NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 16-2639

____________

MEGA CONSTRUCTION CORPORATION, 

a New Jersey corporation, 

 Appellant 

v.

XL AMERICA GROUP, DBA Indian Harbor Insurance Group; 

INTERSTATE FIRE & CASUALTY COMPANY;

SENECA SPECIALTY INSURANCE COMPANY;

TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, DBA Travelers 

Casualty & Surety of Illinois; 

TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, DBA Travelers 

Indemnity Co of Connecticut; 

ABC COMPANY 1-5, a fictitiously named insurance company,

v.

TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA, DBA 

TRAVELERS CASUALTY & SURETY OF ILLINOIS,

TRAVELERS CASUALTY INSURANCE COMPANY OF AMERICA D/B/A/ 

TRAVELERS INDEMNITY COMPANY

OF CONNECTICUT,

 Third Party Plaintiff

v.

OHIO CASUALTY,

 Third Party Defendant

____________

On Appeal from the United States District Court 

for the District of New Jersey

(D.N.J. No. 3-13-cv-00233)
2

District Judge: Honorable Peter G. Sheridan

____________

Submitted Pursuant to Third Circuit L.A.R. 34.1(a)

April 6, 2017

Before: CHAGARES, SCIRICA and FISHER, Circuit Judges.

(Filed: April 11, 2017)

____________

OPINION*

____________

FISHER, Circuit Judge.

Mega Construction Corporation says the District Court was wrong to hold that 

Mega’s insurers have no duty to defend or indemnify it against a shoddy-workmanship 

lawsuit filed in state court. We disagree and will affirm summary judgment for the 

insurers. 

I.

Merion Construction Management, LLC subcontracted out carpentry and other 

work to Mega for a new apartment complex in Conshohocken, Pennsylvania. Mega 

purchased commercial general liability (or CGL) insurance from two insurers: Indian 

Harbor Insurance Company and Interstate Insurance Company. The Indian Harbor policy 

ran from May 2009 to May 2010; Interstate’s ran from May 2010 to May 2011. Mega 

was also named as an additional insured in two of its subcontractees’ CGL policies: one 

 

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not 

constitute binding precedent.
3

with Seneca Specialty Insurance Company and the other through Travelers Casualty 

Insurance Company of America. All four policies required the insurers to defend against 

lawsuits seeking damages for “property damage” (physical injury to tangible property) 

caused by an “occurrence” (an accident).1

Water infiltration was discovered at the complex in June 2009. Merion blamed 

Mega for it in April 2010. Mega worked to fix the problem but it resurfaced six months 

later. Merion again blamed Mega, so Mega notified all four insurers of Merion’s 

accusations. 

The apartment complex was completed in late 2010 or early 2011. The owner, 

Washington Street Associates V, L.P., sold it for $77.7 million — $3.3 million less than 

the asking price. Blaming Mega’s workmanship for the value diminution, Merion and 

Washington sued Mega in Pennsylvania state court alleging violations of the subcontracts 

and certain implied warranties. For damages, they asked for the difference between the 

complex’s asking and sale prices.

Mega filed its own lawsuit against the insurers in New Jersey state court claiming 

they’re required to defend it against the Pennsylvania suit. After removal to the District 

Court on diversity-jurisdiction grounds, the parties filed cross-motions for summary 

judgment. Rejecting Mega’s argument that New Jersey law governs, the District Court 

 

1 App. 90–91.
4

applied Pennsylvania law, granted the insurers’ motions, and denied Mega’s. This timely 

appeal followed. 

II.

The District Court had jurisdiction under 28 U.S.C. § 1332(a). We have it under 

28 U.S.C. § 1291. We review choice-of-law determinations and summary judgment

orders de novo.

2 Summary judgment is warranted when the material facts aren’t 

genuinely disputed and the movant is entitled to judgment as a matter of law.

3

III.

Mega says the District Court should have applied New Jersey law to this case, not 

Pennsylvania law. We disagree. Pennsylvania law governs and compels judgment for 

the insurers.4

A district court sitting in diversity looks to the choice-of-law rules of the state in 

which it sits.5 So New Jersey’s choice-of-law rules govern here. Under those rules we ask 

 

2 Robeson Indus. Corp. v. Hartford Acc. & Indem. Co., 178 F.3d 160, 164–65 (3d Cir. 

1999); see Leonard v. Stemtech Int’l Inc., 834 F.3d 376, 395 n.17 (3d Cir. 2016).

3 See Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322–24 (1986).

4 Mega waived arguments for disturbing summary judgment for Seneca and Travelers 

by failing to raise them in its opening brief. See, e.g., Ross v. Gilhuly, 755 F.3d 185, 192 

n.11 (3d Cir. 2014). As Travelers puts it, Mega only “passingly” mentions Seneca and 

Travelers in its papers, Travelers Br. 11, and only says the District Court erred in its 

choice-of-law analysis on Indian Harbor and Interstate, see, e.g., Mega Br. 9 (“Under 

New Jersey law, Indian Harbor and Interstate have a duty to defend and/or indemnify 

Mega.”). 

