United States District Court, D. Maryland
Xinis United States District Judge
before the Court and ripe for resolution in this insurance
action are the cross-motions for summary judgment filed by
Plaintiff Schnabel Foundation Company
(“Schnabel”) (ECF No. 71) and Defendant National
Union Fire Insurance Company of Pittsburgh, Pennsylvania
(“National Union”) (ECF No. 77). A hearing was
held on May 17, 2018. After the hearing, at Schnabel's
request, the Court permitted additional limited briefing.
(ECF Nos. 90, 91.) For the reasons below, the Court GRANTS
National Union's motion and DENIES Schnabel's
Schnabel's Support of Excavation Work
issue in this case is who must pay the costs associated with
revising work and weathering project delays caused by a
building excavation that, unfortunately, did not go according
to plan. The project was the construction of a 17-story
residential apartment building at 4918 St. Elmo Avenue,
Bethesda, Maryland. The building owner, Bainbridge, hired
Turner Construction Company (“Turner”) as the
general contractor for the project. Turner then hired
Schnabel as a subcontractor to provide sheeting and shoring
or a “Support of Excavation” (“SOE”)
system, which would stabilize and support the surrounding
buildings while necessary excavation occurred. See
ECF No. 71-74 at 6. The project site abutted a number of
properties, including a property owned by White Flint Realty
Group Limited Partnership, which included a restaurant, dance
studio, and other commercial units (“White Flint
connection with the project, Turner purchased from Liberty
Mutual Insurance a primary general liability policy with a
two-million dollar policy limit, and from National Union an
excess policy with a $25 million limit. ECF Nos. 71-3, 71-4.
Schnabel was an additional insured under both policies. ECF
No. 71-54 at 4. Schnabel also purchased separate
builder's risk insurance.
September 29, 2011, Schnabel began work on the project. ECF
No. 71-74 at 6. On December 5, 2011, while Schnabel was
installing a soldier pile as part of the SOE work, the floor
of the White Flint property buckled or “heaved”
which caused physical damage to that property.ECF No. 71-7 at 2;
see ECF No. 71-1 ¶ 18. Shortly thereafter, the
White Flint property and other adjoining properties reported
additional physical damage. See ECF No. 71-30 at
2-4. After independently evaluating the site, Montgomery
County issued a Stop Work Order on March 7, 2012, and the
residents and tenants of the White Flint property were forced
to evacuate for safety reasons. ECF Nos. 71-16, 71-17, 71-21.
and until July 19, 2012, Schnabel revised its SOE and related
work to make safe the project site. See ECF No.
71-21 at 3. Schnabel's SOE work concluded on November 8,
2012, ECF No. 71-13 at 2, and Turner's work concluded in
July 2014, roughly 12 months after the original project
completion dates under the Bainbridge-Turner contract, ECF
No. 71-75 at 24.
Litigation and Coverage Disputes
result of Schnabel's SOE work and the damage to the
third-party properties, several lawsuits were filed. Liberty
Mutual ultimately exhausted its two-million dollar limit
covering various claims. National Union also paid
approximately $12 million in claims related to the White
Flint property, other adjoining properties, and associated
defense costs. See ECF No. 71-1 ¶¶ 39, 42.
This case does not involve any of those claims.
this cause of action arises from claims made by and among
Bainbridge, Turner, and Schnabel relating to project delay
costs caused by Schnabel's SOE work and the resulting
Stop Work Order, as well as for costs for the work to modify
Schnabel's SOE so that the Bainbridge project could
proceed. First, Bainbridge demanded that Turner reimburse it
approximately $6.7 million for construction delay costs.
See ECF No. 71-36 at 3. National Union denied
coverage on this claim. ECF No. 71-39 at 2. Bainbridge and
Turner then settled the claim for $3 million, and Bainbridge
assigned its remaining rights to Turner. ECF Nos.
71-61-71-66. Second, Turner demanded that Schnabel pay the
costs of Schnabel's additional SOE work as well as
indemnify Turner for the Bainbridge claim, for a total claim
of approximately $17 million. See generally ECF Nos.
