Nash St., LLC v. Main St. Am. Assurance Co.

• Decision Date: 09 September 2020
• Docket Number: SC 20389
• Court: Supreme Court of Connecticut
• Parties: NASH STREET, LLC v. MAIN STREET AMERICA ASSURANCE COMPANY ET AL.

NASH STREET, LLC
v.
MAIN STREET AMERICA ASSURANCE COMPANY ET AL.

SC 20389

Supreme Court of Connecticut

Argued January 14, 2020
September 9, 2020^**

Robinson, C. J., and Palmer, McDonald, D'Auria, Mullins, Kahn and Ecker, Js.^*

Syllabus

The plaintiff sought to recover proceeds allegedly due under a commercial general liability insurance policy issued by the defendant insurer to its insured, B Co. The plaintiff contracted with B Co. to renovate the plaintiff's damaged house, including site grading and foundation work, which involved, inter alia, the lifting of the house off of the foundation. The house collapsed after it was lifted by B Co.'s subcontractor. At the time of the collapse, the only work being performed on the house was related to the lifting. The plaintiff brought a separate action against B Co. for property damage arising from the collapse. B Co. tendered defense of the case to the defendant pursuant to the insurance policy, and the defendant declined to defend. The plaintiff subsequently brought the present action against the defendant, seeking recovery under a default judgment that the plaintiff had secured against B Co. in the separate action. The trial court granted the defendant's motion for summary judgment and rendered judgment thereon, concluding that the defendant had no duty to defend or to indemnify B Co. based on the applicability of two provisions in the insurance policy excluding coverage for property damage to "that particular part of real property" on which the insured or anyone working on the insured's behalf is "performing operations if the property damage arises out of those operations" and for property damage to "that particular part of any property that must be restored, repaired or replaced because" the insured's work "was incorrectly performed on it." The plaintiff thereafter appealed, claiming that the trial court improperly granted the defendant's motion for summary judgment because, at the time B Co. tendered defense of the case to the defendant, there existed at least a possibility that the complaint alleged a liability covered under B Co.'s insurance policy that would have triggered the defendant's duty to defend. More specifically, the plaintiff claimed that the defendant had a duty to defend B Co. because the complaint alleged damage only to the house and interior renovation work, whereas the two relevant policy exclusions precluded coverage only for the defective work to the foundation itself and not for damage to the rest of the house. Held that the trial court improperly granted the defendant's motion for summary judgment, that court having incorrectly determined that the two exclusions relieved the defendant of its duty to defend B Co. in the plaintiff's action against B Co., as there was a possibility that the damages the plaintiff alleged in that action were not excluded under the policy; numerous courts, including this court, have recognized that legal uncertainty can give rise to an insurer's duty to defend, there was legal uncertainty in the present case as to the meaning and applicability of the two exclusions, Connecticut law favors a narrow construction of exclusions and requires that ambiguous provisions be construed in favor of the insured, many other courts have interpreted exclusions with the "that particular part" language in a manner favoring coverage, and neither this court nor the Appellate Court has previously interpreted exclusions identical to those at issue in the present case.

Procedural History

Action to recover proceeds allegedly due under a commercial general liability insurance policy issued by the named defendant, and for other relief, brought to the Superior Court in the judicial district of Ansonia-Milford, where the court, Tyma, J., denied the plaintiff's motion for summary judgment and granted the named

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defendant's motion for summary judgment and rendered judgment thereon, from which the plaintiff appealed. Reversed; further proceedings.

David G. Jordan, with whom, on the brief, was Samantha M. Oliveira, for the appellant (plaintiff).

Scott T. Ober, with whom was Colleen M. Garlick, for the appellee (named defendant).

