Harper Constr. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh
| Decision Date | 28 March 2019 |
| Docket Number | Case No. 18-cv-00471-BAS-NLS |
| Citation | 377 F.Supp.3d 1134 |
| Parties | HARPER CONSTRUCTION COMPANY, INC.; Harper Mechanical Contractors, LLC, Plaintiffs, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant. And Related Counterclaim |
| Court | U.S. District Court — Southern District of California |
Greg J. Ryan, Debbie H. Kim, Ryan & Associates, APLC, San Diego, CA, for Plaintiffs.
Drew Peter Rosell, Emily Grant Cottrell, Herold and Sager, Encinitas, CA, for Defendant.
ORDER GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT
Plaintiff Harper Construction Company, Inc. built a $ 35 million training facility for the U.S. Army's Patriot Missile System. Less than two years later, the Government informed Harper of cracked walls and binding doors at the facility. The Government demanded that Harper Construction investigate and repair the facility's defects, and the company has incurred nearly $ 2 million in costs to do so.
Defendant National Union Fire Insurance Company of Pittsburgh, PA, issued a commercial general liability insurance policy to Harper Construction. National Union's insurance policy names the other Plaintiff in this action, Harper Mechanical Contractors, LLC, as an additional insured. This insurance coverage dispute turns on whether National Union has a duty to defend and indemnify Plaintiffs in connection with the defects at the military training facility.
Presently before the Court is National Union's motion for partial summary judgment. (ECF No. 16.) National Union argues its insurance policy does not establish a duty to defend or indemnify Plaintiffs in these circumstances. The Court heard oral argument on the motion. (ECF No. 29.) For the following reasons, the Court GRANTS National Union's motion.
Plaintiff Harper Construction is a general contractor whose primary client is the U.S. Government. (J. Harper Decl. ¶ 3, ECF No. 17-1.) In 2007, the Government awarded Harper Construction a contract to build a U.S. Army training facility for the Patriot Missile System in Fort Sill, Oklahoma ("Project"). (Joint Statement of Undisputed Facts ("JSUF") ¶ 1, ECF No. 20.) The scope of work for the Project contemplated a 148,900 square-foot facility that includes classrooms, various training and simulation areas, and administrative offices.
To complete the Project, "Harper Construction hired design and engineering professionals, suppliers, and various subcontractors." (JSUF ¶ 2.) These subcontractors included Plaintiff Harper Mechanical Contractors, which was formerly known as Harper Grading, LLC. (Id. at 2:4–6, ¶ 2.) Harper Construction hired Harper Mechanical to perform demolition, grading, and other work at the Project.1 (Id. ) Over the next year and a half, Harper completed the Project, and the Government "conducted a Final Inspection of the Project on February 4, 2009." (See id. ¶¶ 3–6.)
Defendant National Union issued Commercial General Liability Policy No. GL 161-74-28 ("Policy") to Harper Construction. (JSUF ¶ 7; Policy, Counterclaim Ex. 1, ECF No. 4 at 27–103.) The Policy was effective from January 1, 2008, to January 1, 2009, and it provides for up to $ 1 million in coverage for each occurrence, with a $ 2 million general aggregate limit. (Policy at 3.)2 An endorsement to the Policy names Harper Mechanical as an additional insured. (See id. at 75.)
The Policy's Insuring Agreement provides that National Union "will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies." (Policy § 1, ¶ 1.) National Union has "the right and duty to defend the insured against any ‘suit’ seeking those damages." (Id. ) That said, an endorsement to the Policy modifies the Insuring Agreement's coverage by limiting the amount National Union is obligated to expend for defense costs. (Id. at 50–52.) The Defense Costs Within Policy Limits Endorsement ("Defense Costs Limits Endorsement") provides:
Our right and duty to defend such claims or "suits" end when we have exhausted the limits available ... for either payments of judgments or settlements or defense costs, as such costs are described in ... this endorsement....
(Id. at 50.) The Policy also contains numerous other endorsements that expand or limit the Insuring Agreement's coverage. (Id. at 23–77.)
