Scottsdale Insurance v. R.I. Pools Inc.
2013 U.S. App. LEXIS 5680
| 2d Cir. | 2013Background
- RI Pools insured by Scottsdale under CGL policies; policy excludes damage to the insured's own work but allows coverage if the work was performed by a subcontractor; insurance defends under Supplementary Payments while suit is investigated; nineteen customers in 2006-2009 reported cracks and deterioration in pools built by RI Pools; three suits followed and insurer initially funded defense, then sought declaratory judgment and reimbursement; district court granted summary judgment for insurer and later ordered reimbursement, which was appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy's 'occurrence' and 'your work' exclusion with subcontractor exception create coverage for defects in RI Pools' own workmanship? | Scottsdale argues defects in RI Pools’ work can be within 'occurrence' due to subcontractor exception. | RI Pools contends defects in its workmanship are not covered as non-occurrence under Jakobson rules. | Remand needed to determine subcontractor exception applicability and occurrence scope. |
| Did the district court err in applying Jakobson to hold there was no coverage for defective work? | Scottsdale contends Jakobson is distinguishable due to subcontractor exception. | RI Pools maintains Jakobson controls, yielding no coverage for workmanship defects. | District court erred; Jakobson not controlling given policy language. |
| Is Scottsdale entitled to reimbursement of defense costs already expended where there may be coverage? | Duty to defend exists if allegations fall within coverage; reimbursement not yet justified. | If no coverage, no right to reimbursement for defense costs. | Remains unresolved; defense duty exists until it is finally determined there is no possibility of coverage. |
Key Cases Cited
- Jakobson Shipyard, Inc. v. Aetna Casualty & Surety Co., 961 F.2d 387 (2d Cir. 1992) (faulty workmanship may be excluded as an 'occurrence' but policy language here differs with subcontractor exception)
- DaCruz v. State Farm Fire & Casualty Co., 846 A.2d 849 (Conn. 2004) (duty to defend broader than duty to indemnify; depends on complaint within coverage)
- Hartford Cas. Ins. Co. v. Litchfield Mut. Fire Ins. Co., 876 A.2d 1139 (Conn. 2005) (duty to defend hinges on allegations that fall within coverage)