Pennsylvania Supreme Court

April 22, 2013

Two cases analyze faulty workmanship claims under CGL policies, with contrary results

Source: http://www.lexology.com, April 12, 2013
By: Virginia L. White-Mahaffey and Erica L. Gerson, Steptoe & Johnson LLP

Less than two weeks apart, two appellate courts issued opinions analyzing whether faulty work claims are covered under commercial general liability policies, each reaching a different result. The United States Court of Appeals for the Third Circuit issued an unpublished opinion in Zurich American Insurance Company v. R.M. Shoemaker Company, No. 12-2268, 2013 WL 1224104 (3d Cir. Mar. 27, 2013). The Supreme Court of North Dakota issued an opinion in K&L Homes, Inc. v. American Family Mutual Insurance Company, No. 20120060, 2013 WL 1364704 (N.D. Apr. 5, 2013).

In R.M. Shoemaker, the Third Circuit, applying Pennsylvania law, affirmed the district court’s summary judgment order holding that a general liability insurer had no duty to defend or indemnify a policyholder in a lawsuit seeking damages resulting from faulty workmanship of the policyholder’s subcontractor. 2013 WL 1224104, at *4.

In R.M. Shoemaker, a New Jersey county hired the policyholder to construct an addition to a correctional facility. The county filed a lawsuit against the policyholder alleging that the policyholder, a construction firm, negligently supervised its subcontractor. The county further alleged that the policyholder’s negligence permitted the subcontractor to engage in willful misconduct, which resulted in “damage to both structural elements and personal property” at the correctional facility. The insurance policies provided coverage for property damage caused by an “occurrence.” The policies defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” 2013 WL 1224104, at *1.…

March 15, 2013

United States: Pennsylvania Makes Its Mark On National Chinese Drywall Coverage Dispute With "One Occurrence" Decision

Source: http://www.mondaq.com, March 12, 2013
By: Andrea Cortland, Cozen O’Connor

On February 15, 2013 a Pennsylvania federal district court held that the shipment of defective drywall from China to the United States constituted one “occurrence” for purposes of insurance coverage, and the occurrence took place when the damage caused by the drywall manifested itself in the residences or buildings of the underlying plaintiffs. With this ruling, Pennsylvania joins Virginia as one of the few states to opine regarding the number of occurrences in the Chinese drywall context.

Devon International, Devon International Industries, and Devon International Group (collectively, Devon), imported a single order of drywall from China to Pensacola, Fla. Unbeknownst to Devon, the drywall was defective, as it contained an inordinately high amount of sulfur, and a few years after selling the drywall to distributors in the United States, Devon was hit with a multitude of Chinese drywall lawsuits in various jurisdictions.

As is common with Chinese drywall cases, the plaintiffs in the underlying lawsuits generally alleged the sulfur emitted by the drywall damaged their real and personal property. Faced with these lawsuits, Devon turned to its liability insurer, Cincinnati Insurance Company (Cincinnati) to defend and indemnify it under the liability policies issued to it by Cincinnati for two consecutive policy periods. Although Cincinnati accepted Devon’s tender, the parties disagreed as to whether the underlying claims against Devon arose out of a single occurrence or multiple occurrences. Litigation between Devon and Cincinnati ensued.…

February 22, 2013

Pennsylvania court holds drywall claims arose out of single occurrence

Source: http://www.lexology.com, February 19, 2013
By: Brian Margolies, Traub Lieberman Straus & Shrewsberry LLP

In its recent decision in Cincinnati Ins. Co. v. Devon International, 2013 U.S. Dist. LEXIS 20659 (E.D. Pa. Feb. 15, 2013), the United States District Court for the Eastern District of Pennsylvania, applying Pennsylvania law, had occasion to consider whether a series of Chinese drywall-related claims, arising out of the insured’s importation of a single batch of defective drywall, were properly considered a single occurrence, or multiple occurrences.

