UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Fletch’s Sandblasting and Painting, Inc.
v. Case No. 15-cv-490-PB Opinion No. 2017 DNH 097 Colony Insurance Company
MEMORANDUM AND ORDER
Fletch’s Sandblasting and Painting, Inc., seeks a
determination in this declaratory judgment action that it is
entitled to coverage under a commercial general liability
insurance policy issued by Colony Insurance Company. Colony has
filed a motion for summary judgment arguing that Fletch’s cannot
claim coverage for what amounts to a claim of defective
workmanship.
I. BACKGROUND
A. The Insurance Policy
Colony sold Fletch’s a standard-form commercial general
liability (“CGL”) insurance policy. See Doc. No. 16-3
[hereinafter “Ex. B”]. The policy provides in pertinent part
that Colony “will pay those sums that the insured becomes
legally obligated to pay as damages because of ‘bodily injury’
or ‘property damage’ to which this insurance applies.” Ex. B at
16, § I(1)(a). Coverage is available under the policy, however, only if the “bodily injury” or “property damage” is caused by an
“occurrence.” See Ex. B at 16, § I(1)(b)(1). An “occurrence”
is defined as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
Ex. B at 29, § V(13). The policy also contains an exclusion for
“property damage” to “[t]hat particular part of any property
that must be restored, repaired or replaced because ‘your work’
was incorrectly performed on it.” Ex. B at 17, 19–20, §
I(2)(j)(6). “Your work” includes “[w]ork or operations
performed by you or on your behalf.” Ex. B. at 31, §
V(22)(a)(1).
B. The Underlying Action1
Fletch’s seeks a defense and indemnification with respect
to a complaint filed against it by Thick Tech Systems, Inc., in
the United States District Court for the District of Maine. See
Amended Complaint, Thick Tech Systems, Inc. v. Methuen
Construction Co., No. 2:15-cv-00076-DBH (D. Me. June 3, 2015);
see also Doc. No. 16-2 [hereinafter “Ex. A”] (copy of Maine
complaint). The complaint alleges that the United States Navy
hired Methuen Construction Company as a general contractor to
make repairs at the Portsmouth Naval Shipyard. Ex. A at 2–3.
1 I describe the facts as alleged in the underlying action without assessing their veracity. Cf. Broom v. Cont’l Cas. Co., 152 N.H. 749, 753 (2005).
2 Methuen subcontracted with Fletch’s to “strip, repair, prime and
finish [certain structures] with an intumescent fireproofing
product known as Albi Clad 800.” Ex. A at 3. Fletch’s, in
turn, subcontracted with Thick Tech to apply the fireproofing
material, while Fletch’s remained responsible for preparing
(e.g., repairing and priming) the structures’ surfaces
beforehand. Ex. A at 3.
Fletch’s allegedly performed the surface preparation work
“negligent[ly],” “in an unworkmanlike manner,” and “[not] in
accordance with the job specifications.” Ex. A at 4. As a
result, when Thick Tech later applied the fireproofing material,
it failed to adhere. Ex. A at 4. “Fletch’s [then] induced
[Thick Tech] to expend and commit further time and resources
needed to correct defects caused by [Fletch’s] poor workmanship
by promising [Thick Tech] that it would be paid for the
additional work and supplies furnished . . . .” Ex. A at 4.
But “Fletch’s had no intention of paying,” and after Thick Tech
“devote[d] significant additional time and resources [to]
performing corrective work made necessary due to Fletch’s
failure of performance,” Fletch’s failed to pay Thick Tech in
full. Ex. A at 4–5.
Thick Tech has sued Fletch’s for breach of contract,
quantum meruit, fraudulent inducement, and a claim “sounding in
3 negligence.” See Ex. A at 5-8.2 Only the negligence claim is
relevant here. That claim asserts that “[a]s a contractor
responsible for completing all surface preparation work . . .
Fletch’s owed [Thick Tech] a duty to complete said work in a
competent manner.” Ex. A at 7. Fletch’s was allegedly
negligent because it “failed to properly prepare the surfaces,”
“failed to follow the job specifications,” “made
misrepresentations to [Thick Tech] concerning the adequacy and
compatibility of the products Fletch’s applied to [the]
surfaces,” and “failed to adequately protect the work while in
progress from weather elements.” Ex. A at 7.
