Webcor Constr., LP v. Zurich Am. Ins. Co.

• Decision Date: 12 March 2019
• Docket Number: Case No.: 17-cv-2220 YGR
• Citation: 372 F.Supp.3d 1061
• Parties: WEBCOR CONSTRUCTION, LP, et al., Plaintiffs, v. ZURICH AMERICAN INSURANCE COMPANY, et al., Defendants. And Third Party Complaint Old Republic General Insurance Corp., Third Party Plaintiff, v. Motorists Mutual Ins. Co., Third Party Defendant.
• Court: U.S. District Court — Northern District of California

372 F.Supp.3d 1061

WEBCOR CONSTRUCTION, LP, et al., Plaintiffs,

v.ZURICH AMERICAN INSURANCE COMPANY, et al., Defendants.And Third Party Complaint

Old Republic General Insurance Corp., Third Party Plaintiff,

v.Motorists Mutual Ins. Co., Third Party Defendant.

Case No.: 17-cv-2220 YGR

United States District Court, N.D. California.

Signed March 12, 2019

James Hugh Wilkins, Wilkins, Drolshagen & Czeshinski, Fresno, CA, for Third Party Defendant.

John R. Campo, Attorney at Law, Redwood City, CA, for Third Party Plaintiff.

ORDER GRANTING MOTORISTS' MOTION FOR SUMMARY JUDGMENT; DENYING OLD REPUBLIC'S MOTION FOR SUMMARY JUDGMENT

Dkt. Nos. 211, 212

Yvonne Gonzalez Rogers, United States District Court Judge

Presently pending before the Court are cross motions for summary judgment by third-party plaintiff Old Republic General Insurance Corporation ("Old Republic") and third-party defendant Motorists Mutual Insurance Company ("Motorists") regarding the latter's duty to defend in an underlying construction case. (Dkt. Nos. 211 and 212.) The Court heard oral argument on the motions on February 5, 2019. Having duly considered the parties' written and oral arguments, and the admissible evidence submitted, and for the reasons set forth herein, the Court ORDERS as follows: (1) the cross-motion of Motorists for summary judgment is GRANTED ; and (2) the motion of Old Republic for summary judgment is DENIED . The Court finds that the undisputed material facts show that there was no potential for coverage under the Motorists policy at issue with respect to additional insureds Architectural Glass and Aluminum Co., Inc. ("AGA") and Webcor Construction, LP dba Webcor Builders ("Webcor") for claims raised in the underlying litigation. Accordingly, a duty to defend did not attach.

I. SUMMARY OF FACTS ¹

A. The Underlying Action

The instant third-party complaint stems from an underlying construction defect action filed in the Superior Court for the State of California, County of San Francisco captioned CDC San Francisco LLC v. Webcor Builders. Inc. et al. , Case No. CGC15-546222. The complaint in the underlying action alleged that plaintiff therein, CDC San Francisco LLC, entered into a construction agreement with Webcor, the general contractor, to build a project known as the Intercontinental Hotel. (Old Republic Request for Judicial Notice, Exh. A [Complaint in Case No. CGC15-546222, hereinafter "ORRJN Exh. A"].) The agreement, in part, called for Webcor to design and build an exterior curtainwall system that would serve as the exterior wall of the hotel. The exterior curtainwall system is "an interconnected system of azure-blue glass that forms the building's entire exterior such that the Hotel appears in the San Francisco skyline as a 32[-]story translucent blue tower of glass." (Id. ¶ 12.) AGA was the "curtainwall contractor" for the project, and was responsible for designing, engineering, testing, fabricating, delivering, and installing the curtainwall system. (Motorists Fact² 4.)

The underlying action, filed on June 9, 2015, alleged that the curtainwall glazing system was comprised of a structural frame into which insulated glass units (IGUs) were fastened. (ORRJN Exh. A ¶ 12.) The IGUs were comprised of two panes of glass, a spacer bar, structural silicone sealant to secure the panes of glass and metal spacer together, and polyisobutylene ("PIB") sealant to form a vapor barrier or hermetic seal around the interior perimeter of the module. (Id. ; Motorist Fact 7.) AGA also subcontracted with Viracon, Inc. to manufacture the IGUs. (Motorist Fact 6.) AGA subcontracted with Midwest Curtainwalls, Inc. ("Midwest") to (1) design and manufacture the curtainwall frame; (2) glaze (or glue) the IGUs into the frame; and (3) ship the completed curtainwalls to San Francisco where AGA installed them at the project site. (Motorists Fact 9, 10.) The project included 6,400 IGUs. (Old Republic Fact 8.) The project was completed around February 27, 2008. (Old Republic Fact 9.)

