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Ohio Casualty Insurance Company v. Island Pool & Spa

February 9, 2011

OHIO CASUALTY INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ISLAND POOL & SPA, INC., DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-10-09.

The opinion of the court was delivered by: Baxter, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Submitted January 4, 2011

Before Judges Payne, Baxter and Koblitz.

The opinion of the court was delivered by BAXTER, J.A.D.

In this insurance coverage dispute, plaintiff Ohio Casualty Insurance Company (Ohio Casualty) appeals from a January 8, 2010 Law Division order requiring Ohio Casualty to provide coverage to defendant Island Pool & Spa, Inc. (Island Pool) under a Comprehensive General Liability (CGL) policy Island Pool had purchased.*fn1 Ohio Casualty also appeals from a January 28, 2010 Law Division order awarding attorney's fees of $16,831 to Island Pool. We agree with Ohio Casualty's contention that the judge erred when he rejected its argument that the "ongoing operations" exclusion applied. We reverse both orders and remand for the entry of summary judgment in favor of Ohio Casualty.

I.

Defendant was hired to repaint an in-ground swimming pool at a residence in Tenafly. To perform the repainting project, defendant drained the pool. Once the pool was emptied, defendant installed a temporary pump to prevent subterranean water from exerting upward pressure on the pool. The temporary pump installed by defendant failed during a torrential rainfall on June 3, 2006, and, as a result, the pool lifted out of the ground, cracked and could not be repaired. The incident also caused considerable damage to the adjacent decking and landscaping. Island Pool repaired all of the damage, by constructing a new pool and providing new decking and landscaping, at a total cost of $89,315.65. It submitted these expenses and list of damages to Ohio Casualty and requested coverage and indemnification.

By letter of June 13, 2006, Ohio Casualty notified Island Pool that it was declining coverage for the loss of the pool based upon exclusions j(5) and (6) of the CGL policy. Ohio Casualty did agree, however, to pay $20,075 to replace the landscaping and $11,530 to replace the decking. The carrier agreed to pay the latter expenses because the language of the j(5) exclusion applied only to the "particular part" of the property on which the insured was "performing operations," and because Island Pool was not "performing operations" on the landscaping or decking, the damage to those portions of the homeowners' property was covered by the CGL policy.

The CGL policy issued by Ohio Casualty to Island Pool obligated Ohio Casualty to "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies" (emphasis added). The j(5) exclusion in the CGL policy stated:

This insurance does not apply to:

j. Damage To Property

"Property damage" to:

5. That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations.*fn2

The term "property damage" is defined in the policy as follows:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

Relying solely on the j(5) exclusion, Ohio Casualty moved for summary judgment, seeking a declaration that it was not obligated to provide coverage to Island Pool for the costs Island Pool incurred in demolishing and replacing the pool. Island Pool cross-moved for summary judgment, seeking a declaration that Ohio Casualty was required to afford coverage and that the j(5) exclusion did not apply. In an oral opinion rendered on December 23, 2009, the judge granted summary judgment in favor of Island Pool, reasoning:

Ohio Casualty's reliance on the exclusion based on the insured's continuing operations is inconsistent and illogical.

Ohio Casualty concedes coverage for damage[] to the decking and landscaping surrounding the pool, which consists and is defined as real property, which was damaged during the insured's uncompleted painting of the pool. . . . [T]he decking and the landscaping was an ...


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