BOB MEYER COMMUNITIES, INC., v. Plaintiff-Appellant, NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION JAMES R. SLIM PLASTERING, INC., B&R MASONRY, and T.R.H. BUILDERS, INC., and Defendants, THE OHIO CASUALTY INSURANCE COMPANY, AMERICAN FIRE AND CASUALTY COMPANY, and HARLEYSVILLE INSURANCE COMPANY OF NEW JERSEY, SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. Defendants-Respondents. Argued December 1, 2014 Decided July 21, 2015 Before Judges Sabatino, Guadagno and Leone. On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-3988-08. Eugene Killian, Jr. argued the cause for appellant (The Killian Firm, attorneys; Ryan Milun and Mr. Killian, on the briefs). John T. Coyne argued the cause for respondent Ohio Casualty Insurance Co. and American Fire & Casualty Co. (McElroy, Deutsch, Mulvaney & Carpenter, LLP, attorneys; Mr. Coyne, on the brief).
PER CURIAM Lance J. Kalik argued the cause for respondent Harleysville Insurance Co. (Riker Danzig Scherer Hyland & Perretti, attorneys; Mr. Kalik, of counsel and on the brief; Peter M. Perkowski, Jr., on the brief). Plaintiff Bob Meyer Communities, Inc. was the general contractor for several homes that allegedly had water infiltration after construction. Plaintiff sued its insurers, defendants American Fire and Casualty Company ("American Fire"), Ohio Casualty Insurance Company ("Ohio Casualty"), and Harleysville Insurance Company of New Jersey ("Harleysville"). Plaintiff appeals from the trial court's December 17, 2010 order denying its motion for partial summary judgment, and granting summary judgment to American Fire, Ohio Casualty, and Harleysville (collectively "defendants"). 1 A trial court must grant a summary judgment motion if "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). On 1 Plaintiff's claims against the remaining defendants have been resolved by dismissal or default judgment. 2
appeal we employ the same summary judgment standard. Townsend v. Pierre, 221 N.J. 36, 59 (2015). We must hew to our "de novo" standard of review. Ibid. Plaintiff argues that the trial court improperly held there was no coverage under commercial general liability ("CGL") insurance policies issued by defendants. The trial court ruled that consequential damage caused by water infiltration due to faulty workmanship by subcontractors was not covered because there was no "property damage" caused by an "occurrence," as defined by the policies. The trial court reached this conclusion despite the inclusion in the policies issued by American Fire and Ohio Casualty of an exception providing that the "Your Work" exclusion "does not apply if the damaged work or the work of which the damage arises was performed on your behalf by a subcontractor" ("subcontractor exception"). On July 9, 2015, another panel of this court decided Cypress Point Condominium Association, Inc. v. Adria Towers, L.L.C., N.J. Super. (App. Div. 2015). In Cypress Point, this court faced the identical issue of whether consequential damages caused by water infiltration due to faulty workmanship by subcontractors was not covered because there was no "property damage" caused by an "occurrence." Id., slip op. at 4. This court interpreted CGL policies which followed the 1986 standard 3
CGL form ("1986 ISO form") issued by the Insurance Services Office, Inc. ("ISO"). Id. at 4-5. This court ruled: We hold that the unintended and unexpected consequential damages caused by the subcontractors' defective work constitute "property damage" and an "occurrence" under the policy. We base this holding in part on the developer's reasonable expectation that, for insurance risk purposes, the subcontractors' faulty workmanship is to be treated differently than the work of a general contractor. We reach that conclusion by viewing the policy as a whole and distinguishing Weedo v. Stone-E-Brick, Inc., 81 N.J. 233 (1979), and Firemen's Insurance Co. of Newark v. National Union Fire Insurance Co., 387 N.J. Super. 434 (App. Div. 2006)[.] [Id. at 5.] In Cypress Point, this court distinguished Weedo and Firemen's particularly because those cases construed ISO's 1973 standard CGL form (the "1973 ISO form"), and because only the cost of replacing the defective work was at issue. Id. at 12-16, 18-19, 22. This court also rejected the "misplaced" reliance on Firemen's by an unpublished case in the Court of Appeals for the Third Circuit. Id. at 21-22 (declining to follow Pa. Nat'l Mut. Cas. Ins. Co. v. Parkshore Dev. Corp., 403 F. App'x 770 (3d Cir. 2010)). This court added that the 1986 ISO form's "addition of the subcontractor's exception is of critical importance when determining whether the subcontractors' faulty workmanship 4
