Facts: In 1991, the plaintiffs were hired by the Winnesquam Regional School District (WRSD) to replace the existing middle school roof with a new standing, seamless metal roof membrane. Approximately ten years later, a parent observed buckling in the ceiling's support beams (purlins) following a heavy snowstorm resulting in a brief, temporary closure of the gymnasium. Inspection revealed that the purlins were missing bolts and were not properly aligned. WRSD hired another entity to repair the roof and filed suit against the plaintiffs to recover their costs. The temporary buckling of the purlins was resolved when the defective workmanship was rectified and the purlins did not require replacement.
The plaintiffs sought coverage under a commercial general liability policy issued by Acadia. Acadia denied coverage based on the absence of allegations of property damage, as well as the applicability of several policy exclusions.
After the underlying lawsuit was resolved, the plaintiffs filed a breach of contract action against Acadia seeking to recover their defense costs. Plaintiffs argued that the writ contained sufficient allegations of property damage and loss of use.
The parties filed cross-motions for summary judgment. The trial court granted summary judgment in favor of Acadia, ruling that WRSD's writ did not allege property damage and, in the alternative, that coverage was barred by the policy's "impaired property" exclusion.
The plaintiffs appealed arguing that: 1) the writ sufficiently alleged property damage as required under the policy; 2) the temporary closure of the gymnasium constituted a loss of use; and 3) the "impaired property" exclusion did not apply.
Acadia argued that: 1) there was no "occurrence" under the policy; 2) the writ alleged only faulty workmanship and did not allege property damage independent of the deficient work, or, in the alternative, the purlins were incorporated into the insured's work product; 3) the writ did not allege a loss of use; and 4) the "impaired property" exclusion barred coverage.
Held: Reversed and remanded. Allegations of property damage are sufficient for purposes of an indemnity insurance policy when they assert "actual damage" to property other than the work product of the insured. Property is damaged when it is "altered in appearance, shape, color or in some other material dimension."
The Court found that the writ asserted claims of property damage beyond the defective roof replacement based on allegations of "actual damage" to the purlins in the form of buckling, bowing, lateral movement and separation of the purlins from the building frame, and ruled that this damage was "separate and distinct" from the plaintiff's work product. The Court rejected the argument that the purlins were incorporated into the work of the insured, ruling that the roof and the purlins were not sufficiently united so as to create an "indistinguishable whole."
The Court also ruled that the "unexpected physical injury" to the purlins following the snowstorm gave rise to an "occurrence" under the policy. Having ruled that the writ sufficiently alleged property damage, the Court did not address issues related to loss of use or the impaired property exclusion.