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Chartis Specialty Insurance Co. v. American Contractors Insurance Company Risk Retention Group

United States District Court, D. Oregon

August 12, 2014

CHARTIS SPECIALTY INSURANCE COMPANY, f/k/a American International Specialty Lines Insurance Company, Plaintiff,
v.
AMERICAN CONTRACTORS INSURANCE COMPANY RISK RETENTION GROUP, HOFFMAN CORPORATION, and HOFFMAN CONSTRUCTION COMPANY OF OREGON, Defendants.

Matthew J. Fink, Charles A. Hafner, Nicolaides Fink Thorpe, Michaelides Sullivan LLP, Chicago, IL, Christopher J. Nye, Reed McClure, Seattle, WA, Attorneys for Plaintiff.

Michael E. Farnell, Ian Hale, Parsons Farnell & Grein, LLP, Portland, OR, Patrick J. Wielinski, Cokinos, Bosien & Young, Attorneys for Defendants.

OPINION AND ORDER ON CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT.

GARR M. KING, District Judge.

This is an insurance coverage dispute between Chartis Specialty Insurance Company ("Chartis") and American Contractors Insurance Company Risk Retention Group ("ACIG"), both of which provided insurance policies covering the development of the Meriwether Condominium Complex. Together, the two insurance companies settled an underlying lawsuit brought by the Meriwether Condominium Owners Association against the Developers of the Meriwether. Chartis seeks a declaratory judgment that the property damage alleged in the lawsuit was caused by more than one "occurrence, " such that Chartis should be reimbursed the $1.6 million it paid to help settle the lawsuit. Hoffman Corporation and Hoffman Construction Company of Oregon (collectively, "Hoffman") successfully intervened as defendants in this dispute and filed a counterclaim against Chartis for breach of contract. Pending before me are the parties' cross-motions for partial summary judgment on the sole issue of whether "property damage" was "caused" by more than one "occurrence."

BACKGROUND

ACIG issued to the Developers a Commercial General Liability Policy, effective April 1, 2006 to November 1, 2006, with a completed operations term extending for 10 years after the completion of the project. The ACIG Policy provides coverage for "property damage'... caused by an "occurrence'" in an amount of $2 million for each occurrence. ACIG Policy 29. Its products-completed operations aggregate limit is $4 million. The policy defines an "occurrence" as "a happening, event, or accident, including continuous or repeated exposure to substantially the same general harmful conditions." ACIG Policy 44.

Chartis issued to Hoffman a Commercial Umbrella Policy, in effect from April 1, 2004 to November 1, 2006, with a completed operations term extending for ten years after the completion of the project. The Chartis Policy lists the Developers as additional Named Insureds. The Chartis Policy provides coverage for "those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by reason of liability imposed by law... because of... Property Damage... that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world." Chartis Policy 46. The "Retained Limit" is $2 million per occurrence with a $4 million aggregate limit. The Policy defines "occurrence" to mean, in relevant part, "an accident, including continuous or repeated exposure to conditions, which results in... Property Damage neither expected nor intended from the standpoint of the Insured. All such exposure to substantially the same general conditions shall be considered as arising out of one Occurrence." Chartis Policy 50.

The Meriwether developed structural problems, triggering a lawsuit by the Owners Association against the Developers in 2011. The lawsuit alleged the Developers (not any contractors or subcontractors) failed in their duties as developers to build the Meriwether free from defects.[1] The Developers allegedly failed in "ensur[ing] that the Meriwether was built free from defects and in a manner so as not to leak or cause property damage." Chartis' Ex. 3, Compl. ¶¶ 7, 10. They also allegedly failed to "adequately investigate and ensure that the defects, resultant leaks, and property damage were properly and sufficiently repaired." Id., Compl. ¶¶ 9, 10.

Many of the defects involved problems with the garage and the roofs. The Owners Association alleged the Developers failed to properly install and/or repair a concrete waterproofing system in the parking garage built under the condominium structures. Specifically, the Owners Association alleged the Developers failed to properly install crystalline waterproofing, failed to properly construct the transition between the crystalline waterproofing system and an EPDM waterproofing membrane, and failed to properly construct sufficient control joints. As a result, the garage developed numerous leaks and cracking in its ceiling. The Owners Association alleged the Developers also failed to properly install "eco" or "green" roofs. The specific allegations with respect to the roofs included: excessive run-off to overflow drains; restricted drainage at main drains; failure to install vegetative free zones around inspection boxes; plant debris and soil medium flushed into storm drainage; placement of mechanical sheet metal and flashing finishes in direct contact with eco roof soil; and plant growth problems. The lawsuit identified multiple other miscellaneous defects, including defective fire sprinklers, insulation, and windows and doors.

ACIG and Chartis together paid $3.6 million to settle the lawsuit in February 2013. ACIG paid $2 million[2] and Chartis paid $1.6 million with a reservation of rights.

LEGAL STANDARDS

Summary judgment is appropriate when there is no genuine dispute as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(a). The initial burden is on the moving party to point out the absence of any genuine issue of material fact. Once the initial burden is satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). On a motion for summary judgment, the court "must view the evidence on summary judgment in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party." Nicholson v. Hyannis Air Service, Inc. , 580 F.3d 1116, 1122 n.1 (9th Cir. 2009) (citation omitted).

DISCUSSION

I.The Chartis Policy ...


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