Westfield Insurance Company v. Icon Legacy Custom Modular Homes et al
MEMORANDUM (Order to follow as separate docket entry) re: 91 MOTION for Summary Judgmentfiled by Icon Legacy Custom Modular Homes and Icon Legacy; and 95 MOTION for Summary Judgment filed by Westfield Insurance Company. Signed by Honorable Matthew W. Brann on 3/13/2018. (jr)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ICON LEGACY CUSTOM
MARCH 13, 2018
Plaintiff and Defendant filed cross-motions for summary judgment. For the
reasons that follow, Plaintiff’s motion will be granted, and Defendant’s motion will
manufactures modular home components. During the events at issue in this lawsuit,
Icon was insured under a commercial general liability policy issued by Defendant
Westfield Insurance Company. Among other things, the policy covered damages in
the form of bodily injury and property damage, if the bodily injury or property
damage was caused by an “occurrence”1—i.e., by an “accident.”2 Additionally, an
endorsement to the policy covered property damage to “[Icon’s] work,” if, inter
alia, the property damage was “entirely the result of work performed on your behalf
by a subcontractor” and was “unexpected and unintended from the standpoint of”
The Underlying Actions
On June 11, 2014, Icon was sued in a New York state trial court (“New York
Action”). 4 The plaintiff there, Bilal Ahmed, alleges that he contracted with Icon for
the purchase and assembly of a modular home, but that the home was improperly
assembled, resulting in numerous deficiencies. 5 Mr. Ahmed’s complaint contains
five counts against Icon: breach of contract (Count I), 6 violation of the New York
Uniform Commercial Code (Count III), 7 breach of warranty (Count IV), 8 unjust
enrichment (Count V), 9 and negligence (Count VI). 10
ECF No. 98, Ex. B (CGL Policy) § I.A.1.b(1).
Id. § V.13.
ECF No. 90, Ex. C (Endorsement).
ECF No. 92 ¶ 16; ECF No. 102 ¶ 16.
ECF No. 98, Ex. D (Complaint in the New York Action) ¶¶ 12, 23-25.
Id. ¶¶ 20-35.
Id. ¶¶ 51-53.
Id. ¶¶ 54-62.
Id. ¶¶ 63-67.
Id. ¶¶ 68-73.
On November 4, 2014, Icon was sued again, this time in a Massachusetts state
trial court (“Massachusetts Action”).11 The plaintiffs there, Anthony and Melanie
Messana, also allege that they contracted with Icon and another company for the
purchase and assembly of a modular home, but—as in the New York Action—that
the home was improperly assembled, resulting in numerous deficiencies. 12 The
Messanas’ complaint contains eight counts against Icon: breach of contract (Count
II), 13 breach of the implied warranty of merchantability (Count VI), 14 breach of the
implied warranty of fitness for a particular purpose (Count VIII),15 breach of express
warranties (Count X), 16 negligence/gross negligence/willful and wanton conduct
(Count XII),17 negligent infliction of emotional distress (Count XIX), 18 violation of
the Massachusetts Consumer Protection Law (Count XXVII),19 and fraud (Count
ECF No. 92 ¶ 43; ECF No. 102 ¶ 43.
ECF No. 98, Ex. E (Complaint in the Massachusetts Action) ¶¶ 10, 30-35.
Id. ¶¶ 46-49.
Id. ¶¶ 65-71.
Id. ¶¶ 78-83.
Id. ¶¶ 88-91.
Id. ¶¶ 99-103.
Id. ¶ 139-42.
