United States District Court, E.D. Louisiana
JEI SOLUTIONS, INC.
BURLINGTON INSURANCE COMPANY
ORDER AND REASONS
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
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.
Peerless's Arbitration Demand
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.
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.
The Arbitration Award
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
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 ...