71-42, 71-45. National Union likewise denied coverage for
this claim. ECF No. 71-54 at 2. Schnabel and Turner then
settled this claim for $5 million, which included an
assignment of Turner's rights to Schnabel. ECF No. 71-67
at 11. Under its separate builders risk policy, Schnabel
ultimately recovered approximately $4.25 million.
See ECF No. 71-76 at 16.
The National Union Policy
to this dispute is the coverage terms of the National Union
policy. In relevant part the policy provides coverage for
“those sums . . . that the Insured becomes legally
obligated to pay as damages by reason of liability imposed by
law because of . . . Property Damage, ” when the
property damage “is caused by an Occurrence”
during the policy period. ECF No. 71-3 at 7. “Property
damage” is defined in the policy as (1) “physical
injury to tangible property, including all resulting loss of
use of that property, ” or (2) “loss of use of
tangible property that is not physically injured.” ECF
No. 71-3 at 29. An “occurrence” is defined as
“an accident, including continuous or repeated exposure
to substantially the same general harmful conditions.”
ECF No. 71-3 at 27.
same policy limits coverage via several exclusions. Relevant
to the parties' cross-motions is Exclusion D, entitled
“Damage to Impaired Property or Property Not Physically
Injured.” This provision excludes from coverage
“damage to Impaired Property or property that has not
been physically injured” that arises out of either (1)
“a defect, deficiency, inadequacy or dangerous
condition” in the work of the insured or (2) “a
delay or failure” by the insured or anyone acting on
the insured's behalf “to perform a contract or
agreement in accordance with its terms”
(“Exclusion D” or the “Impaired Property
exclusion”). ECF No. 71-3 at 12. National Union cited
to Exclusion D, among other provisions, in denying coverage
for the above-described claims. ECF No. 71-39 at 7; ECF No.
71-54 at 5.
settling the claims, Schnabel brought this breach of contract
action against National Union. See ECF No. 2 at 8-9.
Schnabel then moved for summary judgment, arguing that the
claimed losses are covered by the policy and that no policy
exclusions apply. National Union, by contrast, argues that
none of the claimed damages fall under the policy's
initial grant of coverage, and even if coverage exists, the
claimed losses are excluded. As more fully discussed below,
the Court grants summary judgment in National Union's
favor because Exclusion D of the policy bars coverage.
STANDARD OF REVIEW
judgment is appropriate when the Court, construing all
evidence and drawing all reasonable inferences in the light
most favorable to the non-moving party, finds no genuine
dispute exists as to any material fact, thereby entitling the
movant to judgment as a matter of law. Fed.R.Civ.P. 56(a);
see In re Family Dollar FLSA Litig., 637 F.3d 508,
512 (4th Cir. 2011). Summary judgment must be granted
“against a party who fails to make a showing sufficient
to establish the existence of an element essential to that
party's case, and on which that party will bear the
burden of proof at trial.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). “In responding
to a proper motion for summary judgment, the party opposing
summary judgment must present evidence of specific facts from
which the finder of fact could reasonably find for him or
her.” Venugopal v. Shire Labs., 334 F.Supp.2d
835, 840 (D. Md. 2004), aff'd sub nom. Venugopal v.
Shire Labs., Inc., 134 Fed.Appx. 627 (4th Cir. 2005)
(citing Anderson v. Liberty Lobby, 477 U.S. 242, 252
(1986); Celotex, 477 U.S. at 322-23). The party
opposing summary judgment “cannot create a genuine
issue of material fact through mere speculation or the
building of one inference upon another.” Othentec
Ltd. v. Phelan, 526 F.3d 135, 140 (4th Cir. 2008)
(quoting Beale v. Hardy, 769 F.2d 213, 214 (4th Cir.
1985)). Where a party's statement of a fact is
“blatantly contradicted by the record, so that no
reasonable jury could believe it, ” the Court will
credit the record over the averred fact. Scott v.
Harris, 550 U.S. 372, 380 (2007).