James McHugh Constr. Co. v. Travelers Prop. Cas. Co. of Am.

• Decision Date: 20 December 2016
• Docket Number: Civil Action No. PX 16–1099
• Parties: JAMES MCHUGH CONSTRUCTION CO., Plaintiff, v. TRAVELERS PROPERTY CASUALTY CO. OF AMERICA, Defendant.
• Court: U.S. District Court — District of Maryland

223 F.Supp.3d 462

JAMES MCHUGH CONSTRUCTION CO., Plaintiff,

v.TRAVELERS PROPERTY CASUALTY CO. OF AMERICA, Defendant.

Civil Action No. PX 16–1099

United States District Court, D. Maryland.

Signed December 20, 2016

Brian A. Loffredo, Offit Kurman PA, Fulton, MD, Eric J. Pelletier, Offit Kurman PA, Bethesda, MD, Christopher Michael Cano, Robert J. Franco, Franco Moroney LLC, Chicago, IL, for Plaintiff.

Craig David Roswell, Niles Barton and Wilmer LLP, Baltimore, MD, Kirk M. Zapp, Matthew S. Ponzi, Foran Glennon Palandech Ponzi and Rudloff PC, Chicago, IL, for Defendant.

MEMORANDUM OPINION

Paula Xinis, United States District Judge

Pending in this insurance action are Plaintiff's and Defendant's cross-motions for summary judgment (ECF Nos. 6, 33). The issues are fully briefed and the Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. For the reasons stated below, Defendant's motion is granted and Plaintiff's motion is denied.

I. BACKGROUND

The following facts are undisputed. James McHugh Construction Company ("Plaintiff") was selected to be the general contractor for the construction of a high-rise apartment building at 360 West Hubbard in Chicago, Illinois. Pl.'s Resp. to Undisputed Facts, ECF No. 36–1 at 2–3. 360 West Hubbard Joint Venture LLC, as the owner of the project, purchased an insurance policy from Defendant Travelers Property Casualty Company of America ("Defendant") covering Builders Risk and Inland Marine risks for 360 Hubbard. See Insurance Policy, ECF No. 31–2. The insurance policy contains a blanket named insured endorsement and names all contractors, including Plaintiff, as named insureds on the Policy. Pl.'s Resp. to Undisputed Facts, ECF No. 36–1 at 19. The insurance policy also contains a broad form insuring agreement, which states that all loss to the project is covered except for those claims which are excluded:

A. COVERAGE

We will pay for direct physical loss of or damage to Covered Property from any of the Covered Causes of Loss.... Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS OR DAMAGE except those causes of loss listed in the Exclusions....

Insurance Policy, ECF No. 31–2 at 23 (emphasis in original).

In the fall of 2013, tenants began moving into the 360 West Hubbard building, and so the project owner requested Plaintiff to clean the exterior glass windows. Pl.'s Resp. to Undisputed Facts, ECF No. 36–1 at 5. Plaintiff engaged a subcontractor, Corporate Cleaning Services, Inc. ("CCS"), to clean the exterior glass. Id. The subcontract between Plaintiff and CCS describes CCS's scope of work as all "Exterior Window Washing." Specifically, the subcontract states:

Without limiting the generality of [the term "Exterior Window Washing"], the following items are specifically included:

1. Exterior washing of windows and surrounding frames.

2. Protection of all existing finishes from damage during sitework.

3. Rubbish removal to dumpsters provided by others.

4. Daily cleanup, including load out of debris to dumpsters provided by the Contractor.

5. Cooperation and coordination with all project personnel and other trades.

6. Coordination with all agencies having jurisdiction over subcontractor work.

7. All applicable taxes.

CCS–McHugh Subcontract, ECF No. 31–4. CCS was tasked with removing both dirt and "construction debris" that had settled on the window surfaces during the construction process. Construction debris includes dried mortar, concrete, cement, and paint. Pl.'s Resp. to Undisputed Facts, ECF No. 36–1 at 7. The construction debris on the exterior glass could not be removed using standard cleaning methods, Id. at 8, so CCS removed the debris using a metal scraper or similar tool. Id. at 12. CCS failed to follow industry standards when removing debris from the glass designed to eliminate or reduce the risk of damaging glass. see id. at 12–17 ("McHugh believes that CCS failed to properly execute its work method because it was not in conformance with the Subcontract and all applicable industry standards."). As a result, the glass surfaces were scratched.

