Philadelphia Indemnity v Consigli Construction Co. Inc, Dist Court D Mass (2018)

PARTIES AND FACTS

Pipes burst in a Condominium.

The Condominium, insured by Philadelphia, paid – and sued others for subrogation – to recoup.

In the name of their insured Condo, Philadelphia sued

Consigli – general contractor

“Stock” Building Supply – the framing subcontractor to Consigli

“Direct” Builders – the rough framing sub-subcontractor to Stock and

               Penn = Direct’s insurer

(Philadelphia had also sued the Plumber Sagamore, Central Ceilings and designer ATI), claiming that losses and water damage were the result of negligence and breach of the implied warranties of habitability and good workmanship. All of those claims were settled and not part of the current case.

The Court had earlier ruled that subcontractor Stock must defend the General Contractor Consigli

Stock brought a claim against Direct

(and Direct’s insurer) Penn for defense and indemnity

on claims by Philadelphia and Consigli against Stock.

Claims by Stock against Direct were for 1) contractual indemnity 2) breach of contract

ISSUE 1

Must Stock defend Direct?

HOLDING 1

Direct (and its insurer Penn) have a duty to defend Stock on claims against Stock by Philadelphia and Consigli.

REASONS 1

Under the plain language of the Contractor Agreement’s indemnification and defense clause, Direct is obligated to assume Stock’s defense in the case.  Here is the indemnity provision in the Stock ->Direct sub-subcontract

[Direct Builders] agrees to indemnify, hold harmless, and defend [Stock], including property owners and other contractors with which [Stock] has contracted, from and against claims and damages sought by third parties, including claims and damages sought by employees of [Direct Builders] arising out of or resulting from [Direct Builders’] or its subcontractor’s operations, installation of [Stock’s] products, breach of express or implied warranties, negligent acts or omissions, or workplace safety violations. Provided, however, that [Direct Builders’] obligations herein shall not apply if the claims and damages sought arise from the gross or willful and wanton negligence [of Stock].

Since these are claims “arising out of or resulting from [Direct’s] operations, installation of [Stock’s] products, breach of express or implied warranties, [and/or] negligent acts or omissions,” they fall squarely within the scope of Direct’s contractual duty to defend.

The duty to defend is not determined by reference to facts proven at trial; it is judged by allegations of the complaint.  Duty to defend is independent of the duty to indemnify.

The Court rejected the argument by the rough framer, that its work could not have led to the damage caused by frozen water piping.  If the underling Complaint states a claim that some action or inaction of the subcontractor was connected to the damage or injury alleged, the duty to defend arises.

ISSUE 2

Dissolved corporations can be sued to get their insurance -no time limit.

HOLDING 2 – Dissolution of a corporation does not prevent the commencement of an action against the corporation

REASON The old rule that limited the time for suing dissolved corporations was overpowered by a later statute without time limitations.