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Scottsdale Insurance Co. is obligated to indemnify and provide defense coverage for a pool installer that was sued for installing defective pools, said an appellate court Wednesday, in overturning a lower court ruling.
In 2006, 19 customers of Norwalk, Conn.-based R.I. Pools Inc. complained about cracking, flaking and deteriorating concrete, “causing the pools to lose water and, in some cases, rendering them unstable,” and three customers filed suit against the firm, according to Thursday's ruling by the 2nd U.S. Circuit Court of Appeals in New York decision in Scottsdale Insurance Co. et al. v. R.I. Pools Inc.
Another firm had provided the concrete for the work, and two other firms were hired to install the concrete, said the appellate court ruling.
Scottsdale filed suit in 2009
Scottsdale Ariz.-based Scottsdale Insurance filed suit in August 2009, seeking a declaration it had no duty to defend or indemnify R.I. Pools because there was no coverage under its policies. It also sought reimbursement for defense costs already expended.
In September 2010, the federal district court in Hartford, Conn., granted the insurer's motion for summary judgment, holding Scottsdale had no duty to defend or indemnify. In August 2011, it further ordered R.I. Pools to reimburse Scottsdale for defense costs the insurer had already expended.
Appellate court's ruling
The lower court relied on the wrong precedent in issuing its opinion, said a three-judge appellate court panel.
The district court “erred in ruling that defects in the insured's work are not within the scope of an 'occurrence' and never considered the crucial question whether the defects come within the subcontractor exception to the express exclusion for the insured's own work,” said the appellate ruling.
It is “apparent that the damage to the pools caused by the cracked concrete falls within the firm's policies and therefore Scottsdale has a duty to defend, said the ruling.
“Because this duty exists up until the point at which it is legally determined that there is no possibility for coverage under the policies, Scottsdale has not shown entitlement to any reimbursement for defense costs it previously expanded,” said the ruling, which does not detail the sums involved.
The case was remanded for further proceedings.