Insurer must defend, indemnify contractor accused of negligence in building collapse
The $1.4M suit involves a four-story brick building in Boston that was being renovated when it collapsed.
A federal judge ruled that an insurer is obligated to defend and indemnify a Boston contractor accused in an underlying $1.14 million lawsuit for negligently causing the collapse of a four-story brick building during renovations.
Capitol Specialty Insurance Co. sought a declaratory judgment in the U.S. District Court for the District of Massachusetts stating that, under a general liability policy, it had no duty to defend or indemnify the defendants, Dello Russo Enterprises and Michael Dello Russo, in an underlying action against them in Massachusetts Superior Court, according to a federal order filed Tuesday.
In the underlying claims, Peta-Gaye and Michael Prinn, hired Dello Russo for extensive remodeling and renovation to a four-story building built in or prior to 1900. Choo & Co. also designed and prepared architectural and structural construction documents for the project.
As earmarked demolitions began, workers installed shoring to stabilize the building, the order said.
Workers discovered cracks in the bricks the morning of June 28, 2019, which grew larger throughout the day. The next morning, some or all of the building suddenly collapsed and the city of Boston determined that the building was dangerous and it was later demolished, the order said.
It was later determined that the “absence of sufficient or proper shoring caused the [c]ollapse” of the building, according to the order.
In the present matter before the district court, the insurance-coverage dispute stems from the policy’s “property damage” coverage, which applies “only if it is caused by an ‘occurrence,’ which the policy defines as ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions.’”
Additionally, the policy excludes coverage for “‘property damage’ to ‘[t]hat particular part of real property on which you or any contractor or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations,’ or to ‘[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it,’” the order said.
Capitol filed the declaratory judgment action against Dello Russo in June 2021, arguing that it has no duty to indemnify the defendant for property damage claims. Both parties filed cross-motions for summary judgments on the duty to defend.
“‘[Capitol] has a duty to defend [Dello Russo] against the complaints unless and until it has determined that the only actual damage was to property on which [Dello Russo] performed faulty work,’” U.S. District Chief Judge F. Dennis Saylor IV of the District of Massachusetts wrote, giving nod to National Union Fire Insurance Co. of Pittsburgh, PA v. Modern Continental Construction. “Dello Russo’s motion for partial summary judgment on the duty to defend will be granted, and Capitol’s motion for summary judgment will be denied to the same extent.”
Saylor also noted that”‘[u]nder Massachusetts law, ‘faulty workmanship fails to constitute an accidental occurrence in a commercial general liability policy,’” as the district court held in Friel Luxury Home Construction v. ProBuilders Specialty Insurance in 2009.
“Here, the home-improvement contract makes clear — and Capitol does not dispute — that the Prinns did not hire Dello Russo to demolish the entire building. Nor does the underlying complaint allege that Dello Russo or any of its subcontractors in fact demolished the entire building,” Saylor wrote. “In other words, the underlying complaint does not allege that an improperly performed demolition was the accident.
“Rather, the underlying complaint alleges that as a result of Dello Russo’s faulty workmanship during renovations, the building partially collapsed, requiring the demolition of the remaining structure. In other words, the underlying complaint alleges that Dello Russo’s negligence caused an accident. Accordingly, the claims against Dello Russo allege ‘property damage’ caused by an ‘occurrence,’” Saylor added.
The judge rejected Capitol’s reliance on the policy’s “business risk” exclusions, which excludes coverage for claims alleging property damage to “‘[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.’” In other words, Capitol claims that Dello Russo had control over the entire building, and thus, “‘that particular part’ of the property means the entire property,’” the order said.
In 1985, the Massachusetts Appellate Court held in Frankel v. J. Watson Co. that property damage to the superstructure of an old farmhouse sustained property damage after being moved to an alternate site was not excluded from the policy’s exclusionary clause because “‘the ‘particular part’ of the property affected by the alleged faulty workmanship of the insured was the foundation,’ and not the entire farmhouse,’” the order cited.
By contrast, the Massachusetts Supreme Judicial Court held in Jet Line Services v. American Employers Insurance (1989), where an insured was hired to clean and repair a petroleum storage tank that subsequently exploded, the court held that “‘the words ‘that particular part of any property … on which operations are being performed’ refer[ed] to the entire tank and not just to the bottom of the tank that [the insured] was cleaning at the moment of the explosion,’” according to the order.
In the present matter, Saylor said the policy does not define the phrase “‘[t]hat particular part,’” and “any ambiguity must be construed against the insurer, so as to narrow the exception and provide coverage.”
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