Henning Constr. Co. v. Phx. Ins. Co.
| Decision Date | 05 November 2021 |
| Docket Number | 4:21-cv-00051 |
| Citation | 570 F.Supp.3d 670 |
| Parties | HENNING CONSTRUCTION CO., LLC, Plaintiff, v. The PHOENIX INSURANCE CO., Defendant. |
| Court | U.S. District Court — Southern District of Iowa |
Todd M. Lantz, The Weinhardt Law Firm, Des Moines, IA, for Plaintiff.
J. Scott Bardole, Andersen & Assocaites, West Des Moines, IA, Erin Elizabeth O'Brien, Pro Hac Vice, Roderick T. Dunne, Pro Hac Vice, Karbal Cohen Economou Silk & Dunne LLC, Chicago, IL, for Defendant.
ORDER DENYING PHOENIX'S MOTION FOR SUMMARY JUDGMENT AND DENYING HENNING'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT
Before the Court is Defendant The Phoenix Insurance Company's Motion for Summary Judgment, filed on July 7, 2021. ECF No. 21. On July 30, Plaintiff Henning Construction Company, LLC cross-filed its Motion for Partial Summary Judgment, ECF No. 25, and a Resistance to Phoenix's Motion on August 2, ECF No. 26. The parties have filed responses to the respective Motions. ECF Nos. 30, 32. Neither party has requested oral argument, and the Court does not believe that oral argument will substantially aid it in resolving the issues before the Court. The matter is fully submitted.
Henning was hired by Stoney Creek Investors of Sioux City in 2007 as a general contractor to build the Stoney Creek Inn & Conference Center (the Inn) in Sioux City, Iowa. ECF No. 25-1 ¶ 1. Henning's subcontractors commenced work on the Inn in October 2007. Id. ¶¶ 1, 2. Construction was complete by July 2009. Id. ¶ 2; ECF No. 25-2 at 9 ¶ 10. During construction, and for some time after construction was completed, Henning was consecutively insured by four of Phoenix's Commercial General Liability (CGL) policies. ECF No. 25-2 at 5 ¶ 13. Each CGL policy covered up to $4 million in the aggregate if Henning became legally obligated to pay for any property damage caused by its subcontractors’ work on the Inn. ECF No. 26-2 at 5 ¶ 14, 8 ¶ 3.
The policies contained an endorsement, CG D2 04 06 01, modifying the scope of coverage for property damage if an Exterior Insulation and Finish System (EIFS) was used. See , e.g. , ECF No. 21-3 at 79. EIFS is defined in each policy exclusion as "an exterior cladding or finish system used on any part of any structure." Id. EIFS consists of "rigid or semi rigid insulation board made of expanded polystyrene or other materials," "adhesive and/or mechanical fasteners used to attach the insulation board to the substrate," "[a] reinforced base coat," and "[a] finish coat providing surface texture and color." Id. Each CGL policy excludes coverage for property damage arising out of an EIFS system. Id. The EIFS exclusions are broken down into two parts. First, coverage is excluded for property damage arising out of:
The design, manufacture, construction, fabrication, distribution, sale, preparation, installation, application, maintenance or repair, including remodeling, service, correction or replacement of any "exterior insulation and finish system" (commonly referred to as synthetic stucco or EIFS) or any part thereof, or any substantially similar system or any part thereof, including the application or use of conditioners, primers, accessories, flashing, coatings, caulking or sealants in connection with such a system.
Id. Second, coverage is excluded for property damage arising out of Henning's or its subcontractors’ work "with respect to any exterior component, fixture or feature of any structure if an [EIFS], or any substantially similar system, is used on any part of that structure." Id.
Henning's subcontractor, Romesburg Plastering, Inc., installed EIFS on the exterior of the Inn. ECF No. 22 at 2; ECF No. 25-2 at 8 ¶ 5, 4 ¶ 11. The Inn's exterior consisted of the EIFS, manufactured stone, metal panels, and brick, also known as "cladding." ECF No. 25-2 at 2 ¶ 3. Behind the stone cladding system was one layer of Tyvek-brand house wrap, also known as weather-resistive barrier (WRB). ECF No. 32 at 2. WRB is "[a] material behind an exterior wall covering that is intended to resist liquid water that has penetrated behind the exterior covering from further intruding into the exterior wall assembly." ECF No. 25-3 at 33.
