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JEI Solutions, Inc. v. Burlington Insurance Co.

United States District Court, E.D. Louisiana

June 4, 2019

JEI SOLUTIONS, INC.
v.
BURLINGTON INSURANCE COMPANY

         SECTION “L” (1)

          ORDER AND REASONS

         Before the Court is Defendant's motion for judgment on the pleadings or summary judgment (R. Doc. 10). Plaintiff opposes (R. Doc. 12). Having considered the parties' briefs and the applicable law, the Court now issues this Order and Reasons.

         I. BACKGROUND

         Peerless hired JEI as contractor to renovate a certain New Orleans building, and JEI subcontracted the entire scope of the work to Ja'Lia Construction, LLC. Before the project was completed, Peerless unilaterally terminated the contract and filed an arbitration demand against JEI, seeking damages for faulty workmanship. Ultimately, an adverse judgment was rendered against JEI for $89, 239.25. In this lawsuit, JEI seeks to recover that amount from Burlington, its commercial general liability insurer, plus interest, defense costs, and bad faith penalties.

         a. Peerless's Arbitration Demand

         Peerless's original Demand for Arbitration, filed on February 3, 2017, stated only that the nature of the dispute was “Breach of Contract” against JEI. R. Doc. 10-5. Burlington denied coverage and defense on the grounds that an alleged breach of contract does not constitute an “occurrence” to trigger coverage under the policy. R. Doc. 12-3 at 9.

         Months later, in September 2017, Peerless amended its Arbitration Demand and alleged as follows:

• In November 2014, the visible work on the outside of the 4-plex immediately showed numerous problems with the workmanship of JEI, including but not limited to the painting of the outside of the 4-plex and the poor appearance of the outside of the 4-plex resulting from the inadequate and incomplete work of JEI.
• By December 8, 2014, the incomplete and inadequate work done by JEI to correct the appearance of the outside of the 4-plex was extremely disturbing and became the source of the City of New Orleans' Code Enforcement Citation.
• By June 2015, a walkthrough of the building revealed that the project was not near completion and that the work performed was substandard and inadequate. Some examples of this include: rotted, weathered, or termite damaged studs were still present; some studs on the first floor were not connected to the ceiling or floor beam; outside boards were coming loose from the building; some floors were not stable; there were places where you could see outside from the inside (through the siding); there were places where the ground could be seen through openings in the floor; there was a window coming away from the wall; and nails from the inside were visible, penetrating the outside boards.
• In June 2015, Peerless hired an outside firm to review and assess the project. The report was submitted to JEI, and on June 12, 2015, a meeting was held between Peerless, JEI, and the consulting contractor.
• Additionally, some of the work performed by JEI has shown serious structural code violations on the first floor of the building. These serious structural code violations could lead to potential tenants being put in danger, and leaves in question the integrity of the building. Therefore, the questions and concerns of Peerless are not only about building code violations and poor quality workmanship of JEI, but are also regarding the safety of the families who move into the units in the 4-plex building.

R. Doc. 12-3 at 21-26. JEI alleges that it notified Burlington of the amended claims and again demanded coverage and a defense, but Burlington did not respond.

         b. The Arbitration Award

         In March of 2018, the Arbitrator ordered JEI to reimburse Peerless for “inadequate and incomplete work, as itemized and delineated on [Peerless's] Exhibit #18.” R. Doc. 10-7. On March 30, 2018, JEI notified Burlington of the adverse judgment and demanded Burlington pay the award and reimburse defense costs. On October 4, 2018, in response to follow-up correspondence from JEI, Burlington again denied coverage and defense. R. Doc. 12-2. This lawsuit followed. JEI seeks to recover from Burlington the arbitration award rendered in favor of Peerless, the cost of defense against Peerless's arbitration claims, and bad faith damages.

         II. PRESENT MOTION

         Burlington now moves for judgment on the pleadings or summary judgment, arguing it has no duty to defend or indemnify JEI because Peerless's damages as alleged and awarded (i) do not constitute “property damage” caused by an “occurrence” under the Policy, or (ii) coverage is barred by the “Damage To Property” exclusion. In opposition, JEI contends that Peerless's arbitration award specifically mentioned property damage resulting ...


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