856 F. Supp. 2d 683
E.D. Pa.2012Background
- Westfield issued six consecutive CGL and umbrella policies to Bellevue Holding and related entities from 2004 to 2010.
- The insured Defendants built a residential development in Avondale, PA, leading to eight underlying actions alleging property damage and numerous related claims.
- The underlying complaints all assert defects from faulty workmanship, including breach of express/implied warranties and various tort and consumer-protection claims.
- Westfield sought a declaratory judgment that it has no duty to defend or indemnify the Defendants in the Underlying Actions.
- The court applied Pennsylvania law to interpret the policy terms and determine whether the complaints potentially triggered coverage for a defense.
- The court held that the asserted damages and claims arise from contractual fault in workmanship, not a covered ‘occurrence,’ and thus Westfield has no duty to defend or indemnify.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy provides a duty to defend | Westfield argues the Underlying Actions allege solely faulty workmanship, not an ‘occurrence,’ so no defense is required. | BHC contends some negligence and implied warranty claims may constitute an ‘occurrence’ and trigger defense. | No duty to defend; occurrences not supported by the complaints. |
| Whether the Underlying Actions fall within policy coverage as to defense | Complaints are grounded in contract and faulty workmanship, not fortuitous accidents. | Allegations may be extra-contractual and therefore potentially within coverage. | Under Pennsylvania law, faulty workmanship claims do not constitute an ‘occurrence’; actions fall outside coverage. |
| Whether there is a duty to indemnify | Indemnification requires a defense first; since there is no duty to defend, no indemnity is due. | If any underlying claim is within coverage, indemnification should follow for those claims. | No indemnity; absence of defense means no indemnity. |
| Choice of law effect on interpretation | PA law applies; no true conflict with DE law. | DE law could differ on analysis, preserving choice of law issue. | PA law applies; no meaningful choice-of-law distinction changes outcome. |
Key Cases Cited
- Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888 (2006) (occurrence defined; faulty workmanship not an accident)
- Nationwide Mut. Ins. Co. v. CPB Int’l, 562 F.3d 591 (3d Cir. 2009) (occurrence-based coverage; contractual damages not fortuitous)
- Specialty Surfaces Int’l, Inc. v. Cont’l Cas. Co., 609 F.3d 223 (3d Cir. 2010) (faulty workmanship not an occurrence; fortuity required)
- Gambone Bros. Dev. Co. v. Millers Capital Ins. Co., 941 A.2d 706 (Pa. Super. Ct. 2008) (leaks and interior damage not fortuitous under Kvaerner)
- Barzingu s v. Wilheim, 306 F.3d 17 (10th Cir. 2010) (gist of the action; arbitration-related analogy)
- Berg Chilling Sys. v. Hull Corp., 70 F. App’x 620 (3d Cir. 2003) (gist of the action doctrine not applicable to defense analysis)