II. STANDARD OF REVIEW
Summary judgment is appropriate when the record reveals “no
genuine dispute as to any material fact and [that] the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The evidence in the record must be considered in the
light most favorable to the nonmoving party, drawing all
reasonable inferences in its favor. See Navarro v. Pfizer
Corp., 261 F.3d 90, 94 (1st Cir. 2001).
2 The Maine complaint also brings claims against Methuen and Liberty Mutual Insurance Company, but those claims are irrelevant here.
4 A party seeking summary judgment must first identify the
absence of any genuine dispute of material fact. See Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). A material fact
“has the potential to change the outcome of the suit.” See
Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st
Cir. 2010). If the moving party satisfies this burden, the
nonmoving party must then “produce evidence on which a
reasonable finder of fact, under the appropriate proof burden,
could base a verdict for it; if that party cannot produce such
evidence, the motion must be granted.” See Ayala–Gerena v.
Bristol Myers–Squibb Co., 95 F.3d 86, 94 (1st Cir. 1996); see
also Celotex, 477 U.S. at 322–24.
III. ANALYSIS
Colony presents several arguments in support of its summary
judgment motion, two of which I consider in this Memorandum and
Order. First, it contends that Thick Tech’s negligence claim is
not covered under Fletch’s policy because the property damage
that gave rise to the claim was not caused by an “occurrence.”
Alternatively, Colony argues that Fletch’s is not entitled to
coverage because its claim stems from a type of property damage
that is expressly excluded from coverage, even if it was caused
by an occurrence.
5 I begin by describing the background law governing
insurance coverage disputes. I then apply that law to Colony’s
summary judgment arguments.
A. Background Insurance Law
Fletch’s policy entitles it to both a defense and
indemnification for covered claims. The duty to defend is
broader than the duty to indemnify: whereas the duty to
indemnify arises only when the insured is actually held liable,
the duty to defend turns on the nature of the allegations
against the insured. See Great Am. Dining, Inc. v. Phila.
Indem. Ins. Co., 164 N.H.
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Fletch’s Sandblasting and Painting, Inc.
v. Case No. 15-cv-490-PB Opinion No. 2017 DNH 097 Colony Insurance Company
MEMORANDUM AND ORDER
Fletch’s Sandblasting and Painting, Inc., seeks a
determination in this declaratory judgment action that it is
entitled to coverage under a commercial general liability
insurance policy issued by Colony Insurance Company. Colony has
filed a motion for summary judgment arguing that Fletch’s cannot
claim coverage for what amounts to a claim of defective
workmanship.
I. BACKGROUND
A. The Insurance Policy
Colony sold Fletch’s a standard-form commercial general
liability (“CGL”) insurance policy. See Doc. No. 16-3
[hereinafter “Ex. B”]. The policy provides in pertinent part
that Colony “will pay those sums that the insured becomes
legally obligated to pay as damages because of ‘bodily injury’
or ‘property damage’ to which this insurance applies.” Ex. B at
16, § I(1)(a). Coverage is available under the policy, however, only if the “bodily injury” or “property damage” is caused by an
“occurrence.” See Ex. B at 16, § I(1)(b)(1). An “occurrence”
is defined as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
Ex. B at 29, § V(13). The policy also contains an exclusion for
“property damage” to “[t]hat particular part of any property
that must be restored, repaired or replaced because ‘your work’
was incorrectly performed on it.” Ex. B at 17, 19–20, §
I(2)(j)(6). “Your work” includes “[w]ork or operations
performed by you or on your behalf.” Ex. B. at 31, §
V(22)(a)(1).
B. The Underlying Action1
Fletch’s seeks a defense and indemnification with respect
to a complaint filed against it by Thick Tech Systems, Inc., in
the United States District Court for the District of Maine. See
Amended Complaint, Thick Tech Systems, Inc. v. Methuen
Construction Co., No. 2:15-cv-00076-DBH (D. Me. June 3, 2015);
see also Doc. No. 16-2 [hereinafter “Ex. A”] (copy of Maine
complaint). The complaint alleges that the United States Navy
hired Methuen Construction Company as a general contractor to
make repairs at the Portsmouth Naval Shipyard. Ex. A at 2–3.
1 I describe the facts as alleged in the underlying action without assessing their veracity. Cf. Broom v. Cont’l Cas. Co., 152 N.H. 749, 753 (2005).
