190 Conn. App. 245
Conn. App. Ct.2019Background
- 777 Main Street, LLC and 777 Residential, LLC (the 777 entities) hired Viking as general contractor to renovate an existing high‑rise; Viking subcontracted Armani to clean the concrete façade. Armani’s power‑washing with crushed glass damaged ~1,800 windows, requiring $4M+ replacement.
- The 777 entities purchased a Liberty Mutual builder’s risk policy with a renovation endorsement; the main policy by its terms otherwise covered buildings "in the course of construction."
- The policy contained a "Defects, Errors, And Omissions" exclusion (barring loss caused by acts relating to renovation, etc.) and a resulting/ensuing‑loss clause that stated coverage applies if an excluded act "results in a covered peril."
- Liberty Mutual denied the 777 entities’ claim; the 777 entities sued on a cross claim for breach of contract. After discovery, the trial court denied Liberty Mutual’s summary judgment motion but granted the 777 entities’ motion, awarding $1,950,000.
- On appeal the Connecticut Appellate Court reversed: it held the exclusion unambiguously barred coverage for the window damage and the resulting‑loss clause did not reinstate coverage because Armani’s negligent spraying was the sole cause and not a "covered peril."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy's Defects/Errors/Omissions exclusion bar coverage for window damage caused during façade cleaning? | 777: windows were not part of the renovation (or exclusion applies only to finished product), so exclusion does not apply. | Liberty: cleaning was part of renovation and the window damage was directly "related to" that work; exclusion therefore bars coverage. | Held for Liberty: exclusion unambiguous; cleaning = renovation and damage was related to it, so exclusion bars coverage. |
| Does the renovation endorsement or its incorporation make the exclusion inapplicable or meaningless? | 777: applying the exclusion would render the renovation endorsement pointless or the exclusion not incorporated into the endorsement. | Liberty: endorsement extends coverage to existing building but does not negate main policy terms; endorsement is incorporated by reference so exclusion still applies. | Held for Liberty: endorsement incorporated; main form limits to construction absent endorsement, and exclusion still applies. |
| Does the resulting/ensuing‑loss clause reinstate coverage because the excluded act produced damage? | 777: even if the act was excluded, the resulting loss clause covers damage to parts not being renovated (windows). | Liberty: resulting loss clause applies only if the excluded act produces a separate, covered peril (e.g., fire); here there was only one cause (spray), not a covered peril. | Held for Liberty: resulting‑loss clause inapplicable; Armani’s spraying was the sole excluded cause and not a covered peril, so no reinstatement of coverage. |
Key Cases Cited
- Capstone Building Corp. v. American Motorists Ins. Co., 308 Conn. 760 (insurer bears burden to prove an exclusion applies)
- Sansone v. Nationwide Mut. Fire Ins. Co., 62 Conn. App. 526 (ensuing‑loss clause does not reinstate coverage when loss is caused by a single excluded peril)
- New London County Mut. Ins. Co. v. Zachem, 145 Conn. App. 160 (same rule on ensuing loss / separate independent peril)
- Hammer v. Lumberman’s Mut. Cas. Co., 214 Conn. 573 (definition and function of exclusions in insurance policies)
- Acme Galvanizing Co. v. Fireman’s Fund Ins. Co., 221 Cal. App. 3d 170 (ensuing‑loss clause inapplicable where spill was direct result of excluded defect and no separate peril intervened)
- Weeks v. Co‑Operative Ins. Cos., 149 N.H. 174 (resulting‑loss clause requires a subsequent distinct peril to trigger coverage)