# Opelousas Hotel Group L L C v. D D G Construction Inc

> District Court, W.D. Louisiana · December 29, 2022

URL: https://www.frixlaw.com/law-library/cases/10195335

## Case

- **Court:** District Court, W.D. Louisiana
- **Decided:** December 29, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION

OPELOUSAS HOTEL GROUP L L C CASE NO. 6:18-CV-01311

VERSUS JUDGE TERRY A. DOUGHTY

D D G CONSTRUCTION INC MAGISTRATE JUDGE CAROL B.
WHITEHURST

MEMORANDUM RULING
Pending before the Court is a Motion for Summary Judgment on Plaintiff’s Fourth
Amended Complaint [Doc. No. 236] filed by Defendant First Mercury Insurance Company (“First
Mercury”). DDG Construction, Inc. (“DDG”) filed an Opposition [Doc. No. 243], and First
Mercury filed a Reply [Doc. No. 253] to the Opposition.
For the following reasons, the Motion is GRANTED.
I. BACKGROUND AND PROCEDURAL HISTORY
On December 5, 2018, Plaintiff Opelousas Hotel Group, LLC (“Plaintiff”) filed its Original
Complaint for Damages.1 Plaintiff subsequently filed several amended complaints.2 In its Fourth
Amended Complaint, Plaintiff asserted causes of action for breach of contract, negligence in the
supervision and construction of the project, breach of an implied warranty of workmanship,
professional negligence, and redhibition against DDG, its insurers, and several subcontractors.3
Plaintiff sued First Mercury as DDG’s general liability insurer pursuant to the Louisiana Direct
Action Statute.4

1 [Doc. No. 1]
2 [Doc. Nos. 51, 62, 93, 132]
3 [Doc. No. 132, pp. 6–9]
4 La. Rev. Stat. 22:1269
The events leading up to the suit are as follows. On August 12, 2014, Plaintiff entered into
a written contract (“Construction Contract”) with DDG.5 Under the Construction Contract, DDG
agreed to construct as the “prime, general contractor,” a Hampton Inn in Opelousas, Louisiana
(“the Project”) for the original sum of $4,668,330.00.6 Under the Construction Contract, DDG
would construct the entire hotel. DDG does not employ laborers and did not provide any laborers

for the Project.7 Rather, DDG’s role was to hire and manage subcontractors who would be tasked
with the actual construction of the hotel.8 The Construction Contract also provided that it was
governed by Louisiana law.9 According to Plaintiff, on June 1, 2017, DDG was issued a written
notice of default due to DDG’s “lack of progress and finishing the hotel on time, [and] lack of
manpower.”10 The written notice of default allegedly gave DDG seven days to remedy the
default.11 Plaintiff further alleges that after the expiration of the seven days, Plaintiff terminated
the Construction Contract.12
First Mercury issued the following commercial general liability policies (“CGL”) to DDG:
Policy No. CA-CGL-0000031914-01 (07/27/2013 to 07/27/2014) (the “2013 Policy”);13 Policy
No. NJ-CGL-0000045665-01 (07/27/2014 to 07/27/2015) (the “2014 Policy”);14 Policy No. NJ-

CGL-0000045665-02 (07/27/2015 to 07/27/2016) (the “2015 Policy”);15 and Policy No. NJ-CGL-
0000045665-03 (07/27/2016 to 07/27/2017) (the “2016 Policy”).16 The 2013 through 2016

5 [Doc. No. 132, p. 9]
6 [Doc. No. 236-5]
7 [Doc. No. 236-6, p. 24]
8 [Id.]
9 [Doc. No. 236-5]
10 [Doc. No. 236-7, p. 67]
11 [Doc. No. 132, pp. 3–4]
12 [Doc. No. 132, p. 4]
13 [Doc. No. 236-8]
14 [Doc. No. 236-9]
15 [Doc. No. 236-10]
16 [Doc. No. 236-11]
Policies (collectively, the “Policies”) are each subject to a $1,000,000.00 Each Occurrence Limit
and $2,000,000.00 General Aggregate Limit and Products-Completed Operations Aggregate
Limit. In addition, First Mercury issued excess Policy No. IL- EX-0000065023-01 (06/08/2016 to
07/27/2017) (the “Excess Policy”).17 The Excess Policy is subject to a $5,000,000.00 Each
Occurrence Limit, General Aggregate Limit, and Products-Completed Operations Limit. First