2 Methuen subcontracted with Fletch’s to “strip, repair, prime and
finish [certain structures] with an intumescent fireproofing
product known as Albi Clad 800.” Ex. A at 3. Fletch’s, in
turn, subcontracted with Thick Tech to apply the fireproofing
material, while Fletch’s remained responsible for preparing
(e.g., repairing and priming) the structures’ surfaces
beforehand. Ex. A at 3.
Fletch’s allegedly performed the surface preparation work
“negligent[ly],” “in an unworkmanlike manner,” and “[not] in
accordance with the job specifications.” Ex. A at 4. As a
result, when Thick Tech later applied the fireproofing material,
it failed to adhere. Ex. A at 4. “Fletch’s [then] induced
[Thick Tech] to expend and commit further time and resources
needed to correct defects caused by [Fletch’s] poor workmanship
by promising [Thick Tech] that it would be paid for the
additional work and supplies furnished . . . .” Ex. A at 4.
But “Fletch’s had no intention of paying,” and after Thick Tech
“devote[d] significant additional time and resources [to]
performing corrective work made necessary due to Fletch’s
failure of performance,” Fletch’s failed to pay Thick Tech in
full. Ex. A at 4–5.
Thick Tech has sued Fletch’s for breach of contract,
quantum meruit, fraudulent inducement, and a claim “sounding in
3 negligence.” See Ex. A at 5-8.2 Only the negligence claim is
relevant here. That claim asserts that “[a]s a contractor
responsible for completing all surface preparation work . . .
Fletch’s owed [Thick Tech] a duty to complete said work in a
competent manner.” Ex. A at 7. Fletch’s was allegedly
negligent because it “failed to properly prepare the surfaces,”
“failed to follow the job specifications,” “made
misrepresentations to [Thick Tech] concerning the adequacy and
compatibility of the products Fletch’s applied to [the]
surfaces,” and “failed to adequately protect the work while in
progress from weather elements.” Ex. A at 7.
II. STANDARD OF REVIEW
Summary judgment is appropriate when the record reveals “no
genuine dispute as to any material fact and [that] the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The evidence in the record must be considered in the
light most favorable to the nonmoving party, drawing all
reasonable inferences in its favor. See Navarro v. Pfizer
Corp., 261 F.3d 90, 94 (1st Cir. 2001).
2 The Maine complaint also brings claims against Methuen and Liberty Mutual Insurance Company, but those claims are irrelevant here.
4 A party seeking summary judgment must first identify the
absence of any genuine dispute of material fact. See Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). A material fact
“has the potential to change the outcome of the suit.” See
Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st
Cir. 2010). If the moving party satisfies this burden, the
nonmoving party must then “produce evidence on which a
reasonable finder of fact, under the appropriate proof burden,
could base a verdict for it; if that party cannot produce such
evidence, the motion must be granted.” See Ayala–Gerena v.
Bristol Myers–Squibb Co., 95 F.3d 86, 94 (1st Cir. 1996); see
also Celotex, 477 U.S. at 322–24.
III. ANALYSIS
Colony presents several arguments in support of its summary
judgment motion, two of which I consider in this Memorandum and
Order. First, it contends that Thick Tech’s negligence claim is
not covered under Fletch’s policy because the property damage
that gave rise to the claim was not caused by an “occurrence.”
Alternatively, Colony argues that Fletch’s is not entitled to
coverage because its claim stems from a type of property damage
that is expressly excluded from coverage, even if it was caused
by an occurrence.
5 I begin by describing the background law governing
insurance coverage disputes. I then apply that law to Colony’s
summary judgment arguments.
A. Background Insurance Law
Fletch’s policy entitles it to both a defense and
indemnification for covered claims. The duty to defend is
broader than the duty to indemnify: whereas the duty to
indemnify arises only when the insured is actually held liable,
the duty to defend turns on the nature of the allegations
against the insured. See Great Am. Dining, Inc. v. Phila.
Indem. Ins. Co., 164 N.H. 612, 627 (2013). The duty to defend
“is determined by whether the cause of action against the
insured alleges sufficient facts in the pleadings to bring it
within the express terms of the policy.” Broom v. Cont’l Cas.
Co., 152 N.H. 749, 753 (2005).