"After the Project was constructed and turned over to the U.S. Government [in February 2009], Harper Construction was informed in December 2010 of property damage at the Project including, but not limited to, gypsum wallboard cracks and binding doors." (JSUF ¶ 13; see also id. ¶ 6.) In early 2011, Harper conducted repairs at the Project, but the problems "continued to appear after the corrective [action]." (Id. ¶ 14.) Then, in July 2013, the Government sent two letters to Harper Construction requesting an investigation of the problems at the Project and asking that the company propose a plan to correct the issues. (Id. ¶¶ 15–16.) Several months later, "Harper Construction and U.S. Government personnel participated in a mutual agreement meeting to establish a methodology for monitoring the Project to determine the cause of gypsum wallboard cracks." (Id. ¶ 17.) During 2013 and 2014, Harper also "conducted on-site investigations and third-party reviews to determine the cause of the cracks and binding doors." (Id. ¶ 14.)
In August 2014, as Harper continued to investigate the cause of the problems, one of the Government's engineers threatened to escalate matters, expressing to Harper:
I understand the need for due diligence and am trying to be reasonable in affording ample opportunity for so doing but lack of action is resulting in loss of patience on this end. Should you not close in on resolution and lay out a prudent plan to remediate in a prompt and orderly manner, I will be left with little recourse but to initiate pursuit of more formal administrative recourse. Need your help bringing this to a head quickly.
(Counterclaim Ex. 9; JSUF ¶ 18.) Harper Construction's President also submits a declaration stating that the "Government advised that if Harper Construction did not repair the property damage, the U.S. Government would demolish the Patriot Project and force Harper Construction to re-build the facility from the ground up at its own cost." (J. Harper Decl. ¶ 9.) "The U.S. Government also threatened to lodge complaints with Harper Construction's bonding company." (Id. )
Further, in a "letter dated January 20, 2015, the U.S. Government requested, in part, that Harper Construction develop a definite plan of action and a timeline for conducting testing and analysis." (JSUF ¶ 19.) In response, on April 10, 2015, Harper Construction submitted a corrective action plan. (Id. ¶ 20.)
On April 2, 2015—approximately four years after the Government first notified Harper of problems at the Project—Harper Construction's insurance broker submitted a claim to National Union by e-mail, stating:
In 2008 Harper Construction built a project called the Patriot Training Facility. They used a grading contractor, Harper Grading, to do the grading. Harper Grading is NOT owned by Harper Construction. Recently, small cracks appeared in some of the building's walls. It appears water runs under the building causing the building to move up and down. Upon investigation, it appears the fill used in the grading was partially good and partially bad. In order to stop the water from going under the building, Harper Construction is looking at different options. Harper Construction is looking at Harper Grading for the cost of repairs. Harper Grading was insured by [National Union] during the grading work, (see attached certificate), and Harper is looking to [National Union] for the needed work costs.
(JSUF ¶ 21.) On May 7, 2015, National Union acknowledged receipt of the claim and requested documents and information from Harper Construction, including "contract documents," "[a]n explanation of the nature of the alleged damages related to Harper's work," and "[a] summary of any corrective work Harper may have done after completion of its original contracts." (Id. ¶ 22.) National Union further stated that it would investigate the claim, but cautioned that it was "reserving all of its rights and defenses based upon the Policy and/or applicable law." (Counterclaim Ex. 13; see also JSUF ¶ 22.)
Over the next year and a half, Harper Construction corresponded "numerous times" with National Union to provide the insurer with more information to support Harper's claim. (J. Harper Decl. ¶ 21, Ex. G.) During this time, Harper periodically updated National Union regarding the costs the construction company claimed it had incurred to investigate and repair the Project's problems, which soon ballooned to well over a million dollars. (JSUF ¶¶ 23–27.)
Toward the end of 2016 and early 2017, Harper Construction increasingly pressed National Union regarding the status of Harper's claim. (JSUF ¶¶ 43–44.) Then, on March 27, 2017, National Union sent Harper a letter denying coverage for the claim, stating:
Based on the information received to date, it does not appear that this matter involves a lawsuit or any legal obligation of Harper Construction or Harper Grading to pay damages because of "property damage" to which the Policy applies, or any judgment against Harper Construction or Harper Grading. Further, even in the event this matter involved such a claim, it does not appear that this matter involves any "property damage" that took place during the effective dates of the Policy. Finally, it appears based on the information available to date that the wrap exclusion to the Policy would preclude coverage for claims arising out of Harper Construction's work at the Project.
(Countercla...
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