Mercury accepted DDG’s defense of the lawsuit subject to a reservation of rights.18
First Mercury contends that the Policies do not provide coverage for Plaintiff’s damages
because the damage did not occur during the First Mercury policy periods. In support of this
argument, First Mercury contends that Plaintiff’s damages did not manifest until after their
replacement contractor discovered the alleged defects in September 2017, after the last First
Mercury policy period terminated on June 27, 2017.19 First Mercury also argues that several
exclusions contained within the Policies prevent Plaintiff from recovering for any of the damage
allegedly caused by DDG.20 DDG contends in opposition that there are genuine issues of material
fact as to when the damage allegedly caused by DDG was discovered and the existence or extent
of any damage caused by DDG.21

The issues are briefed, and the Court is prepared to rule.
II. LAW AND ANALYSIS
A. Summary Judgment Standard
Under Federal Rule of Civil Procedure 56(a), “[a] party may move for summary judgment,
identifying each claim or defense--or the part of each claim or defense--on which summary

17 [Doc. No. 236-12]
18 [Doc. No. 208-1]
19 [Doc. No. 236-1, p. 4]
20 [Id.]
21 [Doc. No. 243]
judgment is sought. The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.
The court should state on the record the reasons for granting or denying the motion.”
“If the moving party meets the initial burden of showing there is no genuine issue of
material fact, the burden shifts to the nonmoving party to produce evidence or designate specific

facts showing the existence of a genuine issue for trial.” Distribuidora Mari Jose, S.A. de C.V. v.
Transmaritime, Inc., 738 F.3d 703, 706 (5th Cir. 2013) (internal quotation marks and citation
omitted).; see also FED. R. CIV. P. 56(c)(1).
A fact is “material” if proof of its existence or nonexistence would affect the outcome of
the lawsuit under applicable law in the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). A dispute about a material fact is “genuine” if the
evidence is such that a reasonable fact finder could render a verdict for the nonmoving party. Id.
“[A] party cannot defeat summary judgment with conclusory allegations, unsubstantiated
assertions, or only a scintilla of evidence.” Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337,

343 (5th Cir. 2007) (citing Anderson, 477 U.S. at 248). However, in evaluating the evidence
tendered by the parties, the Court must accept the evidence of the nonmovant as credible and draw
all justifiable inferences in its favor. Anderson, 477 U.S. at 255. “A non-conclusory affidavit can
create genuine issues of material fact that preclude summary judgment, even if the affidavit is self-
serving and uncorroborated.” Lester v. Wells Fargo Bank, N.A., 805 F. App'x 288, 291 (5th Cir.
2020) (citations omitted).
Note that “a district court has somewhat greater discretion to consider what weight it will
accord the evidence in a bench trial than in a jury trial.” Matter of Placid Oil Co., 932 F.2d 394,
397 (5th Cir. 1991); see also Nunez v. Superior Oil Co., 572 F.2d 1119, 1124 (5th Cir. 1978) (“If
decision is to be reached by the court, and there are no issues of witness credibility, the court may
conclude on the basis of the affidavits, depositions, and stipulations before it, that there are no
genuine issues of material fact, even though decision may depend on inferences to be drawn from
what has been incontrovertibly proved . . . . The judge, as trier of fact, is in a position to and ought
to draw his inferences without resort to the expense of trial.”).

B. Analysis
First Mercury contends that the Direct-Action suit against it as DDG’s insurer must be
dismissed for two chief reasons: 1) the policies contain exclusions barring any hypothetical
recovery from First Mercury as DDG’s insurer, and 2) the policies were not in effect because
damages did not “manifest” until after all of the coverage periods had elapsed. DDG responds that
genuine issues of material fact preclude summary judgment. At issue in First Mercury’s first
argument are general principles of contract interpretation and whether the exclusions apply to the
damages claimed by Plaintiff. At issue in First Mercury’s second argument is whether the Court
should apply the “manifestation theory” trigger of policy coverage, or whether it should apply

some other theory.
The parties do not dispute that the interpretation of the Policies is controlled by Louisiana
law. The Court agrees and finds that Louisiana law applies to interpretation of the policies. See
Pioneer Expl., L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 512 (5th Cir. 2014) (Federal courts sitting
in diversity apply the choice-of-law rules of the forum state.); see also Champagne v. Ward, 2003-
3211 (La. 1/19/05); 893 So.2d 773 (In cases involving contractual interpretation of an insurance
policy, Louisiana courts employ the law of the state whose policies would be most seriously
impacted if its law was not applied.); see also La. C.C. Art. 3537.
1. Insurance Contract Interpretation Under Louisiana Law
Under Louisiana law, an insurer’s duty to defend an insured is a separate and distinct
inquiry from the insurer’s duty to indemnify the insured in the underlying liability case. Arceneaux
v. Amstar Corp., 2015-0588 (La. 9/7/16), 200 So. 3d 277, 281 (citing Elliott v. Cont'l Cas. Co.,
2006-1505 (La. 2/22/07), 949 So. 2d 1247, 1250). In determining whether an insurance contract