The interpretation of an insurance policy presents a
question of law. See Hunt v. Golden Rule Ins. Co., 638 F.3d 83,
86 (1st Cir. 2011). A court must “construe the [insurance
policy] as would a reasonable person in the position of the
insured based upon a more than casual reading of the policy as a
whole.” Id. at 86 (quoting Concord Gen. Mut. Ins. Co. v. Doe,
161 N.H. 73, 75 (2010)). “If an insurance policy’s terms are
clear and unambiguous, then the policy’s language must be
accorded its natural and ordinary meaning.” Id. On the other
6 hand, if a policy is ambiguous and one reasonable interpretation
requires coverage, the court will find coverage. See id. But
courts “‘will not perform amazing feats of linguistic gymnastics
to find a purported ambiguity’ simply to construe the policy
against the insurer and create coverage where it is clear that
none was intended.” Colony Ins. Co. v. Dover Indoor Climbing
Gym, 158 N.H. 628, 630–31 (2009) (quoting Hudson v. Farm Family
Mut. Ins. Co., 142 N.H. 144, 147 (1997)). The burden of proof
remains with the insurer. Concord Gen. Mut. Ins. Co. v. Green &
Co. Bldg. & Dev. Corp., 160 N.H. 690, 692 (2010).
B. Application
1. Is the underlying claim based on property damage that was caused by an occurrence?
Thick Tech alleges in the underlying action that the costs
it seeks to recover from Fletch’s were incurred because Fletch’s
negligently performed the surface preparation work on the
structures Thick Tech agreed to fireproof. The New Hampshire
Supreme Court has repeatedly recognized that “defective work,
standing alone, does not constitute an occurrence,” Concord
Gen., 160 N.H. at 693, because “[t]he fortuity implied by
reference to accident or exposure is not what is commonly meant
by a failure of workmanship,” McAllister v. Peerless Ins. Co.,
124 N.H. 676, 680 (1984); see also 9A Steven Plitt et al., Couch
on Insurance § 129:4 (3d ed. 2016). Instead, coverage is
7 triggered only when the defective workmanship causes damage “to
property other than the work product.” Concord Gen., 160 N.H.
at 693.
Given the complaint’s framing, I can only reasonably
construe Thick Tech’s claim as one for the labor and material
costs that it incurred to strip the unsuccessfully fireproofed
surfaces, redo the surfaces, and reapply the fireproofing
material. See Ex. A at 4 (“As a result of Fletch’s negligent
acts or omissions, [Thick Tech] was required to devote
significant additional time and resources in performing
corrective work . . . .”); Doc. No. 17–1 at 9 (Fletch’s
concession that Thick Tech’s claim is not for damage to real
property); Ex. A at 8 (“As a proximate cause of Fletch’s
negligent acts and omissions, [Thick Tech] incurred significant
damages and losses.” (emphasis added)); see also Incur,
Merriam-Webster.com, https://www.merriam-
webster.com/dictionary/incur (last visited June 2, 2017)
(contrasting meaning of “incur” with “occur,” where “incur”
connotes a subject bringing a burden onto herself, and “occur”
connotes an event that “presents itself”). So construed, Thick
Tech’s claim is a noncovered claim for defective workmanship
because the costs it seeks to recover were incurred to repair
Fletch’s defective work rather than to compensate Thick Tech for
damage to other property that resulted from the defective work.
8 Fletch’s heavy and exclusive reliance on High Country
Assocs. v. New Hampshire Ins. Co., 139 N.H. 39 (1994), is
misplaced. In that case, homeowners brought a claim for damage
to condominium units based on negligent design, materials
selection, construction, supervision, and inspection. See id.
at 41. The negligence asserted in the underlying action
allegedly caused the buildings to suffer actual damage when
water seeped into the walls, resulting in mildew, rotting, and
diminished structural integrity. See id. at 41, 43. On the
basis of that accidental damage to real property, the court
identified an occurrence triggering coverage. See id. at 43–44.
Here, in contrast, Thick Tech and Fletch’s are contractors
embroiled in a dispute over corrective work. Whereas the claim
in High Country was “not [for] the diminution in value or cost
of repairing work of inferior quality,” id. at 43, that is the
nature of Thick Tech’s claim here. Thick Tech’s negligence
claim is for the time and other costs it incurred to remediate
Fletch’s defective surface preparation work. See Ex. A at 4, 7–
8; Doc. No. 17–1 at 9; see also McAllister, 124 N.H. at 678, 680
(concluding that no accident, i.e., fortuitous event, was
presented by claim seeking merely to correct defective
landscaping and construction). Accordingly, Thick Tech’s claim
is distinguishable from the claim for accidental, fortuitous
damage to real property in High Country.
