10 F. Supp. 3d 252
D. Conn.2014Background
- R.I. Pools sued Paramount (shotcrete supplier) after ~19 pools incorporating Paramount’s shotcrete cracked and leaked; jury awarded compensatory and punitive (attorney-fee) damages to R.I. Pools.
- Harleysville (Paramount’s CGL insurer) defended under reservation, then sued for a declaratory judgment that it has no duty to indemnify Paramount for the underlying judgment.
- The CGL policy covers "property damage" caused by an "occurrence" ("an accident, including continuous or repeated exposure ..."). Limits: $1M per occurrence, $2M aggregate.
- Harleysville contends no "occurrence" occurred (or only one), and that multiple policy exclusions (expected/intended injury; your product; your work; impaired property; recall/sistership; etc.) bar coverage.
- Paramount and R.I. Pools move for summary judgment on coverage; court must decide (under Connecticut law) whether there was an occurrence and whether exclusions apply.
Issues
| Issue | Plaintiff's Argument (Harleysville) | Defendant's Argument (Paramount / R.I. Pools) | Held |
|---|---|---|---|
| Existence of an "occurrence" and "property damage" | Defect was inherent to product; damage consists mainly of repair/removal, so no covered occurrence or only one occurrence (production) | Defective shotcrete was incorporated and caused physical failure of finished pools — each pool’s failure was an "occurrence" causing "property damage" | Occurrence found: defective shotcrete caused physical damage to pools; each pool’s failure counts as a separate occurrence (summary judgment for defendants on coverage) |
| Exclusion a (expected or intended injury) | Recklessness finding shows Paramount subjectively expected or intended harm, so exclusion applies | Recklessness ≠ subjective intent/expectation required by exclusion; trial record doesn’t show Paramount intended or constructively expected failure | Trial record insufficient to decide intent; Harleysville may litigate intent — summary judgment denied as to Exclusion a |
| Exclusion k ("your product" exclusion) | Damage is only to Paramount’s product (shotcrete) or arises from repair/removal, so exclusion bars coverage | Damage was to finished pools (other property) caused by Paramount’s product; exclusion does not bar damage to other property | Exclusion k inapplicable; summary judgment for defendants on Exclusion k |
| Exclusion l ("your work" exclusion) | Shotcrete production/delivery is Paramount’s "work," completed on delivery, so exclusion applies | Paramount merely supplied a product; even if "work," the shotcrete caused damage to other property, so exclusion does not bar coverage | Exclusion l inapplicable on record; summary judgment for defendants on Exclusion l |
| Exclusion j(6) (parts requiring repair due to faulty work) | Damages are repair costs to property on which work was performed | Paramount’s work was completed on delivery; damage occurred later as part of products-completed operations | Exclusion j(6) inapplicable; summary judgment for defendants on j(6) |
| Exclusion m (impaired property / loss of use) | Pools are "impaired" because they incorporate defective product and cannot be used; exclusion barrs coverage | Shotcrete became inextricably incorporated; pools were physically injured such that removal/replacement of product would not restore use — exclusion aimed at loss-of-use where product can be removed | Exclusion m inapplicable here (product cannot be removed to restore use); summary judgment for defendants on Exclusion m |
| Exclusion n (recall / sistership) | R.I. Pools effectively recalled or withdrew shotcrete from use | No market recall of sister products here; insurer seeks to exclude recall costs only | Exclusion n inapplicable; summary judgment for defendants on Exclusion n |
Key Cases Cited
- Capstone Bldg. Corp. v. Am. Motorists Ins. Co., 308 Conn. 760 (Conn. 2013) (defective workmanship can be an "occurrence"; applicability of "your work" exclusion is a separate question)
- Vermont Mut. Ins. Co. v. Walukiewicz, 290 Conn. 582 (Conn. 2009) (definition of "accident"/"occurrence" as unforeseen, unintended event; subjective intent matters for expected/intended exclusion)
- Metropolitan Life Ins. Co. v. Aetna Cas. & Sur. Co., 255 Conn. 295 (Conn. 2001) (the "occurrence" is the last event in the causal chain—each exposure or discrete injury can be a separate occurrence)
- Jakobson Shipyard, Inc. v. Aetna Cas. & Sur. Co., 961 F.2d 387 (2d Cir. 1992) (defective product causing only failure to perform contract specifications generally held not to be an "occurrence" under some policies; district courts must consider policy terms)
- Chubb Ins. Co. of N.J. v. Hartford Fire Ins. Co., 229 F.3d 1135 (2d Cir. 2000) (incorporation of defective component into finished product that causes physical damage can be an "occurrence" causing "property damage")