5 Auto-Owners Ins. Co. v. Stevens & Ricci Inc., 835 F.3d 388, 403 (3d Cir. 2016).
5

if Pennsylvania and New Jersey law differ on a “point in issue.”6 They do. Pennsylvania 

courts say the “definition of ‘accident’ required to establish an ‘occurrence’” under a 

CGL policy “cannot be satisfied by claims based upon faulty workmanship.”7 New 

Jersey courts say just about the opposite: Consequential harm caused by a subcontractor’s 

“negligent work” can be a coverage-triggering “accident” under a CGL policy.8

When faced with a conflict, New Jersey courts apply the Restatement (Second) of 

Conflict of Laws.

9 Restatement § 193 is the “starting point” for choice-of-law disputes 

involving liability-insurance coverage.10 That section says the law of the state that the 

parties understood to be the “principal location of the insured risk” governs unless some 

other state has a “more significant relationship” to the case under Restatement § 6.11 An

insured risk — namely an “activity” that is the “subject matter of the insurance” — is 

“principally located” in a state if it occurs there during a “major portion of the insurance 

period.”12

 

6 Pfizer, Inc. v. Emps. Ins. of Wausau, 712 A.2d 634, 640 (N.J. 1998) (internal quotation 

marks omitted). 

7 Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d 

888, 899 (Pa. 2006) (emphasis added).

8 Cypress Point Condo. Ass’n v. Adria Towers, LLC, 143 A.3d 273, 288 (N.J. 2016).

9 See Amica Mut. Ins. Co. v. Fogel, 656 F.3d 167, 171–73 (3d Cir. 2011) (citing Gilbert 

Spruance Co. v. Pa. Mfrs. Ass’n Ins. Co., 629 A.2d 885, 888 (N.J. 1993); State Farm

Mut. Auto. Ins. Co. v. Estate of Simmons, 417 A.2d 488, 491–93 (N.J. 1980)).

10 Id. at 173; see Restatement (Second) of Conflict of Laws § 193 cmt. a (1977).

11 Fogel, 656 F.3d at 173 (internal quotation marks omitted).

12 Restatement § 193 cmt. b; see Gilbert, 629 A.2d at 899.
6

The insured risk in this case — Mega’s construction work — took place in 

Pennsylvania during much of the relevant coverage period, May 2009 to May 2011. 

During that time Mega worked alongside other contractors to construct the 300+-unit 

apartment complex in Pennsylvania. “Accidents” with potential to cause “property 

damage” at this project were going to occur at the construction site in Pennsylvania, not 

in New Jersey. Thus the parties reasonably understood Pennsylvania to be the insured 

risk’s principal location. Pennsylvania law governs unless New Jersey has a more 

significant relationship under Restatement § 6. 

Section 6 says we consider (a) the interstate system’s needs; (b) the forum’s 

relevant polices; (c) other interested states’ relevant policies and interests in the issue at 

hand; (d) the protection of justified expectations; (e) the basic policies underlying the 

particular field of law; (f) certainty, predictability, and uniformity of result; and (g) ease 

in determining and applying the law in issue. Mega says factors (a), (d), (e), (f), and (g)

combine to compel application of the law of the state of contracting here — New Jersey 

law. Mega notes it entered into the Indian Harbor and Interstate policies there and 

performed its contractual duty to pay premiums there. Mega is also incorporated there

and New Harbor and Interstate are licensed to do business there. Thus, says Mega, 

applying New Jersey law would foster “harmonious relationships” between the states and 

justify the parties’ “reasonably objective expectations.”13 

 

13 Mega Br. 17.
7

We don’t think it would do either. We view Mega’s claims like this: Mega says 

the insurers must defend and indemnify it against a lawsuit filed in Pennsylvania, by two 

Pennsylvania companies (Washington and Merion), who allege Pennsylvania causes of 

action and seek damages for the loss in value from the sale of property located in 

Pennsylvania, that was allegedly caused by Mega’s faulty work done in Pennsylvania, 

under subcontracts entered into in Pennsylvania. In sum, Pennsylvania’s relationship to 

this dispute is the more significant one. The District Court rightly applied that state’s law.

Under Pennsylvania law Mega concedes defeat — and rightly so. Faultyworkmanship claims don’t fall within the definition of an “‘accident’ required to establish 

an ‘occurrence’” under a CGL policy in Pennsylvania.14 The claims against Mega in the 

Pennsylvania suit allege exactly that: faulty workmanship violating the subcontracts. 

Mega’s coverage claims fail as a matter of law. Summary judgment was warranted for 

the insurers. 

IV.

For these reasons, we’ll affirm the District Court’s order.

 

14 Kvaerner, 908 A.2d at 899; see Mega Br. 11–12 (citing Kvaerner and other decisions 

applying it).