Pavarini Constr. Co. v. ACE Am. Ins. Co.

• Decision Date: 29 October 2015
• Docket Number: CASE NO. 14–CV–20524–KING
• Citation: 161 F.Supp.3d 1227
• Parties: Pavarini Construction Co. (Se) Inc., a Delaware Corporation, individually, and for the use and benefit of Steadfast Insurance Company, a Delaware Corporation, Plaintiff, v. Ace American Insurance Company, a Pennsylvania Corporation, Defendant.
• Court: U.S. District Court — Southern District of Florida

161 F.Supp.3d 1227

Pavarini Construction Co. (Se) Inc., a Delaware Corporation, individually, and for the use and benefit of Steadfast Insurance Company, a Delaware Corporation, Plaintiff,

v.Ace American Insurance Company, a Pennsylvania Corporation, Defendant.

CASE NO. 14–CV–20524–KING

United States District Court, S.D. Florida.

Signed October 29, 2015

Entered October 30, 2015

David T. Dekker, Laura A. Freid-Studlo, Melissa C. Lesmes, Stephen Scott Asay, Pillsbury Withrop Shaw Pittman LLP, Washington, DC, Russell Marc Landy, Peter Francis Valori, Damian & Valori LLP, Miami, FL, for Plaintiff.

Joel D. Adler, Marlow Adler Abrams Newman & Lewis, Maritza Pena, Marlow Connell Abrams Adler Newman & Lewis, Coral Gables, FL, for Defendant.

AMENDED ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

JAMES LAWRENCE KING, UNITED STATES DISTRICT JUDGE, SOUTHERN DISTRICT OF FLORIDA

THIS MATTER comes before the Court upon cross-motions for summary Judgment (DE 128), filed July 13, 2015. The motions are fully briefed.

I. INTRODUCTION

Plaintiff Pavarini Construction Co. was the general contractor for construction of 900 Biscayne Bay Condominium, a 63–floor, 516–unit condominium (“the Project”). See DE 131 at ¶¶ 1–2. The project was insured by three relevant insurance policies: (1) the commercial general liability (“CGL”) policy issued by American Home Assurance Company (“American Home”); (2) the CGL policy issued by Defendant ACE American Insurance Company (“ACE”); and (3) the Subguard policy issued by Steadfast Insurance Company (“Steadfast”). See id. at ¶¶ 20–24.

The American Home and ACE CGL policies are part of an Owner Controlled Insurance Program (“OCIP”) made up of a set of CGL policies designed to provide insurance coverage for the project owner, Terra–Adi International Bayshore, LLC, (“Project Owner”), Plaintiff Pavarini and certain of Plaintiff's subcontractors with uniform insurance coverage for claims of property damage and bodily injury. See id. at ¶¶ 17–22. Separately, the Subguard policy with Steadfast (“Steadfast policy”) provides coverage to Plaintiff Pavarini Construction Co. as general contractor for risk of subcontractor contractual default. See id. at ¶¶ 24, 26.

The American Home policy contains a $2 million per occurrence limit and a $4 million aggregate limit. See id. at ¶ 20. ACE's policy has a $25 million per occurrence limit and $25 million aggregate limit. See id. at ¶ 22. The ACE CGL policy is excess over the American Home CGL policy. See id. The Steadfast policy contains a $25 million aggregate limit. See id. at ¶ 79. The Steadfast policy's $25 million aggregate limit applies not just to the 900 Biscayne Bay Condominium but to all covered projects. See DE 131 at ¶ 5; DE 131–2 at 105, 110–11, 115. The American Home policy, ACE policy, and Steadfast policy contain “Other Insurance” provisions providing that the insurance is excess over any other insurance available. See DE 123 at 23, 102.

Plaintiff Pavarini hired subcontractor Alan W. Smith, Inc. (“AWS”) for the installation of concrete masonry unit (“CMU”) walls and certain reinforcing steel. See DE 131 at ¶ 12. Plaintiff hired subcontractor TCOE Corporation (“TCOE”) for the supply and installation of reinforcing steel within the cast-in-place concrete columns, beams, and shear walls. See id. at ¶ 13. AWS and TCOE were covered by the American Home and ACE policies. See DE 110 at 6; DE 128 at 7. The work performed by both subcontractors was so seriously deficient. A significant amount of reinforcing steel was either omitted entirely or improperly installed throughout the building, including placement within its critical concrete structural elements, causing destabilization. See DE 110 at 2; DE 131 at ¶ 48.

The building's compromised structural support system resulted in excessive movement of building components. See DE 131 at ¶¶ 50–51. This, in turn, caused stucco debonding and cracking on the walls of the building, worsening cracking of cast-in-place concrete elements (columns, beams, and shear walls), and cracking in the mechanical penthouse enclosure on the roof, which led to water intrusion. See id.

