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Schnabel Foundation Co. v. National Union Fire Insurance Company of Pittsburg

United States District Court, D. Maryland

June 12, 2018



          Paula Xinis United States District Judge

         Pending 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 motion.[1]

         I. BACKGROUND

         A. Schnabel's Support of Excavation Work

         At 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 property”).

         In 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.

         On 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.[2]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.

         Thereafter, 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.

         B. Litigation and Coverage Disputes

         As a 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.

         Instead, 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.

         C. The National Union Policy

         Central 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.

         The 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.

         After settling the claims, Schnabel brought this breach of contract action against National Union.[3] 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.


         Summary 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).

         III. ...

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