Taking into consideration a "Revised Occurrence Endorsement," the federal district court determined the insurer had a duty to defend. Gemini Ins Co. v. Constrx Ltd., 2018 U.S. Dist. LEXIS 163453 (D. Haw. Sept. 24, 2018).
Constrx Ltd. (CRX) contracted with the AOAO to perform remedial construction repairs to condominium buildings and apartment units. CRX asserted that it completed all work, including charge orders and punch list items and it left the site. CRX was paid less that the contract amount and demanded arbitration against the AOAO. In the arbitration the AOAO relied upon a report by Posard Brock & Associates (PBA) Report which set forth the AOAO's claims against CRX, including corrective work, remaining punch list work, construction delay costs, cost overruns, and other items justifying its payment than less that the contract amount.
At the arbitration, a Final Award was issued in favor of CRX. When it sought to confirm the Final Award, the AOAO sought to vacate the award. The circuit court granted the AOAO's motion to vacate, and CRX appealed.
Gemini had issued a CGL policy to CRX. Gemini defended CRX in the arbitration under a reservation of rights. Gemini later sued for a declaratory judgment, requesting a declaration that it had no duty to defend or indemnify CRX for claims asserted in the underlying arbitration. Gemini moved for summary judgment. The motion was denied because the possibility for coverage existed, particularly in light of the Revised Occurrence Endorsement. The Endorsement contained a modified definition of "occurrence" which expressly included within coverage "property damage" caused by CRX as long as the damage was not to CRX's own work. Because the standard term "occurrence" was modified in the Gemini policy, cases from the Hawaii federal district court holding that contract and contract-based tort claims were not within the scope of typical CGL policies did not bar coverage under the circumstances alleged here.
In the underlying arbitration, the PBA Report alleged that work performed by CRX or on its behalf caused damage to property to other than "your work,' including damage for "corrective work that was performed by CRX to correct construction defects as a result of their self-performed work or that of their subcontractors." This included window leaks and flashing, plumbing leaks, damage to unit interiors and belongings, and carpet cutting. Moreover, remaining punch list items to be completed included miscellaneous corrective work at each building.
Neither CRX nor its subcontractors performed work involving the owners' belongings, refrigerators, furniture, glass and hardware items. Nor did CRX or its subcontractors perform any work on window or door screens. Therefore, there was a possibility that this property damage was not accidental and coverage existed based upon the claims in the PBA Report.
Gemini argued that all of the claims made in the PBA Report described corrective work and punch list items that reflected repairs or outstanding matters relating to CRX and its subcontractors' actual work. While Gemini might ultimately be correct about the cause of the damage, the AOAO's claims asserted in the underlying arbitration were not so clear and created the potential for coverage.
None of the exclusions raised by Gemini were applicable to bar coverage. Therefore, Gemini had a duty to defend and its motion for summary judgment was denied. As far as the duty to indemnify, Gemini's motion was premature and was dismissed without prejudice to refile its motion after the appeal in state court determined whether CRX had liability for the AOAO's claims.