Id. ¶¶ 272-97
On November 19, 2015, Icon was sued yet again, this time in a Vermont state
trial court (“Vermont Action”).21 The plaintiff there, Dagney Trevor, also alleges
that she contracted with Icon and another company for the purchase and assembly of
a modular home, but—as in the other actions—that the home was improperly
assembled, resulting in numerous deficiencies. 22 Ms. Trevor’s complaint contains
seventeen counts against Icon: violation of the Vermont Consumer Protection Act
(Counts I and VII), 23 breach of fiduciary duty (Count II),24 unjust enrichment (Count
III), 25 estoppel (Count IV), 26 breach of contract (Count V), 27 negligence (Count
VI), 28 breach of contractual duties to a third party beneficiary (Count IX), 29 fraud
(Count X),30 constructive fraud (Count XI),31 negligent misrepresentation (Count
XIII), 32 negligent hiring, selection, and/or supervision (Count XIV), 33 breach of
ECF No. 92 ¶ 65; ECF No. 102 ¶ 65.
ECF No. 98 (Complaint in the Vermont Action) ¶¶ 6-8, 32, 78-79.
Id. ¶¶ 128-47; 176-82.
Id. ¶¶ 148-53.
Id. ¶¶ 154-59.
Id. ¶¶ 160-65.
Id. ¶¶ 166-70.
Id. ¶¶ 171-75.
Id. ¶¶ 191-96.
Id. ¶¶ 197-212
Id. ¶¶ 213-221.
Id. ¶¶ 226-32.
Id. ¶¶ 235-44.
express warranties (Count XV), 34 breach of the implied warranty of merchantability
(Count XVI), 35 breach of the implied warranty of fitness for a particular purpose
(Count XVII), 36 breach of the implied warranty of good workmanship (Count
XVIII), 37 and violations of the Magnuson-Moss Warranty Act (Count XIX). 38
Westfield agreed to defend Icon in the New York Action and the
Massachusetts Action. 39 Westfield refused, however, to defend Icon in the Vermont
On March 17, 2015, Westfield filed suit against Icon in this Court, seeking a
declaration that it is not obligated to defend or indemnify Icon in any of the three
underlying actions. 41
Icon counterclaimed, arguing that Westfield breached its
contractual obligation to defend in the Vermont Action and that such refusal to
defend was in bad faith; Icon also seeks a declaration that Westfield is obligated to
defend Icon in the Vermont Action. 42
Id. ¶¶ 245-58.
Id. ¶¶ 259-65.
Id. ¶¶ 266-73.
Id. ¶¶ 274-79.
Id. ¶¶ 280-87.
ECF No. 98, Ex. G and H.
ECF No. 98, Ex. I.
ECF No. 28.
This Court dismissed Icon’s bad faith
counterclaim on August 29, 2016. 43 On July 10, 2017, both parties moved for
summary judgment on all remaining claims.
Standard of Review
Summary judgment is granted when “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.”44 A dispute is “genuine if a reasonable trier-of-fact could find in
favor of the non-movant,” and “material if it could affect the outcome of the case.” 45
To defeat a motion for summary judgment, then, the nonmoving party must point to
evidence in the record that would allow a jury to rule in that party’s favor.46 When
deciding whether to grant summary judgment, a court should draw all reasonable
inferences in favor of the non-moving party. 47
An Insurer’s Duty to Defend
Under Pennsylvania law, 48 an insurer has a duty to defend against any suit
brought against one of its insureds that potentially falls within the coverage of the
ECF No. 47.
Federal Rule of Civil Procedure 56(a).
Lichtenstein v. Univ. of Pittsburgh Medical Ctr., 691 F.3d 294, 300 (3rd Cir. 2012) (citing
Anderson v. Liberty Lobby, 477 U.S. 242, 248, 252 (1986).
