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“Property Damage” Must Be Actual Not Potential
Post 4771
Breach of Construction Contract Not an Insured Peril
After the plaintiff’s motion for summary judgment was rejected and the defendant insurer’s motion for summary judgment was granted the plaintiff appealed. In Westchester Modular Homes Of Fairfield County, Inc. v. Arbella Protection Insurance Company, No. AC 45433, Court of Appeals of Connecticut (April 2, 2024) and the Court of Appeals resolved the dispute.
FACTS
On or about April 27, 2016, the plaintiff entered into a contract with Diana Lada L’Henaff and Jean Jacques L’Henaff for the construction of a new modular home on property located in New Canaan (property). During construction, disputes arose between the L’Henaffs and the plaintiff. Ultimately, the L’Henaffs terminated their contract with the plaintiff on December 14, 2016. The plaintiff filed a mechanic’s lien on the property on or about February 3, 2017, and commenced an action to foreclose on the lien on or about April 7, 2017 (underlying litigation).
The L’Henaffs filed a counterclaim that alleged that they “desired to build a modern home and had very carefully and specifically specified the type of insulation, materials, and finishes that they required the builder that won the job to satisfy.” The L’Henaffs alleged that work on the project progressed slowly and with constant problems. The L’Henaffs alleged that the plaintiff had breached the construction contract.
The plaintiff, as a named insured under a commercial general liability policy issued by the defendant (policy), filed a claim for coverage with the defendant which was refused. The defendant disclaimed coverage on the basis that the first revised counterclaim filed in the underlying litigation did not allege “property damage” caused by an “occurrence” and, therefore, it did not trigger coverage under the policy.
The trial court determined that the pleadings in the underlying litigation did not allege property damage. As to the extrinsic documents submitted to the defendant by the plaintiff, the court determined that such evidence established only the existence of possible defective work that could lead to future property damage if not remedied but that it did not demonstrate the existence of current property damage.
DISCUSSION
Because there are no factual issues in dispute in the present case, the court was only faced with the legal question whether the defendant had a duty to defend the plaintiff. Specifically, the defendant contended that the extrinsic documents suggested, “at most, that the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed.” (Emphasis in original)
The Plaintiffs alleged construction defects and did not allege damage that the defects caused to other, nondefective property. Since the plaintiffs expert testified that he had identified defective work that, if not remedied, could lead to property damage in the future but identified no damage, Plaintiffs failed to allege facts bringing the underlying litigation seeking property damage that would have required a defense.
The Court of Appeals made clear that repairs to structural deficiencies, made for the purpose of preventing physical injury to tangible property before the alleged deficiency has caused property damage are not within the insuring agreement’s definition of property damage.
Because there was no indication of water damage at all. At most, the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed. Damage to nondefective property in the form of rot or mold caused by water intrusion would be property damage within the terms of the policy language. However, the plaintiff did not present any evidence of actual damage or case law holding that the presence of water, in the absence of actual damage, amounts to covered physical damage.
The Court of Appeals concluded that the notification of the mere presence of water, without some corresponding physical damage, did not provide the defendant with actual knowledge of facts establishing a reasonable possibility of coverage because the presence of water does not constitute property damage within the terms of the policy.
Accordingly, the defendant did not have a duty to defend the plaintiff in the underlying litigation, and the court properly rendered summary judgment in favor of the defendant.
ZALMA OPINION
When an insured breaches the terms of a construction contract it will invariably be sued by the other party to the contract for damages resulting from the breach. Westchester Modular Homes breached its contract by creating a defective modular home that would, in the future, if defects were not cured, suffer physical damage. Since there was no physical damage to the structure – just the potential of damage – coverage did not apply and Westchester was obligated to defend and indemnify itself to the allegations of the underlying litigation.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
See the video at and at and at https://www.zalma.com/blog plus more than 5250 posts.
The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
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Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
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When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