In December of 2010, upon becoming aware of the deficiency, the Project Owner served Plaintiff with a formal demand to repair all damage. See id. at ¶ 46. Both AWS and Plaintiff sought indemnification through the American Home and ACE policies. See id. at ¶¶ 64–69. American Home and ACE initially refused coverage.¹ See id. at ¶ 69. AWS was contractually obligated to indemnify Plaintiff for the cost of repairing damage caused by its defective work. See id. at ¶ 68. In order to meet its indemnification obligation, AWS looked to the American Home and ACE policies for funding. See id. Refusal of coverage by American Home and ACE contributed to the contractual default of AWS, which then allowed Plaintiff to receive coverage through the Steadfast policy. See id. at ¶¶ 69–70.

On October 5, 2011, Plaintiff and Steadfast entered into a Payment Agreement, whereby Steadfast agreed to advance funds to Plaintiff for approved costs on an ongoing basis. See id. at ¶ 75. In return, Plaintiff promised to continue to pursue claims against American Home and ACE and to repay Steadfast with any recovery. See id. Through repayment, Plaintiff reduces the amount for which Steadfast can seek recovery. See id. at ¶ 95.

Costs incurred by Plaintiff as part of its remediation efforts include amounts paid to: consultants to investigate the damage and design a plan of remediation, install hurricane netting to prevent bodily injury and additional property damage, install a structural steel exoskeleton and a metal panel façade (the “Panel System”) to provide the required structural support in the absence of functional steel beams, and repair the mechanical penthouse enclosure on the roof. See id. at ¶¶ 57, 91. The parties do not dispute that Plaintiff incurred $25,121,474.84 in costs relating to the remediation effort. See DE 135 at 1–3. After accounting for $2 million recovered from the American Home policy and related salvage efforts, Plaintiff seeks a total of $23,116,798.44 in damages. See DE 131 at ¶ 100.

While the amount is undisputed, the parties dispute the nature and character of the loss. See DE 135 at 1–3. Plaintiff claims that none of the costs include the repair of defective work itself; rather all repairs were of damage to otherwise non-defective building components. See DE 136 at 14–15. Defendant counters that much of the repair effort amounted to a de facto repair of the defectively installed steel. See DE 128 at 3; DE 135 at 2

Plaintiff brought this action against Defendant ACE for declaratory judgment seeking an adjudication of the rights, duties, and obligations under the ACE policy and for breach of contract seeking monetary damages. The cross-motions for summary judgment address three main issues: (1) whether Plaintiff has standing to bring its claims; (2) whether the damage caused by the defective work of Plaintiff's subcontractors is covered by the ACE CGL policy; and (3) whether the American Home and ACE CGL policies should prorate with the Steadfast policy based on the other insurance provisions. Additionally, there is a collateral dispute as to the admissibility of certain affidavits sworn to after the close of discovery.

II. LEGAL STANDARD ON MOTION FOR SUMMARY JUDGMENT

Summary judgment is appropriate where the pleadings and supporting materials establish that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56 ; Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A fact is “material” if it may determine the outcome under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmoving party must show specific facts to support that there is a genuine dispute. Id. at 256, 106 S.Ct. 2505. On a motion for summary judgment, the court must view the evidence and resolve all inferences in the light most favorable to the nonmoving party. Id. at 255, 106 S.Ct. 2505. In reviewing the record evidence, the Court may not undertake the jury's function of weighing the evidence or undertaking credibility determinations. Latimer v. Roaring Toyz, Inc., 601 F.3d 1224, 1237 (11th Cir.2010).

III. STANDING

Defendant Ace American argues that Plaintiff lacks standing because the Steadfast policy provided coverage and made Plaintiff whole. See DE 128 at 17. In addition, Defendant claims that Steadfast expressly waived its contractual and equitable subrogation rights and therefore those rights could not have been assigned. See id. at 14–17. Plaintiff disagrees that Steadfast waived its subrogation rights. See DE 136 at 4. In addition, Plaintiff contends that it has suffered direct pecuniary damages for which it has yet to be made whole. See id. Specifically, Plaintiff maintains that the Steadfast policy required it to pay the first $950,000 in damages, that it has not yet been reimbursed by Steadfast for $1,721,500.79 in damages, that the unnecessary exhaustion of the Steadfast policy has harmed its risk management portfolio,² and that it is contractually obligated to pursue recovery as a condition to receiving further payments from Steadfast. See id. at 12–13. In sum, Plaintiff contends that it has standing to bring these claims because of ongoing harm to independent, legally protected interests.

The Court finds that Plaintiff has standing to bring these claims. Plaintiff has demonstrated invasion of its legally protected interest in the Steadfast policy. See Mt. Hawley Ins. Co. v. Sandy Lake Properties, Inc., 425 F.3d 1308, 1311 (11th Cir.2005). It is undisputed that, pursuant to the terms of the Steadfast policy, Plaintiff has the contractual right to receive coverage. Plaintiff's right to receive coverage is now nearly exhausted, Plaintiff has suffered a concrete and particularized harm. Fur...