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An appellate court in Pennsylvania has ruled that a deleterious substances exclusion in a commercial general liability ( CGL ) insurance policy issued to a contractor precluded coverage for damages caused by dust allegedly created by the contractor s work.
The Case
Collin R. Ginther, d/b/a Buxmont Grout Care, an unincorporated business located in Sellersville, Pennsylvania, was hired by Regal Abstract, LP, and First American Abstract of PA, LLC, to clean and repair tile and grout in the lobby of their premises in Lancaster, Pennsylvania.
The work included grout removal in an area of about 600 square feet of tile. Plastic sheets had been hung in the area in which Buxmont performed its work because the area was undergoing general renovations.
Buxmont, however, allegedly did not seal the entire area off in an effort to allow access.
Buxmont used drills, grinders, and other tools to remove the grout and, in doing so, allegedly created grout dust that migrated from the lobby and settled in other parts of the offices in which it was working. Buxmont worked late into the evening, but then was asked to leave by a representative of First American who said that the quantity of dust that had been generated was greater than he had expected.
Regal and First American submitted a claim for the costs associated with cleaning up the grout dust to their property insurer, Donegal Mutual Insurance Company, and Donegal subsequently paid the claims of both Regal and First American.
Donegal submitted a claim for property damage to Preferred Contractors Insurance Company Risk Retention Group, LLC ( PCIC ), which had issued a commercial general liability insurance policy to Buxmont, reporting that Buxmont was performing tile work. Dust buildup throughout the building.
PCIC, through its adjustment firm, reviewed Donegal s claim and issued a disclaimer letter. Among the grounds for disclaiming coverage cited by PCIC in the disclaimer letter was Exclusion O to the Buxmont policy, covering deleterious substances.
Donegal, exercising its rights of subrogation under the insurance policies it had issued to Regal and First American, filed two lawsuits against Buxmont in Pennsylvania state court, alleging that [d]uring the process of attempting to clean, polish and/or otherwise improve the surface on February 6, 2014, Defendant Ginther and/or his company, Buxmont Grout Care, negligently caused a dust storm while attempting to clean and/or repair tile and grout work on the insured s property. Donegal further alleged that [t]he dust storm had damaged Donegal s insureds property, damaged their equipment, and necessitated substantial clean up.
Donegal demanded $7,417.88 from Buxmont in the Regal suit and $36,300.24 from Buxmont in the First American suit.
Buxmont tendered the suits to PCIC for a defense and indemnity, and PCIC, through its claims adjuster, Golden State Claims Adjusters, issued a second disclaimer letter.
Buxmont then hired private counsel to defend the claims. Buxmont s counsel spoke with a claims manager for Golden State concerning the second disclaimer letter. Among the points raised by counsel for Buxmont in his conversation with the claims manager was that grout came in two forms, concrete-based and epoxy-based, that epoxy-based grout does not contain concrete compounds, and that without further investigation it was not clear whether Buxmont had worked with concrete based grout or epoxy-based grout.
PCIC engaged a consultant, Patrick Watson, to visit the lobby, inspect the grout on which Buxmont had worked, and, if possible, decipher the content of the grout.
Mr. Watson concluded that the grout Buxmont had worked on was a cementitious grout with siliceous granular material, most likely mason s sand.
Following receipt of Mr. Watson s report, PCIC, through Golden State, issued another disclaimer letter to counsel for Ginther.
Buxmont answered the suits and subsequently stipulated judgments for $36,300.24 and $7,417.88.
It then sued PCIC for breach of contract and violation of Pennsylvania s bad faith statute.
The parties moved for summary judgment.
The PCIC Policy
The PCIC policy stated that it did not apply to:
property damage arising out of, resulting from, caused by, contributed to by, or in any way related to, in whole or in part, the discharge, dispersal, release, escape, disposal, existence, presence, handling, ingestion, inhalation, installation, sale, distribution, encapsulation, storage, transportation, use or removal of, or exposure to any deleterious substance.
(ii) Equally to any . . . property damage involving air, land, structure, building, outdoors, indoors, confined or enclosed space, or the air within any of them, watercourse or water, including surface or underground water;
(iii) Regardless of whether any alleged defects or claimed negligence in design, construction or materials, or any other conduct or misconduct, may have or is claimed to have precipitated, caused in whole or in part, or acted jointly, concurrently or in any sequence with any deleterious substance in any form whatsoever in causing or contributing to bodily injury or property damage.
(3) To any loss, cost or expense arising out of any:
(i) Request, demand, order or requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to or assess the effects of any deleterious substances in any form whatsoever; or
(ii) Claim or suit seeking, involving or arising from any testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of any deleterious substances in any form whatsoever.
The District Court s Decision
The district court granted summary judgment in favor of PCCI, finding that it had not breached its insurance contract with Buxmont.
In its decision, the district court explained that the deleterious substances exclusion specifically included silica, silicates, or any material containing silica or silicates, and that an expert had determined that the grout that Buxmont had worked on contained a siliceous granular material. Clearly, the district court said, grout containing siliceous material was a material containing silica or silicates for which PCIC explicitly excluded coverage.
Therefore, the district court concluded, PCIC did not breach its insurance contract with Buxmont by disclaiming coverage under the deleterious substances exclusion. As PCIC had not breached its insurance contract with Buxmont, it also had not engaged in bad faith, the district court concluded.
The case is Ginther v. Preferred Contractors Ins. Co. Risk Retention Group, LLC, No. 16-686 (E.D. Pa. Sep. 29, 2017). Attorneys involved include: For COLLIN R. GINTHER, doing business as BUXMONT GROUT CARE, Plaintiff: WILLIAM G. ROARK, LEAD ATTORNEY, HAMBURG, RUBIN, MULLIN, MAXWELL & LUPIN, LANSDALE, PA. For PREFERRED CONTRACTORS INSURANCE COMPANY RISK RETENTION GROUP, LLC, Defendant: STEPHEN PAUL CHAWAGA, LEAD ATTORNEY, MC ELROY, DEUTSCH, MULVANEY & CARPENTER, LLP., PHILADELPHIA, PA.
Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.