9 The purpose of CGL insurance underscores why Thick Tech’s
complaint does not present a covered occurrence. CGL policies
are designed to insure against fortuitous, unanticipated events
that give rise to “tort liability for physical injury to the
person or property of others.” Plitt et al., supra, § 129:5.
Such accidental property damage, which may occasionally occur in
the course of running a business, is covered. See Plitt et al.,
supra, § 129:1. But CGL policies are not designed to cover
business risk itself, which “occurs as a consequence of the
insured not performing well and is a component of every business
relationship that is necessarily borne by the insured in order
to satisfy its customers.” Plitt et al., supra, § 129:1; see
Lyman Morse Boatbuilding, Inc. v. N. Assur. Co. of Am., 772 F.3d
960, 968–69 (1st Cir. 2014) (explaining the difference between
noncovered “business risk” and covered “occurrence of harm
risk”). In a contracting relationship such as the one between
Fletch’s and Thick Tech, the events against which a CGL policy
insures do not include a contractor’s failure of workmanship,
even where another contractor detrimentally relies on or
remediates it. Guaranteeing a contractor’s performance is the
purpose of a performance bond, not a CGL policy insuring against
accidents causing property damage.
10 For these reasons, the costs that Thick Tech is seeking to
recover from Fletch’s were not incurred because of property
damage caused by an occurrence.
2. Is Thick Tech’s negligence claim grounded in excluded property damage?
Fletch’s policy does not apply to claims that stem from
property damage to “[t]hat particular part of any property that
must be restored, repaired or replaced because ‘your work’ was
incorrectly performed on it.” Ex. B at 17, 19–20, § I(2)(j)(6).
Colony argues that Thick Tech’s negligence claim is excluded
under this provision because the costs it is attempting to
recover from Fletch’s were incurred to repair Fletch’s defective
work.
Fletch’s offers the following in response to this argument:
Paragraph (6) concerns only damage to property that was damaged because Fletch’s work was improperly performed on it. Again, all of Fletch’s work was performed on the real property owned by the United States Navy. There is no claim for damage to any property on which Fletch’s performed any work. Indeed, all of Fletch’s work was done before [Thick Tech] even began its work, so Fletch’s could not have performed any work on [Thick Tech’s] work product.
This exclusion thus has no application to this case.
Doc. No. 17-1 at 9.
Fletch’s’ response is based on the mistaken premise that
the property damage exclusion applies only if the damaged
property that gives rise to a claim against an insured is owned
11 by the party that brings the claim. Fletch’s cites no case to
support this premise and I find no support for it in the
language of the policy itself. Here, it is quite clear that
Thick Tech’s negligence claim is seeking compensation for costs
that Thick Tech incurred to repair Fletch’s incorrectly
performed work. Under these circumstances, the exclusion
applies regardless of whether Thick Tech owns the property it
repaired. Because Fletch’s does not present any other argument
to support its position that the exclusion is inapplicable, I
agree with Colony that Thick Tech’s negligence claim is excluded
from coverage even if the property damage that gave rise to the
claim was caused by an occurrence.3
IV. CONCLUSION
For the reasons stated in this Memorandum and Order, I
grant Colony’s motion for summary judgment (Doc. No. 16). The
3 Perhaps Fletch’s is instead attempting to argue that, regardless of who owns the structures that Thick Tech prepared for fireproofing, the property damage exclusion is inapplicable because Thick Tech is seeking to recover for the cost of repairing Fletch’s defective work rather than for damage to the underlying structures. I decline to consider any such argument because it has not been adequately briefed. A single sentence in a one paragraph argument that is supported by neither case law nor legal reasoning is simply not sufficient to warrant the court’s attention.
12 clerk is directed to enter judgment accordingly and close the
case.4
SO ORDERED.
/s/Paul Barbadoro___________ Paul Barbadoro United States District Judge
June 6, 2017
cc: Michael H. Darling, Esq. William L. Boesch, Esq.
4 In addition to the claim for declaratory relief, Fletch’s action against Colony also includes a claim for breach of contract for denying coverage. Doc. No. 1-1 at 4. For the reasons stated in this Memorandum and Order, Colony is entitled to summary judgment on that claim as well.