The court found there was no duty to defend the subcontractor for alleged faulty workmanship in installing stone veneer at a condominium construction project. Quality Stone Veneer, Inc. v. Selective Ins.Co. of Am., 2017 U.S. Dist. LEXIS 9393 (E.D. Pa. Jan. 23, 2017).
Quality Stone Veneer (QSV) entered a subcontract with Mignatti Construction, the general contractor, for development of a condominium. QSV agreed to provide all the materials and labor related to the installation of stone veneer at the project. After construction began, the Association filed a complaint against Mignatti, claiming deficiencies in the construction of the furnace, ventilation, roofing, alarms, sprinklers, electrical and water systems. Mignatti filed a joinder complaint against QSV for contribution and/or indemnity for breach of warranty and negligence.
Selective Insurance Company of America refused to defend QSV. QSV filed a complaint for declaratory judgment. Both Selective and QSV filed motions for summary judgment.
Under Pennsylvania law, "occurrence" was addressed by the Supreme Court in Kvaerner Metal Div. v. Comm. Union Ins. Co., 908 A.2d 888 ( Pa. 2006). There, the court held that claims based upon faulty workmanship "simply do not present the degree of fortuity contemplated by the ordinary definition of 'accident' or its common judicial construction in this context." Id. at 899. " The term "occurrence" in the policy excluded contractual claims for faulty workmanship. Further, negligence claims that alleged foreseeable damages stemming from faulty workmanship did not fall within the definition of "occurrence."
Nevertheless, QSV argued that when read together, the insuring agreement and products-completed operations hazard made clear that Selective must defend. The policy provided different aggregate limits depending upon the type of damages. It provided a $2,000,000 general aggregate limit and a separate $2,000,000 aggregate limit for products-completed operations. The products-completed provision applied when bodily injury or property damage occurred "away from premises [QSV] owns or rents and arises out of [QSV's] product or work." If damage occurred at a premises that was owned or rented by QSV, then the general aggregate limit applied.
The broad language in the products-completed provision did not change the fact that an "occurrence" was still required. This was made clear by the CGL coverage form, which stated that insurance applied only if the property damage was caused by an occurrence. A reading of the entire policy revealed that the products-completed operations hazard was subject to the CGL coverage limitations and, therefore, subject to the "occurrence" requirement. The products-completed operations hazard was not its own affirmative grant of coverage but rather a provision within the CGL policy's coverage. Therefore, Selective's motion for summary judgment was granted.