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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.
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.”