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James McHugh Construction Co. v. Travelers Property Casualty Co. of America

United States District Court, D. Maryland

December 20, 2016

JAMES McHUGH CONSTRUCTION CO., Plaintiff,
v.
TRAVELERS PROPERTY CASUALTY CO. OF AMERICA, Defendant.

          MEMORANDUM OPINION

          Paula Xinis United States District Judge

         Pending in this insurance action are Plaintiff's and Defendant's cross-motions for summary judgment (ECF Nos. 6, 33). The issues are fully briefed and the Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. For the reasons stated below, Defendant's motion is granted and Plaintiff's motion is denied.

         I. BACKGROUND

         The following facts are undisputed. James McHugh Construction Company (“Plaintiff”) was selected to be the general contractor for the construction of a high-rise apartment building at 360 West Hubbard in Chicago, Illinois. Pl.'s Resp. to Undisputed Facts, ECF No. 36-1 at 2-3. 360 West Hubbard Joint Venture LLC, as the owner of the project, purchased an insurance policy from Defendant Travelers Property Casualty Company of America (“Defendant”) covering Builders Risk and Inland Marine risks for 360 Hubbard. See Insurance Policy, ECF No. 31-2. The insurance policy contains a blanket named insured endorsement and names all contractors, including Plaintiff, as named insureds on the Policy. Pl.'s Resp. to Undisputed Facts, ECF No. 36-1 at 19. The insurance policy also contains a broad form insuring agreement, which states that all loss to the project is covered except for those claims which are excluded:

A. COVERAGE
We will pay for direct physical loss of or damage to Covered Property from any of the Covered Causes of Loss . . . . Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS OR DAMAGE except those causes of loss listed in the Exclusions . . . .

         Insurance Policy, ECF No. 31-2 at 23 (emphasis in original).

         In the fall of 2013, tenants began moving into the 360 West Hubbard building, and so the project owner requested Plaintiff to clean the exterior glass windows. Pl.'s Resp. to Undisputed Facts, ECF No. 36-1 at 5. Plaintiff engaged a subcontractor, Corporate Cleaning Services, Inc. (“CCS”), to clean the exterior glass. Id. The subcontract between Plaintiff and CCS describes CCS's scope of work as all “Exterior Window Washing.” Specifically, the subcontract states:

         Without limiting the generality of [the term “Exterior Window Washing”], the following items are specifically included:

1. Exterior washing of windows and surrounding frames.
2. Protection of all existing finishes from damage during sitework.
3. Rubbish removal to dumpsters provided by others.
4. Daily cleanup, including load out of debris to dumpsters provided by the Contractor.
5. Cooperation and coordination with all project personnel and other trades.
6. Coordination with all agencies having jurisdiction over subcontractor work.
7. All applicable taxes.

CCS-McHugh Subcontract, ECF No. 31-4. CCS was tasked with removing both dirt and “construction debris” that had settled on the window surfaces during the construction process. Construction debris includes dried mortar, concrete, cement, and paint. Pl.'s Resp. to Undisputed Facts, ECF No. 36-1 at 7. The construction debris on the exterior glass could not be removed using standard cleaning methods, Id. at 8, so CCS removed the debris using a metal scraper or similar tool. Id. at 12. CCS failed to follow industry standards when removing debris from the glass designed to eliminate or reduce the risk of damaging glass. see Id. at 12-17 (“McHugh believes that CCS failed to properly execute its work method because it was not in conformance with the Subcontract and all applicable industry standards.”). As a result, the glass surfaces were scratched.

         The scratched windows were rejected by the building's owner and thus Plaintiff was forced to incur the costs of repairing and replacing the scratched windows. Pl.'s Mot. Sum.

         Judgment, ECF No. 31 at 3. Plaintiff reported the loss and claim to Defendant. On July 15, 2014, Defendant denied the claim. The sole basis for Defendant's denial was Exclusion B(3)(d)(2) in the insurance policy for “Omission or faulty, inadequate or defective: Materials, workmanship or maintenance.” Def.'s Rejection Letter, ECF No. 31-3. The insurance policy's exclusion clause states, in pertinent part:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage.
3. We will not pay for loss or damage caused by or resulting from any of the following. But if loss or damage by a Covered Cause of Loss results, we will pay for that resulting loss or damage.
d. Omission in, or faulty, inadequate or defective:
(2) Materials, workmanship or maintenance.

         Insurance Policy, ECF No. 31-2 at 30-32. According to Defendant, CCS's cleaning of the windows is “considered faulty, inadequate or defective maintenance” under the policy. Def.'s Rejection Letter, ECF No. 31-3.

         On February 5, 2016, Plaintiff filed a complaint in the Circuit Court for Montgomery County alleging breach of contract and seeking a declaratory judgment that Plaintiff's claim is covered by the insurance policy. ECF No. 2. On April 13, 2016, Defendant timely removed the case to this Court based on diversity of citizenship pursuant to 28 U.S.C. § 1332. ECF No. 1. That same day, Plaintiff filed a motion for summary judgment. ECF No. 6.

         On August 1, 2016, Plaintiff filed an amended memorandum in support of its motion for summary judgment. ECF No. 31. It argues that it prevails as a matter of law because the “faulty workmanship” exclusion, which served as the sole basis for Defendant's denial of Plaintiff's claim, is ambiguous and the ambiguity should be resolved in favor of Plaintiff as the insured. Plaintiff's position is that the term “faulty workmanship” does not cover the damage caused by CCS. ECF No. 31 at 2. And even if this Court finds that Defendant has met its burden in proving the faulty workmanship exception applies, the “ensuing loss” exception to the faulty workmanship exclusion applies to Plaintiff's loss, and thus policy covered the loss. Defendant filed a cross-motion for summary judgment on August 15, 2016. ECF No. 34. It argues that the faulty workmanship exclusion justifies its denial of Plaintiff's claim and that the ensuing loss exception does not apply. Id.

         II. ...


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