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Opinion

McDONALD, J. The dispositive issue before us is whether the defendant insurer had a duty to defend an action brought against its insured in an underlying action alleging property damage resulting from a house that collapsed while being lifted off its foundation. The insurance policy under review contained clauses excluding coverage for damage that occurs to "that particular part" of real property on which the insured was working. In this case, brought under the direct action statute; see General Statutes § 38a-321; the plaintiff, Nash Street, LLC, appeals from the judgment of the trial court, which granted the motion for summary judgment filed by the named defendant, Main Street America Assurance Company.¹ The plaintiff claims that the trial court improperly granted the defendant's motion for summary judgment because, at the time the insured, New Beginnings Residential Renovations, LLC, tendered defense of the underlying action to the defendant, there existed at least a possibility that the complaint alleged a liability that was covered under New Beginnings' insurance policy and, thus, triggered the defendant's duty to defend. We agree with the plaintiff and reverse the judgment of the trial court.

The parties stipulated to the following facts in the direct action. The plaintiff's property in Milford needed repairs after being damaged by Hurricanes Sandy and Irene. The plaintiff contracted with New Beginnings to renovate the house, including site grading and foundation work for which the house would be lifted and temporarily placed onto cribbing. A subcontractor was retained to lift the house and to do concrete work on the foundation.

While the subcontractor was lifting the house in preparation for the foundation work, the house "shifted off the supporting cribbing and collapsed." At the time of the collapse, the only work being performed on the house was related to the lifting. New Beginnings and/or its subcontractor caused the collapse by failing to ensure that the cribbing was secure. As a result, the house sustained "extensive physical damage . . . ."

The plaintiff brought an action against, inter alios, New Beginnings for property damage arising out of the collapse. The complaint alleged, in pertinent part, that "New Beginnings was negligent in the performance of its work in the following respects . . . New Beginnings and/or its subcontractors negligently constructed or assembled the cribbing [that] caused the collapse; and . . . New Beginnings and/or its subcontractors failed to ensure that the cribbing properly supported the house. . . . As a result of New Beginnings' negligence, the cribbing failed, causing damage to the house and the renovation work therein." New Beginnings tendered defense of the case to the defendant pursuant to a

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commercial general liability insurance policy, and the defendant declined to defend. The plaintiff was awarded a default judgment against New Beginnings for its failure to plead in the amount of $558,007.16. No part of the judgment has been paid.

The record reveals the following additional facts. The plaintiff brought the present action against the defendant under the direct action statute, seeking recovery for the judgment against New Beginnings. In response, the defendant filed an answer and five special defenses, each claiming that the alleged damages were not covered by the insurance policy.² Both parties moved for summary judgment. The plaintiff argued that there was no genuine issue of material fact that there is coverage under the policy and that the exclusions are inapplicable. The defendant argued that there is no genuine issue of material fact that two of the policy's "business risk" exclusions—k (5) and (6)—preclude coverage.

Under exclusion k (5), the policy excludes coverage for property damage to "[t]hat particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the 'property damage' arises out of those operations . . . ." Under exclusion k (6), the policy excludes coverage for property damage to "[t]hat particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it."

The plaintiff argued that "that particular part" of the property on which New Beginnings and/or its subcontractor were working was "the site grading and foundation work underneath the house . . . [and that] New Beginnings [and/or its subcontractor were] not performing any renovation or other work on the house itself." Thus, the plaintiff contended, it did not seek to recover for the damage to the work being done underneath the house—that work would be excluded under k (5) and (6). Rather, the plaintiff sought to recover for the damage to the house, including renovation work that had allegedly been completed a year before the collapse.

The defendant argued that "that particular part" of the property on which the subcontractor was performing operations was the whole house because the whole house was being lifted. It further argued that the possibility that the house might collapse while being raised was a foreseeable risk in undertaking those operations. The defendant reasoned that all damage that occurs to a house under these circumstances is a "business risk" that falls squarely within exclusions k (5) and (6).

In due course, the trial court issued a memorandum of decision, denying the plaintiff's motion for summary judgment and granting the defendant's motion for sum-

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mary judgment. The court stated that the parties agreed that the only issue was whether exclusions k (5) or (6) "preclude[d] coverage for the property damage to the entire house that occurred as a result of the [house's] shifting [off of] the cribbing and...