creates a duty to defend, Louisiana courts apply the “Eight Corners Rule.” See Pontchartrain Nat.
Gas Sys. v. Texas Brine Co., LLC, 2018-0244 (La. App. 1 Cir. 10/11/18), 264 So. 3d 545, 552–
53, writ denied, 2019-0080 (La. 3/6/19), 264 So. 3d 1204, (citing Maldonado v. Kiewit La. Co.,
2013-0756 (La. App. 1 Cir. 3/24/14), 146 So. 3d 210, 218)). The Eight Corners Rule compares the
plaintiff’s petition to the policy without considering extrinsic evidence. Id. A duty to defend is
created unless the policy unambiguously excludes coverage as applied to the allegations in the
petition. Arceneaux, 200 So.3d at 281–82 (citing Steptore v. Masco Constr. Co., 93-2064 (La.
8/18/94), 643 So. 2d 1213, 1218)); Elliott, 949 So. 2d at 1250. If the pleadings against the insured
disclose even a possibility of liability under the policy, the insurer has a duty to defend the insured.

Id. at 282 (citing Steptore, 643 So. 2d at 1218); Elliott, 949 So. 2d at 1250; and Meloy v. Conoco,
Inc., 504 So. 2d 833, 839 (La. 1987)).
Here, First Mercury accepted DDG’s defense with a reservation of rights. Because DDG
made no claims against First Mercury for failure to accept its defense, the Court assumes for the
purposes of this Motion that First Mercury had a duty to defend and acted in conformity with said
duty. However, the question of an insurer’s duty to defend is a different question than an insurer’s
duty to indemnify.
An insurer’s duty to indemnify depends on the facts established in the lawsuit. Hanover
Ins. Co. v. Superior Labor Servs., Inc., 11-2375, 2016 WL 7156067, at *2 (E.D. La. Dec. 8, 2016)
(“The duty to indemnify is ‘triggered by actual facts that establish liability in the underlying
lawsuit.’”); see also Admiral Ins. Co. v. Dual Trucking, Inc., CV 20-383, 2020 WL 2526952, at
*8 (E.D. La. May 18, 2020). When uncontroverted facts preclude the possibility of a duty to
indemnify, “the duty to defend ceases and the duty to indemnify is negated.” Donahue v. Republic
Nat’l Distrib. Co., 489 F.Supp.3d 455, 470 (E.D. La. 2020).

First Mercury maintains that coverage is excluded under the Policies because of several
exceptions.22 First Mercury also argues that damages did not occur during the policy periods
because defects did not manifest until after the last policy period terminated, and that Plaintiff’s
breach of contract claims against DDG are not an occurrence or property damage as defined in the
Policies.23 DDG argues in response that there are genuine issues of material fact as to whether
coverage under the Policies was triggered due to conflicting testimony as to when the damage
occurred.24 DDG also argues that there are genuine issues of material fact as to the existence of
any deficiencies in the work it performed, and, in the alternative, the extent of damages arising out
of any alleged deficiencies.25

The Court agrees with First Mercury that the exclusions in the Policies clearly and
unambiguously preclude coverage for the damages sought by the Plaintiff in its Direct-Action
Statute suit against First Mercury. The Court also finds that the manifestation theory of trigger of
coverage applies to the Policies and that under the manifestation theory, Plaintiff’s damages did
not occur during the First Mercury policy periods.

22 See [Doc. No. 236-1, p. 5]
23 See [Id.]
24 See [Doc. No. 243, p. 3]
25 See [Id. at pp. 6–7]
i. The Policy Exclusions
First Mercury argues that the following Policy Exclusions preclude suit against it for
indemnity or contribution under the Direct Action Statute: Damage to Property Exclusion,26
Damage to Your Product Exclusion,27 Damage to Impaired Property or Property Not Physically
Injured Exclusion,28 Exterior Insulation and Finish Systems Exclusion (“EIFS Exclusion”),29

Professional Liability Exclusion,30 and Contractual Liability Exclusion.31 The Court will address
each exclusion below.
a. Damage to Property Exclusion
The Policies contain a Damage to Property Exclusion which states that:
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; or
(6) That particular part of any property that must be restored,
repaired or replaced because “your work” was incorrectly
performed on it.32
Under the Policies, “Your Work” is defined as follows:
22. “Your work”:
a. Means:
(1) Work or operations performed by you or on your
behalf; and
(2) Materials, parts or equipment furnished in connection
with such work or operations.