causing consequential damages amounts to 'property damage' and an 'occurrence' under the policy." Id. at 17. We ruled that the subcontractor's exception created a "reasonable expectation" that "consequential damages caused by the subcontractors' faulty workmanship constituted 'property damage' and an 'occurrence.'" Id. at 20. This court pointed out that its holding followed the interpretation of the 1986 ISO form adopted by the majority of courts nationwide. Id. at 20-22. We are persuaded by and adopt the opinion in Cypress Point. We also find it dispositive of plaintiff's appeal from the grant of summary judgment in favor of American Fire and Ohio Casualty. Their CGL policies are derived from the 1986 ISO form, and include language identical to the language of the pertinent provisions in the CGL policies in Cypress Point. See id. at 9-10, 16-17. The trial court here similarly relied on the interpretations of the 1973 ISO form in Weedo and Firemen's, and cited Parkshore. As in Cypress Point, plaintiff here seeks to recover under the policies, not the cost of repairing the defective work, but only the consequential damages to other portions of the property. See id. at 6. Cypress Point convincingly rejects the contrary arguments raised by defendants and accepted by the trial court. We follow Cypress Point and hold that unintended and unexpected consequential damages caused 5
by the subcontractors' defective work constitute "property damage" and an "occurrence" under the CGL policies issued by American Fire and Ohio Casualty. The CGL policies issued by Harleysville are also derived from the 1986 ISO form, but Harleysville issued a policy endorsement deleting the subcontractor's exception. Plaintiff cites a September 2010 email from Harleysville's underwriting manager stating that, despite the endorsement, Harleysville was still providing coverage for consequential damages as a result of a subcontractor's work. Harleysville's underwriting manager submitted a certification contesting plaintiff's reliance on his email. Plaintiff argued Harleysville's email created an independent basis for a reasonable expectation of coverage for such damages, or at least a genuine issue of material fact. However, the trial court did not address plaintiff's argument. On remand, the trial court shall consider this issue in light of the rationales of this court's opinion in Cypress Point. In Cypress Point, we observed that concluding that plaintiff met the definitions of "property damage" and "occurrence" under the policy does not automatically mean that insurance coverage exists. We do not reach the question of whether plaintiff is entitled to insurance coverage under the policy. The insurers contended before the judge that even if there were "property damage" and an "occurrence" under the policy, plaintiff's 6
claims would otherwise be excluded. The judge never reached those issues, and we decline to do so here. [Id. at 23.] Here, Ohio Casualty and American Fire sought summary judgment on the additional ground that plaintiff's claims were subject to the policies' fungi or bacteria exclusion. Harleysville raises that argument, and also argues that the "property damage" occurred prior to its policy period. The trial court did not address those arguments. As in Cypress Point, we do not decide whether plaintiff is ultimately entitled to insurance coverage under the policies. On remand, defendants may raise those arguments, and other arguments not inconsistent with Cypress Point, to show "that plaintiff's claims are otherwise excluded under the terms of the policy." Id. at 7, 24. Plaintiff also may renew its motion for partial summary judgment, which the trial court denied as a consequence of its grant of summary judgment to defendants but did not otherwise address. 2 2 Harleysville may renew on remand its argument, not reached by the trial court, that it has no duty to defend plaintiff in an action by owners of a damaged home. 7
We vacate the trial court's December 17, 2010 order, and remand for further proceedings consistent with this opinion. We do not retain jurisdiction. 8