Federal Rule of Civil Procedure 56(c)(1); Liberty Lobby, 477 U.S. at 249.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation
Both parties have utilized Pennsylvania law when briefing the issues under consideration; this
Court, therefore, will do the same.
insured’s policy. 49 To determine whether this duty is triggered, a court looks the
factual allegations of the underlying plaintiff’s complaint as well as the language of
the policy, and determines whether any potential liability on the insured’s behalf
would be covered by the policy. 50 If such a duty is found to exist, the insurer must
defend against the suit “until it becomes absolutely clear that there is no longer a
possibility that the insurer owes its insured a defense.” 51
Commercial general liability policies such as the one at issue in this case do
not cover claims for breach of contract or breach of warranty, 52 nor do they cover
claims for fraud or other intentional conduct.53
Pennsylvania courts have
determined that such policies also do not cover damages to a contractor’s work
caused by faulty workmanship, whether that work was performed by the general
contractor54 or a subcontractor.55
Gedeon v. State Farm Mut. Auto. Ins. Co., 410 Pa. 55, 58 (1963); see also Ramara, Inc. v.
Westfield Ins. Co., 814 F.3d 660, 673 (3d Cir. 2016).
Ramara, 814 F.3d at 673-74.
Id.; see also American and Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 606 Pa. 584, 609
(2010) (“The question of whether a claim against an insured is potentially covered is answered
by comparing the four corners of the insurance contract to the four corners of the complaint.”)
Nationwide Mutual Insurance Co. v. CPB International, Inc., 562 F.3d 591, 597 (3d Cir.
Gene & Harvey Builders, Inc. v. Pennsylvania Manufacturers’ Association Insurance Co., 512
Pa. 420, 427 (1986).
Kvaerner Metals Division of Kvaerner U.S., Inc. v. Commercial Union Insurance Co., 589 Pa.
Millers Capital Insurance Co. v. Gambone Brothers Development, Inc., 941 A.2d 706, 713,
715 (Pa. Super. Ct. 2007) (“Both complaints aver [that the insured] and/or its subcontractors
built homes with defective stucco exteriors, windows, and other artificial seals intended to
Application to the Underlying Actions
All three of the underlying actions are, at heart, based on faulty workmanship;
therefore, Westfield is not obligated to defend Icon in any of them. As noted above,
Icon’s main policy covers Icon for bodily injury and property damage caused by an
Because faulty workmanship may not be classified as an
“occurrence,” Icon does not rely on this provision.56 Instead, Icon points to the
endorsement, which (as noted supra) covers damage that is “unexpected and
untended from [Icon’s] standpoint.” This provision, however, is unavailing.
When concluding that faulty workmanship is not an “occurrence” for
purposes of a commercial general liability policy, the Pennsylvania Supreme Court,
in Kvaerner Metals Division of Kvaerner U.S., Inc. v. Commercial Union Insurance
Co., first noted that “occurrence” was defined by the policy at issue as “an
accident.”57 That court then turned to the dictionary definition of “accident” (“an
unexpected an undesirable event, or something that occurs unexpectedly or
unintentionally”), and declared that “[t]he key term” in such definition was
protect the home interiors from the elements. Both complaints are based on claims for faulty
workmanship. . . . Yet, claims predicated on faulty workmanship cannot be considered
‘occurrences’ for purposes of an occurrence based CGL policy as a matter of plain language
and judicial construction.”)
As the insured, Icon bears the burden of establishing coverage. Nationwide Mutual Insurance
Co. v. Cosenza, 258 F.3d 197, 206 (3d Cir. 2001).
Kvaerner, 809 A.2d at 332.
“unexpected,” which “implies a degree of fortuity that is not present in a claim for
faulty workmanship.” 58
Since faulty workmanship is not an “occurrence” because it is not
“unexpected,” it cannot be covered by an endorsement which requires, as a
prerequisite to coverage, that the damage at issue be “unexpected.” Stated another
way, faulty workmanship—whether by Icon or its subcontractors—is, as a matter of
law, not unexpected, and is therefore not covered by the endorsement.
Consequently, this Court will declare that Westfield has no duty to defend Icon in
any of the three underlying actions, and will enter summary judgment against Icon,
in Westfield’s favor.
For the reasons stated above, Westfield’s Motion for Summary Judgment will
be granted, and Icon’s will be denied. An appropriate Order follows.
BY THE COURT:
s/ Matthew W. Brann
Matthew W. Brann
United States District Judge
Id. at 333.
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