Insured Can’t Duck Cost to Repair Its Own Duct Work
Insurance Law Update
U.S. District Court, S.D. Texas, Houston Division
In Building Specialties, Inc. v. Liberty Mut. Fire Ins. Co., ___ F.Supp.2d ___, 2010 WL 1990115 (S.D. Tex. May 17, 2010), the U.S. District Court, S.D. Texas, Houston Division, held that the insurer had no duty to defend or indemnify its insured for claims arising out of the insured’s allegedly defective duct work.
Lone Star Refrigeration contracted with Building Specialties to install the insulation and duct work for the heating and air conditioning system in a Houston residence. A leak subsequently developed, allegedly as a result of defects in the duct work installation provided by Building Specialties. Lone Star sued Building Specialties for the costs associated with remedying the defective duct work. Liberty Mutual declined Building Specialties’ tender of the claim for coverage and Building Specialties sued.
In granting summary judgment for Liberty Mutual, the court held that because the underlying petition alleged only that the duct work was defective and had to be replaced, Lone Star failed to allege “property damage.” The court also held that, to the extent Building Specialties claimed a duty to defend or indemnify arising out of “property damage” to the faulty product, that claim was excluded by the “your product” exclusion as a matter of law, but it found there was insufficient evidence to evaluate the potential application of the “subcontractor exception” to the “your work” exclusion for indemnity purposes.
The court declined to consider an affidavit offered by the insured as extrinsic evidence indicating that there was damage to the home’s hardwood floors because the affidavit was based on hearsay, and it contradicted the pleaded facts alleging that the only damages sought were for repair and replacement of the duct work. The court concluded that Liberty Mutual had no duty to defend or indemnify as a matter of law.