In the underlying action, CDC San Francisco LLC alleged that migration or movement of the PIB sealant had caused a gray film or "mottling" in the interior space of the IGUs, as well as discoloration of the structural silicon to a brownish color on the visible edges of the IGUs. (Motorists Fact 12; ORRJN Exh. A ¶ 14.) The complaint therein alleged "there is no way to repair the PIB without damaging the [IGUs] and the exterior Curtain Wall glazing system to access the film formation." (ORRJN Exh. A at ¶ 14.) The complaint explained in considerable detail the defects with the curtain wall system and the warranties associated therewith. (See id. ¶¶ 14-25.) In addition to these factual allegations, the underlying complaint alleged potential damages based upon the "substantial costs to repair the deficient work" and the "costs to repair property damaged by deficient work...." (Id. ¶¶ 29, 34, 41, 45, 51, 57, 61, 67, 72, 77, 81, 86, 90, and 95 (emphasis supplied).)

B. The Policy

Subcontractor Midwest obtained a commercial general liability policy from third-party defendant Motorists, with an effective policy period of June 30, 2006 to June 30, 2007 (Motorists policy number 33.261515-90E or "the Policy"). (Motorists Fact 19.) The Policy included as additional insureds both AGA and Webcor. (Id. ) The additional insured endorsement of the Policy stated:

A. Section II-Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf;

In the performance of your ongoing operations for the additional insured(s) at the location(s) designated above.

B. With respect to the insurance afforded to these additional insureds, the following additional exclusions apply:

This insurance does not apply to ‘bodily injury’ or ‘property damage’ occurring after:

1. All work, including materials, parts or equipment furnished in connection with such work, on the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the location of the covered operations has been completed; or

2. That portion of ‘your work’ out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.

(Motorists Fact 21.) The Policy covered "property damage" defined as "physical injury to tangible property, including all resulting loss of use of that property" and "loss of use of tangible property that is not physically injured." (Motorists Fact 22.)

Further, the Policy applied to property damage only if it "occur[ed] during the policy period." (Campo Decl., Exh. 3 at MM000226). Under the terms of the Policy, property damage "will be deemed to have been known to have occurred at the earliest time when any insured ... (1) Reports all, or any part, of the ... ‘property damage’ to [the insurer]; ... (2) Receives a written or verbal demand or claim for damages because of the ... ‘property damage’; or (3) Becomes aware by any other means that ... ‘property damage’ has occurred or has begun to occur." (Id. )

In pertinent part, the Policy specifically excluded from coverage:

j. Damage to Property

‘Property damage’ to ... (5) [t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations, or (6) [t]hat particular part of any property that must be restored, repaired, or replaced because ‘your work’ was incorrectly performed on it ... [unless] included in the ‘products-completed operations hazard.’³

k. Damage to Your Product

‘Property damage’ to ‘your product’ arising out of it or any part of it.

l . Damage to Your Work

‘Property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.’ This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

m. Damage to Impaired Property Or Property Not Physically Injured

‘Property damage’ to ‘impaired property’ or property that has not been physically injured, arising out of [¶ ...] [a] defect, deficiency, inadequacy or dangerous condition in ‘your product’ or ‘your work’ after it has been put to its intended use.

(Id. at MM000229-30, 240-41.) The Policy also defined certain terms relevant here, including:

8. ‘Impaired property’ means tangible property, other than ‘your product’ or ‘your work,’ that cannot be used or is less useful because:

a. It incorporates ‘your product’ or ‘your work’ that is known or thought to be defective, deficient, inadequate or dangerous; or

b. you have failed to fulfill the terms of a contract or agreement;

if such property can be restored to use by:

a. the repair, replacement, adjustment or removal of ‘your product’ or ‘your work’; or

b. Your fulfilling the terms of the contract or agreement.

* * *

21. ‘Your product’:

a. Means:

(1) Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:

(a) You;

(b) Others trading under your name; or

(c) A person or organization whose business or assets you have acquired; and

(2) Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products.

b. Includes:

(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of ‘your product’; and

(2) The providing of or failure to provide warnings or instructions....

22. ‘Your work’:

a. Means:

(1) Work or operations performed by you or on your behalf; and

(2) Materials, parts or equipment

...