Insurer Must Defend General Contractor
Interpreting Massachusetts law, the federal district court determined consequential damage resulting from the insured’s faulty work triggered a duty to defend. Capitol Spec. Ins. Corp. v. Dello Russo Enter. LLC, 2023 U.S. Dist. LEXIS 11627 (D. Mass. Jan. 24, 2023).
Peta-Gay and Michael Print sued the insured, Dello Russo, who they hired as the general contractor for extensive remodelling and renovation of their building. During the demolition work, certain structural load-bearing walls were removed, including a portion of an exterior bricked masonry wall. Shoring of other parts of the building was inadequate and removal of the masonry wall reduced the structural integrity of the building. Cracks began to appear in the remaining portion of the masonry wall and increased over the next few days. Soon thereafter, the City of Boston determined the building was dangerous and that salvage of the undamaged portions was not feasible. Therefore, the building was demolished.
Certain Underwriters at Lloyd’s, London, filed suit against Dello Russo as subrogee of the Prinns. Dello Russo tendered the complaint to its insurer, Capitol Specialty Insurance Corporation, who defended under a reservation of rights,. Capitol then filed a suit seeking a declaratory judgment that it had no duty to defend or to indemnify. The parties cross-claimed for summary judgment.
Under Massachusetts law, faulty workmanship was not an accidental occurrence. Coverage was possible, however, when faulty workmanship caused an accident. Here, the home-improvement contract stated that Dello Russo was not hired to demolish the entire building. Therefore, the underlying complaint did not allege that an improperly performed demolition was the accident. Instead, the underlying complaint alleged that as a result of Dello Russo’s faulty workmanship during renovations, the building partially collapsed, requiring the demolition of the remaining structure. Therefore, the claims against Dello Russo alleged “property damage” caused by an “occurrence.”
Capitol argued that exclusions (j)(5) and (j)(6) were applicable. These provisions excluded coverage for claims alleging property damage to “[t]hat particular part of real property on which you . . . are performing operations, if the ‘property damage’ arises out of those operations,” or “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” Capitol contended that as the general contractor, Dello Russo had control over the entire premises, and thus that “particular part” of property meant the entire project.
The court noted that Dello Russo was not hired to construct, renovate or demolish an entire building. He was required to provide “demo shoring equipment,” but not responsible for demolishing or removing any of the building’s load-bearing walls. Nor was Dello Russo responsible for demolishing the building’s exterior, or any other way performing work relating to the building’s exterior walls, windows, foundation, or roof. Rather, Dello Russo’s tasks included removing all non-load-bearing walls, and demolishing the building’s entire interior residential space. In other works, Dello Russo was obligated to work only a “particular part” of the building: its interior.
Therefore, Capitol had a duty to defend. Capitol’s motion in regards to the duty to indemnify was premature because the underlying action had not determined liability or adjudicated factual disputes.