26 See [Doc. Nos. 236-8, pp. 8-9, 236-9 pp. 66-67, 236-10, pp. 128–129, and 236-11, pp. 197–98]
27 See [Doc. Nos. 236-8, p. 9, 236-9 p. 67, 236-10, p. 129, and 236-11, p. 198]
28 See [Id.]
29 See [Doc. Nos. 236-8, p. 33, 236-9 p. 90, 236-10, p. 154, and 236-11, p. 224]
30 See [Doc. Nos. 236-8, p. 31, 236-9 p. 91, 236-10, p. 155, and 236-11, p. 225]
31 See [Doc. Nos. 236-8, p. 6, 236-9 p. 64, 236-10, p. 126, and 236-11, p. 195]
32 See supra footnote 26.
b. Includes:
(1) Warranties or representations made at any time with
respect to the fitness, quality, durability, performance or
use of “your work”, and
(2) The providing of or failure to provide warnings or
instructions.33
First Mercury asserts that Exclusions (j)(5) and (j)(6) of the Damage to Property Exclusions are
intended to limit coverage for defective work performed by the insured.34
In Supreme Servs. & Specialty Co. v. Sonny Greer, Inc., 2006-1827 (La. 5/22/07), 958 So.
2d 634, 641, the Louisiana Supreme Court held that a CGL containing the “work product”
exclusion “does not insure any obligation of the policy holder to repair or replace his own defective
product.” The court also noted that a CGL policy “is not written to guarantee the quality of the
insured’s work or product.” Id. (quoting McMath Const. Co. v. Dupuy, 2003-1413 (La. App. 1 Cir.
11/17/04), 897 So. 2d 677, writ denied, 2004-3085 (La. 2/18/05), 896 So. 2d 40).
Here, the Damage to Property Exclusion unambiguously precludes coverage for any
damage arising out of DDG’s defective work. Subsection j(5) applies to the property in question
here because the Plaintiff alleges that subcontractors hired by DDG performed defective work.
Similarly, subsection j(6) also applies as Plaintiff hired replacement contractors and subcontractors
to finish and repair DDG’s allegedly deficient work. There is also no question that DDG’s work
qualifies as “your work” under the Policies. DDG hired various subcontractors to complete the
construction of the hotel. Therefore, the work to construct the hotel qualifies as work or operation
performed “on your (DDG’s) behalf.”
The evidence makes clear that all of the damage occurred on property worked on by DDG’s
subcontractors and did not affect other property. Ladd Ehlinger’s Report, the report relied upon by

33 [Doc. Nos. 236-8, p. 20, 236-9 p. 78, 236-10, p. 140, and 236-11, p. 209]
34 [Doc. No. 236-1, p. 19]
DDG’s corporate representative, identifies numerous errors made by Plaintiff’s architect and
DDG.35 Specifically, the following errors were identified and attributed to DDG and the Plaintiff’s
architect in Ehlinger’s Report:
inadequate waterproofing of an elevator pit,
floating vanities falling off the wall,
improper Exterior Insulation and Finish System (“EIFS”),
the roof access hatch opens the wrong direction,
stairwells missing layers of gypsum board,
fireproofing, and incorrect paint,
the Store Front and windows lack end dams to prevent leaks,
unconventional behavior by the architect,
the structural steel column block outs were not filled with concrete,
improper framing causing door frames not to fit properly,
ceilings not uniform,
lobby walls out of plumb with elevator frames,
a single stud (rather than a double stud) installed on the underside of
the floor trusses,
the elevator shaft failing to meet structural requirements,
two fresh air makeup units for HVAC not installed,
electrical and mechanical work not up to code,
dryer lint traps installed too far below the slab,
washing machine pad not properly designed to accommodate the
volume of water discharged by the washing machines,
inability of roof drains to discharge into the storm drainage,
no provisions to run irrigation piping under the parking lot,
use of the wrong forms, and
conflicts of interest.36
All of these alleged errors concern the particular parts of property that DDG or its subcontractors
worked on, and none reference damage to other property. Additionally, the Fourth Amended
Complaint alleged the following problems associated with the design and construction of the
Project:
One of the two fresh air makeup units was not installed;
roof drains not tied into storm drainage;
failed to install conduit in parking areas to allow for electrical wiring
to light poles;

