Pennsylvania National Mutual Casualty Insurance v. Parkshore Development Corp.

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 09-3821
_____________
PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY
v.
PARKSHORE DEVELOPMENT CORPORATION; CATALINA COVE
CONDOMINIUM ASSOCIATION, INC.; KEEN'S CAULKING AND
WATERPROOFING; ABC CORPORATION I THROUGH ABC
CORPORATION X fictitious names
Parkshore Development Corporation,
Appellant
____________
On Appeal from the United States District Court
for the District of New Jersey
(No. 07-cv-01331)
District Judge: Hon. Robert B. Kugler
Submitted November 19, 2010
Before: BARRY, CHAGARES, and VANASKIE, Circuit Judges.
(Filed December 10, 2010)
____________
OPINION OF THE COURT
____________
CHAGARES, Circuit Judge.
Parkshore Development Corporation (“Parkshore”) appeals the District Court’s
grant of summary judgment which relieved its insurer, Pennsylvania National Mutual
Casualty Insurance Company, from providing coverage for claims of water damage
stemming from faulty workmanship by subcontractors at a Parkshore condominium
development project. The District Court determined there was no coverage under the
policy because there was no “occurrence” due to the fact that the only damage was to the
property itself. For the reasons that follow, we will affirm the judgment of the District
Court.
I.
We write for the parties’ benefit and recite only the facts essential to our
disposition. Parkshore was the developer and general contractor of the Catalina Cove
Condominiums in Linwood, New Jersey. Parkshore hired subcontractors to perform all
of the work and construction at the site including roofing, framing, installing windows
and doors, caulking and sealing, installing vent hoods, implementing an irrigation system,
grading, setting the foundation, and installing gutters and leaders. Parkshore completed
the first unit at Catalina Cove in 1989 and the project was finished in 1998. In July 1999,
the Catalina Cove Condominium Association (“CCCA”) notified Parkshore that stucco
around some of the windows had not been caulked properly, causing water leakage.
Parkshore hired Keen’s Caulking & Waterproofing to re-caulk the windows.
In October 2006, the CCCA filed a complaint in the Superior Court of New Jersey
alleging claims against Parkshore for breach of contract, negligence, breach of implied
2
warranties in the design and construction of the condominiums, negligence in failing to
remediate properly the water damage, and for violations of the New Jersey Consumer
Fraud Act. To support these allegations, the CCCA’s expert, Michael Hyland, reported
that there were multiple deficiencies in the site grading and drainage which allowed water
to enter the crawl space and cause damage. Additionally, Hyland concluded that the final
project failed to conform to building code requirements and deviated from the approved
engineering site plan. In a supplemental report, Hyland detailed more deficiencies in the
roofing, siding, window installation, framing, wood trim and irrigation which resulted in
water penetration and caused damage to the framing, sheathing, windows, casings and
stucco finish.
Parkshore tendered the defense and indemnification of this action to Pennsylvania
National Mutual Casualty Insurance Company (“Penn National”). Penn National issued a
Commercial General Liability (“CGL”) policy to Parkshore for every year beginning
March 7, 1989 through March 7, 2006. On March 22, 2007, Penn National filed a
declaratory judgment action in the District Court seeking a declaration that it had no
obligation to provide insurance coverage to Parkshore in the CCCA lawsuit. The District
Court granted Penn National’s summary judgment motion on all claims except those for
consumer fraud,1 finding that the allegations in the lawsuit filed by the CCCA did not
give rise to an “occurrence” under the policy. On September 23, 2009, Parkshore filed
this appeal.
1
Before this appeal, the parties agreed to dismiss the insurance coverage claims related to
the consumer fraud issues in the underlying case.
3
II.
The District Court had diversity jurisdiction pursuant to 28 U.S.C. § 1332 and we
have appellate jurisdiction pursuant to 28 U.S.C. § 1291. Our review of the District
Court=s grant of summary judgment is plenary, and we apply the same legal standard as it
should have. Vitalo v. Cabot Corp., 399 F.3d 536, 542 (3d Cir. 2005). A party is entitled
to summary judgment “if the pleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to any material fact and that the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). In conducting
our analysis, we must view the record in the light most favorable to Parkshore, and must
draw all reasonable inferences in its favor. See Vitalo, 399 F.3d at 542; Fed. R. Civ. P.
56(c). To defeat summary judgment, however, Parkshore must “produce admissible
evidence containing ‘specific facts showing that there is a genuine issue for trial.’”
Vitalo, 399 F.3d at 542 (quoting Fed. R. Civ. P. 56(e)).
III.
Parkshore maintains that defective workmanship performed by its subcontractors
which caused damage to its non-defective work qualifies as “property damage” caused by
an “occurrence,” and thus is covered under its CGL policy. Parkshore contends that the
water damage at the CCCA condominiums was an accident that was neither expected nor
intended by Parkshore and, as such constitutes an “occurrence.” In support of this
interpretation, Parkshore relies on Weedo v. Stone-E-Brick, Inc., 405 A.2d 788 (N.J.
4
1979), and its progeny to show that construction defects resulting in consequential
damage to the property itself could qualify as an “occurrence.” 2
We conclude that Parkshore’s interpretation of Weedo is misguided. While
Weedo does distinguish between the business risk of repairing a defect and the risk of
faulty workmanship that causes consequential damage, the decision does not determine
the existence of an “occurrence” where faulty workmanship causes damage to the
completed project itself. See Weedo, 405 A.2d at 791 (“The risk intended to be insured is
the possibility that the goods, products or work of the insured, once relinquished or
completed, will cause bodily injury or damage to property other than to the product or
completed work itself, and for which the insured may be found liable.” (internal quotation
marks omitted)). This conclusion is further enforced by the subsequent holdings in
Firemen’s Ins. Co. of Newark v. Nat’l Union Fire Ins. Co., 904 A.2d 754 (N.J. Super. Ct.
App. Div. 2006), and S.N. Golden Estates, Inc. v. Continental Cas. Co., 680 A.2d 1114(N.J. Super. Ct. App. Div. 1996). See Firemen’s, 904 A.2d at 761-63 (applying Weedo,
the court found that faulty workmanship whether performed by a contractor or
subcontractor which causes damage to the general contractor’s work is not an
“occurrence”); S.N. Golden, 680 A.2d at 1117, 1119 (finding an “occurrence” because
the insured’s faulty construction of septic systems caused damage to neighboring
2
Parkshore also supports its position by relying on the commentary of the Insurance
Services Office’s 1986 edition of the CGL coverage form and by evaluating the CGL
exclusions to determine the intent of the coverage. We have considered these arguments
and find that they are not persuasive in establishing an “occurrence” under the CGL
policy.
5
residents’ homes). While other courts have permitted an “occurrence” where faulty
construction damages only the insured’s own work,3 New Jersey courts foreclose such a
possibility. Therefore, we conclude that Parkshore’s arguments are not persuasive in
establishing an “occurrence” under the CGL policy.
IV.
Accordingly, we will affirm the District Court’s order granting summary
judgment to Penn National.
3
Subcontractors did all of the work at the condominium project, but the whole project
nonetheless was Parkshore’s “own work” because Parkshore was the general contractor.
See Firemen’s, 904 A.2d at 761.
6