Monday, September 3, 2012

First circuit rules on gradual detioration and faulty construction or maintenance exclusions

Insureds Paul Gargano and his wife sought coverage from Vigilant, who provided them with a homeowner's policy, for the cost to remedy failed staining on shingles on their house.  The stain was peeling off the shingles.

Vigilant denied coverage on the basis of two policy exclusions.  The first excluded  coverage for "gradual deterioration . . . however caused, or any loss caused by . . . gradual deterioration."  The second excluded losses resulting from faulty acts, errors or omissions in planning, construction or maintenance.  "Construction" was defined as including materials and workmanship used for construction or repair.

In Gargano v. Vigilant Ins. Co., 2012 WL 3632442 (1st Cir.), the United States Court of Appeals for the First Circuit rejected the Garganos' argument that the policy exclusions were ambiguous.  It held that the Garganos' argument that the deterioration of the stain was progressing "rapidly," not gradually, "did not rise above word play."  "While, to be sure, 'gradual' has no mathematically fixed range, the pace of the detaching stain was a long way from a lightning bolt or a falling tree, and in calling it gradual the district court was drawing no fine line."

The court also held that in the faulty construction or maintenance exclusion, "'faulty' does not mean negligent or blameworthy on the part of a homeowner or his contractor, but simply tainted by imperfection." 

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