35 [Doc. No. 236-16]
36 [Id.]
failed to properly design and install irrigation lines under the parking
lot to service landscape areas around the building;
failed to properly design and install commercial washing machine
pad to accommodate volume of water discharged by the washing
machines;
failed to design and install the elevator shaft in accordance with
structural requirements;
failed to properly design and install the structure and interior spaces;
failed to fill structural steel columns with concrete;
failed to design and install the structure to required two-hour fire
rating;
failed to properly construct and waterproof the elevator pit;
failed to properly install the roof access hatch;
failed to properly design and install dryer lint trap;
failed to design and install electrical work in compliance with
applicable code sections;
failed to design and install mechanical work in compliance with
applicable code sections;
defectively designed and constructed the exterior EFIS cladding;
failed to properly design exterior window bracing and framing;
failed to properly design and construct truss system;
failed to properly design and install the foundation system and failed
to design and install adequate blocking to support floating vanities.37
Every specific item of damage identified by Plaintiff only concerns that particular part of property
that must be restored, repaired, or replaced because DDG’s work was incorrectly performed on
that property, and no item of damage identifies damage to other property, i.e. damage to property
that DDG’s subcontractors did not design or construct. Accordingly, the Court finds that the
Damage to Property Exclusion applies to exclude coverage of all damages related to repairing or
correcting DDG’s allegedly deficient work.
b. Damage to Your Product Exclusion
The Policies define and exclude damage to “Your Product.” “Your Product” is defined as:
(k) Any goods or products, other than real property,
manufactured, sold, handled, distributed or disposed of by:
(a) You;

37 [Doc. No. 132, pp. 5–6]
(b) Others trading under your name; or
(c) A person or organization whose business or assets you
have acquired; and
(2) Containers (other than vehicles), materials, parts or
equipment furnished in connection with such goods or
products.
b. Includes
(1) Warranties or representations made at any time with
respect to the fitness, quality, durability, performance or use
of “your product”; and
(2) The providing of or failure to provide warnings or
instructions[.]38
In Atain Specialty Ins. Co. v. VIG II, LLC, CV 15-6499, 2017 WL 3867672 (E.D. La. Feb. 9, 2017),
the court analyzed a similarly worded “Your Product Exclusion.” The court noted that the
exclusion “encompasses damage to the product itself.” Id. at 6. The court first determined what
qualified as the insured’s “product,” and then determined whether the plaintiff alleged damage to
anything other than the insured’s product. Id. at 6–7. The insurer claimed that the plaintiff’s entire
home was the insured’s product. Id. at 6. The court noted that the insured sold “the entire home”
to plaintiffs. Id. The policies defined “product” as “[a]ny goods or products, other than real
property, manufactured, sold, handled, distributed or disposed of by . . . [y]ou.” Id. Based on this
definition, the court found that the home was a good or product that was both manufactured and
sold by the insured, and that the Damage to Your Product provisions precluded indemnification
for all damage to the plaintiffs’ home. The court further noted that the insurer owes coverage only
if the petition “includes claims for damage to anything other than the home itself.” Id. at *7. The
petition contained no allegations of damage to anything other than the home itself so the court
found that the policies and petition “unambiguously preclude coverage.” Id.

38 See supra footnote 27.
Here, DDG was the general contractor for the Project. DDG’s corporate representative
stated that DDG’s role was to manage the entire construction of the hotel. Therefore, the Project
itself – the construction of the hotel – is DDG’s product. The Damage to Your Product Exclusion
unambiguously precludes coverage for such products. First Mercury owes coverage only for
damage to other property. As explained above, Plaintiff has not identified damage to any property

other than property constructed or designed by DDG or one of its subcontractors. Like the plaintiff
in Atain, Plaintiff seeks only the cost of repairing the damage to the Hampton Inn and remedying
the defects in the Project. Accordingly, the Court finds that the Damage to Your Product Exclusion
precludes coverage for damages arising out of the cost of repairing damage to the Project itself.
c. Damage to Impaired Property or Property Not Physically
Injured
The Policies include a “Damage to Impaired Property Exclusion” which states:
m. Damage To Impaired Property Or Property Not Physically
Injured
“Property damage” to “impaired property” or property that has not
been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition
in “your product” or “your work”; or
(2) A delay or failure by you or anyone acting on your behalf
to perform a contract or agreement in accordance with its
terms.
This exclusion does not apply to the loss of use of other property
arising out of sudden and accidental physical injury to “your
product” or “your work” after it has been put to its intended use.39
Section V in the Policies includes the following relevant definitions:
8. “Impaired property” means tangible property, other than “your
product” or “your work”, that cannot be used or is less useful
because:
a. It incorporates “your product” or “your work” that is
known or thought to be defective, deficient, inadequate or
dangerous; or

