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Lee Kennedy Co., Inc. v. Arch Insurance Co.

United States District Court, D. Massachusetts

January 4, 2019

LEE KENNEDY CO., INC., Plaintiff,
v.
ARCH INSURANCE COMPANY, Defendant.

          MEMORANDUM AND ORDER

          INDIRA TALWANI UNITED STATES DISTRICT JUDGE.

         Before this court is an insurance coverage dispute. In early 2013, a private school hired Lee Kennedy Co., Inc. (“LKC”), a construction contractor, to construct their new gymnasium. LKC hired a subcontractor to construct the gymnasium floor. However, the subcontractor's workmanship allegedly resulted in deficiencies with the floor that LKC ultimately corrected. LKC now brings this suit against Arch Insurance Company (“Arch”) claiming entitlement to coverage under the Arch Contractor Controlled Insurance Program policy (“the Policy”) for the costs LKC incurred to fix the floor deficiencies caused by the subcontractor's work.

         The parties have filed cross-motions for summary judgment. Arch's Motion for Summary Judgment [#25] seeks summary judgment on both the breach of contract (Count I) and declaratory judgment (Count III) claims, and LKC's Cross-Motion for Summary Judgment [#32] seeks summary judgment on the declaratory judgment claim.[1]

         For the foregoing reasons, Arch's Motion for Summary Judgment [#25] is ALLOWED and LKC's Cross-Motion for Summary Judgment [#32] is DENIED.

         I. FACTS

         A. The Project

         In early 2013, LKC signed a contract with the Winsor School to construct a new gymnasium (the “Project”), and in May 2013, Arch's previously issued Policy covering LKC for specific construction projects was amended to include the Project. Transmittal Aff. Barbara O'Donnell Supp. Def.'s Mot. Summ. J. (“O'Donnell Aff.”) Ex. C [#28-3], Ex. D [#28-4].

         In December 2013, LKC subcontracted the Project floor work to a subcontractor, Kenvo Floor Co., Inc. (“Kenvo”), who subsequently enrolled in the Policy as an insured subcontractor. Id. Ex. B [#28-2], Ex. E [#28-6]. Kevno's primary work included the installation of “kip” pads, the subfloor, and the finish floor surface. Id. Ex. A ¶ 8 [#28-1]. At the time of the installation, LKC had no knowledge of any negligent or faulty installation by Kenvo. Id. Ex. A ¶ 9 [#28-1].

         The Project was completed in April 2015. Id. Ex. A ¶ 10 [#28-1]. In a series of three reports, dated May 29, August 6, and August 26, 2015, the Project's architect, William Rawn Associates (“the Architect”) notified LKC of a series of flooring system deficiencies.[2] Id. Ex. F [#28-6], Ex. G [#28-7], Ex. H [#28-8]. On September 14, 2015, LKC informed Kenvo that LKC was withholding $192, 383.39 in payments to Kenvo to offset amounts anticipated by LKC to fix the floor deficiencies. Id. Ex. I [#28-9], Ex. J ¶¶ 6, 9 [#28-10].[3]

         On June 2, 2016, the Architect sent LKC a “Letter of Non-Compliance, ” noting that “[t]he Resilient Acoustic Isolation Subfloor in the gymnasium is not in compliance with the Contract Documents” and requiring specific performance under “Actions Required.” Id. Ex. O at 2 [#28-15]. On June 3, 2016, LKC, through its insurance broker, submitted a request to Arch for coverage of the costs LKC expected to incur in order to remedy the Project floor, see id. Ex. P [#28-16], which Arch denied on July 19, 2016, raising the same arguments that Arch has in defense of this litigation, see id. Ex. R [#28-18].

         B. The Policy Terms

         Under Section I, Part 1, titled “Coverages, ” Arch:

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. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for ...

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