The insured, Devon, was a U.S.-based sourcing agent for Chinese manufactured products. In 2006, it was retained to procure drywall manufactured in China. Devon subsequently made a single purchase of drywall from Shandong – a Chinese manufacturer – and then shipped the drywall to Florida for use in construction. The majority of the drywall was shipped to Devon’s initial customer; however, Devon also sold a portion of the drywall to other individuals and entities in Florida for use in construction. In 2009, Devon received a letter from its initial customer seeking a defense and indemnification in connection with a “multitude” of Chinese drywall claims filed in several jurisdictions. These underlying plaintiffs alleged damage in late 2008 and throughout 2009.

Cincinnati Insurance Company insured Devon under consecutive general liability policies, the first of which was issued for the period November 20, 2008 to November 20, 2009, and the second for the period November 20, 2009 to November 20, 2010. The policies provided coverage for property damage arising out of an occurrence, but only to the extent the property damage occurred during the policy period. Cincinnati and Devon disputed whether the underlying claims should be considered multiple occurrences, thus potentially triggering coverage under both of Cincinnati’s policies, or a single occurrence triggering coverage only under one of the policies.…

February 18, 2013

United States: Another Win For Pennsylvania Policyholders Concerning The Duty To Defend And The Pollution Exclusion

Source: Mondaq, February 6, 2013
By: John N. Ellison and Luke E. Debevec

Policyholders with pollution-related liabilities in Pennsylvania scored another win in January, in the ongoing litigation battle with insurance companies that argue for the broadest possible interpretation of the “pollution exclusions” in their policies. In an important decision issued January 22, 2012, Chief Magistrate Judge Lisa Pupo Lenihan of the United States District Court for the Western District of Pennsylvania, ruled that TIG Insurance Company (formerly Transamerica) owed a defense to its policyholders, Wiseman Oil Company, Inc. and its owners, for claims brought by the United States under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), relating to environmental contamination from the historic operations of an industrial/commercial waste- treatment/reprocessing facility.

Magistrate Judge Lenihan’s Report and Recommendations concludes that an insurance company’s duty to defend exists unless the insurance company can prove, from allegations within the four corners of the complaint, that there is no chance of coverage existing. By contrast, the policyholder is permitted to introduce extrinsic evidence to demonstrate the potential for coverage, even if it does not appear on the face of the complaint. On the question of whether the insurance company owed a duty to defend to the plaintiffs in the underlying CERCLA lawsuit, the court did not find it necessary to rule definitively concerning the pollution exclusion. This was because even under the insurance company’s interpretation of the clause, a fair reading of the government’s complaint did not “expressly rule out” the possibility of insurance coverage.

The insurance policy at issue in the case was a comprehensive general liability form containing the standard form 1970 pollution exclusion. The clause states that it excludes “bodily injury or property damage arising out of the discharge, dispersal, release or escape of . . . toxic chemicals, liquids or gases, waste materials or other . . . contaminants or pollutants into or upon land . . ., but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.”…

February 11, 2013

United States: Another Win For Pennsylvania Policyholders Concerning The Duty To Defend And The Pollution Exclusion

Source: http://www.mondaq.com, February 6, 2013
By: John N. Ellison and Luck E. Debevec

Policyholders with pollution-related liabilities in Pennsylvania scored another win in January, in the ongoing litigation battle with insurance companies that argue for the broadest possible interpretation of the “pollution exclusions” in their policies. In an important decision issued January 22, 2012, Chief Magistrate Judge Lisa Pupo Lenihan of the United States District Court for the Western District of Pennsylvania, ruled that TIG Insurance Company (formerly Transamerica) owed a defense to its policyholders, Wiseman Oil Company, Inc. and its owners, for claims brought by the United States under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), relating to environmental contamination from the historic operations of an industrial/commercial waste- treatment/reprocessing facility.

Magistrate Judge Lenihan’s Report and Recommendations concludes that an insurance company’s duty to defend exists unless the insurance company can prove, from allegations within the four corners of the complaint, that there is no chance of coverage existing. By contrast, the policyholder is permitted to introduce extrinsic evidence to demonstrate the potential for coverage, even if it does not appear on the face of the complaint. On the question of whether the insurance company owed a duty to defend to the plaintiffs in the underlying CERCLA lawsuit, the court did not find it necessary to rule definitively concerning the pollution exclusion. This was because even under the insurance company’s interpretation of the clause, a fair reading of the government’s complaint did not “expressly rule out” the possibility of insurance coverage.…