39 See supra footnote 28.
b. You have failed to fulfill the terms of a contract or
agreement; if such property can be restored to use by the
repair, replacement, adjustment or removal of “your
product” or “your work” or your fulfilling the terms of the
contract or agreement.40
In Stewart Interior Contractors, L.L.C. v. Metalpro Indus., L.L.C., the Louisiana Fourth Circuit
Court of Appeals examined an identical provision in a CGL. The court found the provision to be
“clear and unambiguous” and noted that it “precludes coverage from damage to property that has
not been physically injured or for which only loss of use is sought.” 2007-0251 (La. App. 4 Cir.
10/10/07), 969 So. 2d 653, 663–64, citing N. Am. Treatment Sys., Inc. v. Scottsdale Ins. Co., 2005-
0081 (La. App. 1 Cir. 8/23/06), 943 So. 2d 429, writ denied, 2006-2918 (La. 2/16/07), 949 So. 2d
423, and writ denied, 2006-2803 (La. 2/16/07), 949 So. 2d 424; PCS Nitrogen Fertilizer, L.P. v.
U.S. Filter/Arrowhead, Inc., 2001-2577 (La. App. 1 Cir. 11/8/02), 834 So. 2d 456, 459. The court
also noted that the exclusion “does not apply where there is physical damage to property other than
the insured’s work or product after the product has been put to its intended use.” Id. citing Gaylord
Chem. Corp. v. ProPump, Inc., 1998-2367 (La. App. 1 Cir. 2/18/00), 753 So. 2d 349, 355.
Here, as stated above, the Ehlinger Report and Fourth Amended Complaint describe
numerous items which were inadequately constructed or designed by DDG or its subcontractors.
There is no evidence that any of these defective items damaged property which was not constructed
or designed by DDG or its subcontractors. Accordingly, the Court finds that the Damage to
Impaired Property or Property Not Physically Injured Exclusion clearly and unambiguously
excludes liability for loss of use attendant to the repair of property constructed or designed by
DDG or its contractors.

40 [Doc. Nos. 236-8, p. 9, 236-9 p. 67, 236-10, p. 129, and 236-11, p. 198]
d. Exterior Insulation and Finish Systems Exclusion
The Policies include an EIFS Exclusion which states:
A. This insurance does not apply to “bodily injury”, “property
damage” or “personal and advertising injury” arising out of, caused
by, or attributable to, whether in whole or in part, the following:
1. The design, manufacture, construction, fabrication,
preparation, distribution and sale, installation, application,
maintenance or repair, including remodeling, service,
correction or replacement, of any “exterior insulation and
finish system” or any part thereof, or any substantially
similar system or any part thereof, including the application
or use of conditioners, primers, accessories, flashings,
coatings, caulking or sealants in connection with such a
system; or
2. “Your product” or “your work” with respect to any
exterior component, fixture or feature of any structure if an
“exterior insulation and finish system”, or any substantially
similar system, is used on the part of that structure
containing that component, fixture or feature.
B. The following definition is added to the Definitions Section:
“Exterior insulation and finish system” means a non-load bearing
exterior cladding or finish system, and all component parts therein,
used on any part of any structure, and consisting of:
1. A rigid or semi-rigid insulation board made of expanded
polystyrene and other materials;
2. The adhesive and/or mechanical fasteners used to attach
the insulation board to the substrate;
3. A reinforced or unreinforced base coat;
4. A finish coat providing surface texture to which color may
be added; and
5. Any flashing, caulking or sealant used with the system for
any purpose.41
This EIFS Exclusion precludes coverage for “property” damage attributable to any EIFS. The EIFS
Exclusion also excludes coverage for the insured’s “product” or “work” with respect to a structure
using EIFS or a substantially similar system.

41 See supra footnote 29.
Here, the Fourth Amended Complaint alleges damages for defectively designed and
constructed exterior EIFS cladding.42 Additionally, the Ehlinger Report states that the EIFS was
not properly designed or constructed. Accordingly, the Court finds that the EIFS Exclusion is clear
and unambiguous and that it excludes coverage for damage related to the improper design or
construction of the EIFS.

e. Professional Liability Exclusion
The Policies contain a Professional Liability Exclusion which states:
1. This insurance does not apply to “bodily injury,” “property
damage” or “personal and advertising injury” arising out of the
rendering of or failure to render any professional services by you or
on your behalf, but only with respect to either or both of the
following operations:
a. Providing engineering, architectural or surveying services
to others in your capacity as an engineer, architect or
surveyor; and
b. Providing, or hiring independent professionals to provide,
engineering, architectural or surveying services in
connection with construction work you perform. . . .
2. Subject to Paragraph 3. below, professional services include:
a. Preparing, approving, or failing to prepare or approve,
maps, shop drawings, opinions, reports, surveys, field
orders, change orders, or drawings and specifications; and
b. Supervisory or inspection activities performed as part of
any related architectural or engineering activities.
3. Professional services do not include services within construction
means, methods, techniques, sequences and procedures employed
by you in connection with your operations in your capacity as a
construction contractor.43
This exclusion precludes coverage for “property damage” arising out of the rendering or failure to
render professional services by DDG and its subcontractors. Additionally, this exclusion precludes
coverage for property damage arising out of providing or hiring independent professionals to

