Court Opinion

ID: 180855
Source: CourtListenerOpinion
Date Created: 2010-12-10 18:00:58+00
Date Added: 2024-06-11T17:25:53.159928
License: Public Domain

NOT PRECEDENTIAL

               UNITED STATES COURT OF APPEALS
                    FOR THE THIRD CIRCUIT
                         _____________

                             No. 09-3821
                            _____________

PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY

                                   v.

   PARKSHORE DEVELOPMENT CORPORATION; CATALINA COVE
    CONDOMINIUM ASSOCIATION, INC.; KEEN'S CAULKING AND
     WATERPROOFING; ABC CORPORATION I THROUGH ABC
               CORPORATION X fictitious names

                      Parkshore Development Corporation,

                                                   Appellant
                            ____________

             On Appeal from the United States District Court
                     for the District of New Jersey
                           (No. 07-cv-01331)
                 District Judge: Hon. Robert B. Kugler

                     Submitted November 19, 2010

      Before: BARRY, CHAGARES, and VANASKIE, Circuit Judges.

                       (Filed December 10, 2010)

                             ____________

                      OPINION OF THE COURT
                          ____________
CHAGARES, Circuit Judge.

         Parkshore Development Corporation (“Parkshore”) appeals the District Court’s

grant of summary judgment which relieved its insurer, Pennsylvania National Mutual

Casualty Insurance Company, from providing coverage for claims of water damage

stemming from faulty workmanship by subcontractors at a Parkshore condominium

development project. The District Court determined there was no coverage under the

policy because there was no “occurrence” due to the fact that the only damage was to the

property itself. For the reasons that follow, we will affirm the judgment of the District

Court.

                                                I.

         We write for the parties’ benefit and recite only the facts essential to our

disposition. Parkshore was the developer and general contractor of the Catalina Cove

Condominiums in Linwood, New Jersey. Parkshore hired subcontractors to perform all

of the work and construction at the site including roofing, framing, installing windows

and doors, caulking and sealing, installing vent hoods, implementing an irrigation system,

grading, setting the foundation, and installing gutters and leaders. Parkshore completed

the first unit at Catalina Cove in 1989 and the project was finished in 1998. In July 1999,

the Catalina Cove Condominium Association (“CCCA”) notified Parkshore that stucco

around some of the windows had not been caulked properly, causing water leakage.

Parkshore hired Keen’s Caulking & Waterproofing to re-caulk the windows.

         In October 2006, the CCCA filed a complaint in the Superior Court of New Jersey

alleging claims against Parkshore for breach of contract, negligence, breach of implied

                                                2
warranties in the design and construction of the condominiums, negligence in failing to

remediate properly the water damage, and for violations of the New Jersey Consumer

Fraud Act. To support these allegations, the CCCA’s expert, Michael Hyland, reported

that there were multiple deficiencies in the site grading and drainage which allowed water

to enter the crawl space and cause damage. Additionally, Hyland concluded that the final

project failed to conform to building code requirements and deviated from the approved

engineering site plan. In a supplemental report, Hyland detailed more deficiencies in the

roofing, siding, window installation, framing, wood trim and irrigation which resulted in

water penetration and caused damage to the framing, sheathing, windows, casings and

stucco finish.

       Parkshore tendered the defense and indemnification of this action to Pennsylvania

National Mutual Casualty Insurance Company (“Penn National”). Penn National issued a

Commercial General Liability (“CGL”) policy to Parkshore for every year beginning

March 7, 1989 through March 7, 2006. On March 22, 2007, Penn National filed a

declaratory judgment action in the District Court seeking a declaration that it had no

obligation to provide insurance coverage to Parkshore in the CCCA lawsuit. The District

Court granted Penn National’s summary judgment motion on all claims except those for

consumer fraud,1 finding that the allegations in the lawsuit filed by the CCCA did not

give rise to an “occurrence” under the policy. On September 23, 2009, Parkshore filed

this appeal.