In February 2016, Stoney Creek notified Henning that the Inn was experiencing water intrusion and water penetration problems causing damage. ECF No. 25-2 at 2 ¶¶ 4, 5. Henning responded immediately by hiring a specialist in building-envelope failures, Jeff Neumeier at Resource, LLC, to investigate. Id. ¶ 6. Neumeier conducted a forensic investigation and surveyed the Inn to provide his professional opinion on the cause of the water infiltration. ECF No. 25-3. It was Neumeier's professional opinion that the WRB on the Inn was "not installed in the appropriate configuration ... as per the industry standards of the time." Id. at 15. The International Building Code (IBC) states that two layers of WRB building wrap are required behind all stone installations. Id. at 11, 38, 41. Neumeier determined that the architectural concrete masonry veneer (ACMV) was "not installed to the industry standards" because the installer "failed to install the second layer of WRB" behind the stone veneer and cladding system "as indicated by the contract documents." Id. at 15. Further, he stated WRB is an interior feature of a wall because it is "not intended to exist on an outside surface." Id. at 9 ¶ 5. Neumeier identified several other workmanship problems, including a lack of properly installed "flashings"—which prevent moisture from entering the walls or redirect it to the exterior of the structure—and improper EIFS installation. Id. at 15, 34. All of these workmanship problems contributed to the Inn's water infiltration and ineffective water exfiltration. Id. However, according to Neumeier, the "most significant deficiency in the original construction of [the Inn] was the absence of two layers of [WRB] behind the manufactured stone veneer." ECF No. 25-3 at 1 ¶ 4.
The Inn's water damage extended from the exterior of the building to the framing lumber, wall insulation, and interior drywall. ECF No. 25-2 at 9 ¶ 13. After receiving notice of the water intrusion and resulting property damage, Henning coordinated repairs at the Inn from 2016 to 2018, as it was legally obligated to do. ECF No. 30-1 at 4 ¶ 19. Henning claims that approximately 5,000 square feet of interior repairs were completed, in addition to almost 13,000 square feet of exterior cladding system repairs. ECF No. 25-2 at 10 ¶ 20. Henning relied on the liability insurance it had purchased to cover the more than $2 million in repairs. ECF Nos. 26-1 at 2; 26-2 at 8 ¶ 2. Henning settled insurance claims with the masonry subcontractor and its insurer for the ACMV stone system, the rough carpentry subcontractor and its insurer, a subsequent general liability insurer, and the EIFS subcontractor. ECF Nos. 25-2 at 4; 26-2 at 4 ¶ 12. But when Henning reported the issue to Phoenix in early 2016 by submitting a claim for Phoenix's share of the repair costs, Phoenix declined coverage based on the EIFS exclusion in its CGL policies. ECF No. 25-2 at 10 ¶ 21.
Henning filed a Complaint with this Court on February 18, 2021, alleging breach of contract against Phoenix for its failure to indemnify under the CGL policies. ECF No. 1. Phoenix now moves for summary judgment on grounds that damages to the Inn were caused by, or related to, the use of EIFS on the exterior of the Inn. ECF No. 21. Phoenix argues the EIFS exclusion in the CGL policies releases it from liability to indemnify Henning, and thus it owes no coverage to Henning as a matter of law. Id. Henning resists Phoenix's Motion and cross-files a Motion for Partial Summary Judgment. ECF No. 26. Henning argues not only does the EIFS exclusion not apply to its claims as a matter of law, but there are other issues regarding interior and structural damages that must be resolved prior to a judgment in this case, even if the EIFS exclusion issue is resolved. Id.
Federal Rule of Civil Procedure 56(a) provides, "A party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought." Rule 56(a) mandates the entry of summary judgment upon motion after there has been adequate time for discovery "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Summary judgment is proper when the record, viewed in the light most favorable to the nonmoving party and giving that party the benefit of all reasonable inferences, shows there is no genuine issue of material fact and the moving party is therefore entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a) ; Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Harlston v. McDonnell Douglas Corp. , 37 F.3d 379, 382 (8th Cir. 1994). A disputed issue is "genuine" when the evidence produced "is such that a reasonable jury could return a verdict for the nonmoving party." See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is considered "material" if it "might affect the outcome of the suit under the governing law." See id.
"In considering a motion for summary judgment the court does not weigh the evidence, make credibility determinations, or attempt to discern the truth of any factual issue." Great Plains Real Estate Dev., L.L.C. v. Union Cent. Life Ins. Co. , 536 F.3d 939, 944 (8th Cir. 2008) (quoting Morris v. City of Chillicothe , 512 F.3d 1013, 1018 (8th Cir. 2008) ). Rather, the court only determines whether there are any disputed issues concerning the existence of material facts and, if so, whether those disputes are genuine. See Anderson...
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