42 [Doc. No. 132, p. 26]
43 See supra footnote 30.
provide engineering, architectural, or surveying services in connection with construction work
DDG performs. See Project Consulting Servs., Inc. v. Emps. Ins. Co. of Wausau, No. CV 20-1441,
2021 WL 4148100 (E.D. La. Sept. 13, 2021), appeal dismissed, No. 21-30651, 2022 WL 1165408
(5th Cir. Feb. 25, 2022) (Where the court held that an insurer had no duty to defend the insured
from a professional liability claim because of a similarly worded professional liability exclusion).

Here, Plaintiff alleges several damages associated with the design of the Project.44 The
Court finds that the Professional Liability Exclusion is clear and unambiguous. The Court also
finds that this exclusion precludes coverage of DDG providing engineering, architectural, or
surveying services, and DDG hiring independent professionals to provide engineering,
architectural, or surveying services in connection with construction work performed by DDG.
f. Contractual Liability Exclusion
The Policies include a Contractual Liability Exclusion which excludes the following:
“Bodily injury” or “property damage” for which the insured is
obligated to pay damages by reason of the assumption of liability in
a contract or agreement. This exclusion does not apply to liability
for damages:
(1) That the insured would have in the absence of the
contract or agreement; or
(2) Assumed in a contract or agreement that is an “insured
contract”, provided the “bodily injury” or “property
damage” occurs subsequent to the execution of the contract
or agreement. Solely for the purposes of liability assumed in
an “insured contract”, reasonable attorney fees and
necessary litigation expenses incurred by or for a party other
than an insured are deemed to be damages because of
“bodily injury” or “property damage”, provided:
(a) Liability to such party for, or for the cost of, that
party’s defense has also been assumed in the same
“insured contract”; and
(b) Such attorney fees and litigation expenses are for
defense of that party against a civil or alternative

44 See [Doc. No. 132, pp. 5–6]
dispute resolution proceeding in which damages to
which this insurance applies are alleged.
An “occurrence” in the breach of contract context takes place when the defective workmanship or
the incorporation of defective materials result in related property damage. Markel Am. Ins. Co. v.
Schubert’s Marine E., Inc., CIV.A. 04-376, 2007 WL 54808, at *3 (E.D. La. Jan. 5, 2007) (citing
Hartford Cas. Co. v. Cruse, 938 F.2d 601, 604–05 (5th Cir. 1991)). Here, as explained above,
although Plaintiff has identified several defects in DDG’s work, Plaintiff has not identified any
other property damage caused by those defects. Accordingly, the Court finds that no “occurrence,”
as defined in the Policies, has taken place, and that the Contractual Liability Exclusion precludes
coverage for any contractual liability that may arise out of DDG’s defective work.
ii. Trigger of Coverage

Although the Court finds that the Policies exclude coverage of any hypothetical damage
Plaintiff may seek to recover from First Mercury on behalf of DDG, the Court nonetheless will
examine whether coverage under the Policies was triggered. First Mercury argues that coverage of
the Policies is triggered once the damages first “manifest,” and that the Policies do not afford
coverage to DDG because the damages did not manifest until after the last Policy terminated on
June 27, 2017. Additionally, First Mercury argues that breach of contract claims do not constitute
“an occurrence” under the Policies. In response, DDG argues that there is a genuine issue of
material fact as to when the damages first manifested because of testimony by the owner of the
construction company hired to replace DDG and testimony by DDG’s corporate representative.

The Court finds that the manifestation theory of trigger of damages applies to the Policies
and that there is no genuine issue of material fact as to whether damages occurred during the First
Mercury policy periods.
a. Manifestation of Damages
Louisiana courts generally apply the manifestation theory of damages to determine when
property damage takes place for purposes of triggering coverage for construction defects. See
Mann v. Tim Clark Constr., LLC, 2018-0961 (La. App. 4 Cir. 5/22/19), 273 So. 3d 397, 402–03,
writ denied, 2019-01019 (La.10/1/19), 280 So. 3d 158; Rando v. Top Notch Props., L.L.C., 2003-