1
 Before this appeal, the parties agreed to dismiss the insurance coverage claims related to
the consumer fraud issues in the underlying case.
                                             3
                                             II.

       The District Court had diversity jurisdiction pursuant to 28 U.S.C. § 1332 and we

have appellate jurisdiction pursuant to 28 U.S.C. § 1291. Our review of the District

Court=s grant of summary judgment is plenary, and we apply the same legal standard as it

should have. Vitalo v. Cabot Corp., 399 F.3d 536, 542 (3d Cir. 2005). A party is entitled

to summary judgment “if the pleadings, the discovery and disclosure materials on file,

and any affidavits show that there is no genuine issue as to any material fact and that the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). In conducting

our analysis, we must view the record in the light most favorable to Parkshore, and must

draw all reasonable inferences in its favor. See Vitalo, 399 F.3d at 542; Fed. R. Civ. P.

56(c). To defeat summary judgment, however, Parkshore must “produce admissible

evidence containing ‘specific facts showing that there is a genuine issue for trial.’”

Vitalo, 399 F.3d at 542 (quoting Fed. R. Civ. P. 56(e)).

                                             III.

       Parkshore maintains that defective workmanship performed by its subcontractors

which caused damage to its non-defective work qualifies as “property damage” caused by

an “occurrence,” and thus is covered under its CGL policy. Parkshore contends that the

water damage at the CCCA condominiums was an accident that was neither expected nor

intended by Parkshore and, as such constitutes an “occurrence.” In support of this

interpretation, Parkshore relies on Weedo v. Stone-E-Brick, Inc., 405 A.2d 788 (N.J.

                                              4
1979), and its progeny to show that construction defects resulting in consequential

damage to the property itself could qualify as an “occurrence.” 2

       We conclude that Parkshore’s interpretation of Weedo is misguided. While

Weedo does distinguish between the business risk of repairing a defect and the risk of

faulty workmanship that causes consequential damage, the decision does not determine

the existence of an “occurrence” where faulty workmanship causes damage to the

completed project itself. See Weedo, 405 A.2d at 791 (“The risk intended to be insured is

the possibility that the goods, products or work of the insured, once relinquished or

completed, will cause bodily injury or damage to property other than to the product or

completed work itself, and for which the insured may be found liable.” (internal quotation

marks omitted)). This conclusion is further enforced by the subsequent holdings in

Firemen’s Ins. Co. of Newark v. Nat’l Union Fire Ins. Co., 904 A.2d 754 (N.J. Super. Ct.

App. Div. 2006), and S.N. Golden Estates, Inc. v. Continental Cas. Co., 680 A.2d 1114

(N.J. Super. Ct. App. Div. 1996). See Firemen’s, 904 A.2d at 761-63 (applying Weedo,

the court found that faulty workmanship whether performed by a contractor or

subcontractor which causes damage to the general contractor’s work is not an

“occurrence”); S.N. Golden, 680 A.2d at 1117, 1119 (finding an “occurrence” because

the insured’s faulty construction of septic systems caused damage to neighboring

2
 Parkshore also supports its position by relying on the commentary of the Insurance
Services Office’s 1986 edition of the CGL coverage form and by evaluating the CGL
exclusions to determine the intent of the coverage. We have considered these arguments
and find that they are not persuasive in establishing an “occurrence” under the CGL
policy.

                                             5
residents’ homes). While other courts have permitted an “occurrence” where faulty

construction damages only the insured’s own work,3 New Jersey courts foreclose such a

possibility. Therefore, we conclude that Parkshore’s arguments are not persuasive in

establishing an “occurrence” under the CGL policy.

                                           IV.

       Accordingly, we will affirm the District Court’s order granting summary

judgment to Penn National.

3
 Subcontractors did all of the work at the condominium project, but the whole project
nonetheless was Parkshore’s “own work” because Parkshore was the general contractor.
See Firemen’s, 904 A.2d at 761.
                                            6