable expectations would not construe "one occurrence" to mean 281 alleged defects in the construction of a condominium project and even more so when these alleged defects did not involve the same deficiency or field.      Therefore, the Insurers' second motion was granted in part and denied in part. 

from Insurance Law Hawaii https://ift.tt/sgBXCfk