1800 (La. App. 4 Cir. 6/2/04), 879 So. 2d 821, 833. Under the manifestation theory, property
damage “occurs” when it first becomes manifest, regardless of when the act that caused the damage
occurred. Mann, 273 So. 3d at 402–03 (citing Eagle Pipe & Supply, Inc. v. Amerada Hess Corp.,
2010-2267 (La. 10/25/11), 79 So. 3d 246, 278 n.75); M & R Drywall, Inc. v. MAPP Constr., LLC,
2017-0186 (La. App. 1 Cir. 4/29/19), 280 So. 3d 260, 276, writ denied sub nom. M&R Drywall,
Inc. v. Mapp Constr., LLC, 2019-01325 (La. 11/19/19), 282 So. 3d 1073, and writ denied, 2019-
01403 (La. 11/19/19), 282 So. 3d 1073, and writ denied, 2019-01411 (La. 11/19/19), 282 So. 3d
1074. Further, “[w]hen uncontroverted facts preclude the possibility of a duty to indemnify, the
duty to defend ceases and the duty to indemnify is negated.” Donahue, 489 F. Supp. 3d at 470.

The Court finds that the manifestation theory of trigger of coverage applies here. Further,
the uncontroverted testimony establishes that damages manifested after the last First Mercury
policy period terminated, precluding the possibility that First Mercury has a duty to indemnify
DDG.
The Court rejects DDG’s argument that there is a genuine issue of material fact as to
whether coverage was triggered under the Policies. In support of its argument, DDG relies upon
the testimony of Pinu Patel (“Patel”), owner of the construction company hired to replace DDG,
and Suni Desai (“Desai”), the corporate representative of DDG.
According to DDG, Desai testified that he “could not recall” whether DDG did any
additional work during or immediately following the issuance of the alleged notice of default. As
noted above, the notice of default was allegedly issued on June 1, 2017, the Construction Contract
was terminated by Plaintiffs seven days afterwards, and the last First Mercury policy Period
terminated on June 27, 2017. DDG’s argument as to when work on the Construction Project ended

is irrelevant as to whether coverage under the Policies was triggered. It is undisputed that DDG
performed work on the Project while the Policies were in effect. The pertinent question is whether
any damages manifested before June 27, 2017, the date the last First Mercury policy Period ended.
DDG also cites to Patel’s deposition testimony to support its argument. Patel testified that
the Project was approximately fifty percent finished when his company took over construction of
the hotel; specifically, he stated:
Fifty percent when I -- when they told me to take over, and that's the
reason I told them there's not enough money left because there's a lot
of redo's that we would need to do. And then on top of it, whoever
the sub-contractor, the new sub- contractor, would have had to walk
in there and find out what's happening, what happened, how did it do,
and all that good stuff.45
According to DDG, “there is a question as to when the visit that Mr. Patel referenced took place
such that any issues with the work could have manifested or been identified at that time.”46 Patel’s
company took over the Project in September 2017,47 but it is unclear when Patel’s initial visit took
place.
The date of Patel’s visit could be a relevant issue if he had testified that he observed defects
during that initial visit, but he testified that he observed no defects during his first visit.
Specifically, Patel testified:

45 [Doc. No. 243-2, pp. 32-33]
46 [Doc. No. 243, p. 6]
47 [Doc. No. 236-7, p. 198]
Q Although no errors were pointed out, in your experience as a
general contractor while you were there, --
A Uh-huh.
Q -- did you observe any construction defect errors?
A No.48
Further, Patel testified that construction defects were not “pointed out” during his visit, that the
visit took place for “30, 40 minutes max,” that “everything was locked,” that he “didn’t want to go
inside,” and that he was not there long enough to “say or point out any errors.”49 Patel’s testimony
demonstrates that any factual issue as to when his visit took place is irrelevant because there is no
evidence that he observed any defect during his visit.
Desai also testified that Patel’s company discovered the defects while trying to obtain
approval from city inspectors so that the hotel could open. This demonstrates that the defects must
have been discovered sometime after Patel’s company took over. Patel’s company took over in
September of 2017. The last First Mercury policy period ended in June of 2017. Desai’s testimony
demonstrates that there is no factual issue as to when the damages were first discovered, i.e., when
the damages first “manifested.” Accordingly, the Court finds that coverage under First Mercury’s
Policies was not triggered because the damage did not manifest until sometime after the last Policy
expired.
III. CONCLUSION
For the reasons set forth herein,
IT IS ORDERED, ADJUDGED, AND DECREED that the Motion for Summary
Judgment on Plaintiff’s Fourth Amended Complaint [Doc. No. 236] filed by Defendant First
Mercury Insurance Company (“First Mercury”) is hereby GRANTED.

48 [Doc. No. 243-2, p. 32]
49 [Id.]
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that any claim against
First Mercury set out in the Fourth Amended Complaint [Doc. No. 132] is hereby DISMISSED
WITH PREJUDICE.
MONROE, LOUISIANA, this 29th day of December, 2022.

/lerky A. Dought j
Unttited States District Fudg

22

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10195335. Public record. Not legal advice.