The scratched windows were rejected by the building's owner and thus Plaintiff was forced to incur the costs of repairing and replacing the scratched windows. Pl.'s Mot. Sum. Judgment, ECF No. 31 at 3. Plaintiff reported the loss and claim to Defendant. On July 15, 2014, Defendant denied the claim. The sole basis for Defendant's denial was Exclusion B(3)(d)(2) in the insurance policy for "Omission or faulty, inadequate or defective: Materials, workmanship or maintenance." Def.'s Rejection Letter, ECF No. 31–3. The insurance policy's exclusion clause states, in pertinent part:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage.

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3. We will not pay for loss or damage caused by or resulting from any of the following. But if loss or damage by a Covered Cause of Loss results, we will pay for that resulting loss or damage.

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d. Omission in, or faulty, inadequate or defective:

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(2) Materials, workmanship or maintenance.

Insurance Policy, ECF No. 31–2 at 30–32. According to Defendant, CCS's cleaning of the windows is "considered faulty, inadequate or defective maintenance" under the policy. Def.'s Rejection Letter, ECF No. 31–3.

On February 5, 2016, Plaintiff filed a complaint in the Circuit Court for Montgomery County alleging breach of contract and seeking a declaratory judgment that Plaintiff's claim is covered by the insurance policy. ECF No. 2. On April 13, 2016, Defendant timely removed the case to this Court based on diversity of citizenship pursuant to 28 U.S.C. § 1332. ECF No. 1. That same day, Plaintiff filed a motion for summary judgment. ECF No. 6.

On August 1, 2016, Plaintiff filed an amended memorandum in support of its motion for summary judgment. ECF No. 31. It argues that it prevails as a matter of law because the "faulty workmanship" exclusion, which served as the sole basis for Defendant's denial of Plaintiff's claim, is ambiguous and the ambiguity should be resolved in favor of Plaintiff as the insured. Plaintiff's position is that the term "faulty workmanship" does not cover the damage caused by CCS. ECF No. 31 at 2. And even if this Court finds that Defendant has met its burden in proving the faulty workmanship exception applies, the "ensuing loss" exception to the faulty workmanship exclusion applies to Plaintiff's loss, and thus policy covered the loss. Defendant filed a cross-motion for summary judgment on August 15, 2016. ECF No. 34. It argues that the faulty workmanship exclusion justifies its denial of Plaintiff's claim and that the ensuing loss exception does not apply. Id.

II. STANDARD OF REVIEW

"The court shall grant summary judgment 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." Fed. R. Civ. P. 56(a) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citing predecessor to current Rule 56(a) ). The burden is on the moving party to demonstrate the absence of any genuine dispute of material fact. Adickes v. S.H. Kress & Co. , 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). If sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing the motion, then a genuine dispute of material fact is presented and summary judgment should be denied. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). However, the "mere existence of a scintilla of evidence in support of the [opposing party's] position" is insufficient to defeat a motion for summary judgment. Id. at 252, 106 S.Ct. 2505. The facts themselves, and the inferences to be drawn from the underlying facts, must be viewed in the light most favorable to the opposing party, Scott v. Harris , 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) ; Iko v. Shreve , 535 F.3d 225, 230 (4th Cir. 2008), who may not rest upon the mere allegations or denials of his pleading but instead must, by affidavit or other evidentiary showing, set out specific facts showing a genuine dispute for trial, Fed. R. Civ. P. 56(c)(1).

When a court is called upon to decide cross-motions for summary judgment, it must review each motion separately on its own merits to decide whether either party deserves judgment as a matter of law. Rossignol v. Voorhaar , 316 F.3d 516, 523 (4th Cir. 2003). Thus, as with any motion for summary judgment, the court must review the facts and reasonable inferences therefrom in the light most favorable to the party opposing that motion. Id. Here, the underlying facts are largely undisputed. The parties' arguments center on the proper interpretation of the insurance policy.

III. ANALYSIS

Because the parties executed the insurance policy in Maryland, the parties agree that Maryland law applies to the "faulty workmanship" and "resulting loss" issues addressed in the cross-motions. Def.'s Mot. Summ. J., ECF No. 34 at 8–9. The Court will therefore apply Maryland law.

A. Defendant's Cross–Motion for Summary Judgment

i. The Faulty Workmanship Exclusion

Defendant's principal argument against coverage is that CCS's "faulty workmanship" damaged the windows, and so the policy expressly excludes the claim. Insurance Policy, ECF No. 31–2 at 32. Plaintiff responds that the term "faulty workmanship" is ambiguous because the contract does not specify whether it applies to processes, like cleaning windows, or final products such as the windows themselves, or both. Second, Plaintiff argues that it is unclear whether the term applies where originally the contracted-for work was completed properly (clean, debris-free glass), but thereafter subject to collateral damage (glass scratched during cleaning). Plaintiff urges the court to construe this supposed ambiguity in its favor and find that...