Judge Dennis Jacobs
Pavarini McGovern was general contractor for construction of WXIV/Broadway Grand Realty’s 40 Mercer St. residential condo project. Welding work was subcontracted to Ment Brothers. Pavarini sued Ment after finding damage purportedly caused by welding sparks. No units had been sold when the damage occurred. Citing the residential construction exclusion in its commercial liability policy to Ment, insurer Interstate refused to defend Ment on the grounds that the damage had occurred during construction of a condominium. The Second Circuit reversed district court’s grant of judgment for Interstate. It found that 40 Mercer satisfied the policy’s definition of “apartment,” such that the policy’s apartment exception to the residential construction exclusion entitled Ment to coverage. Record evidence showed that as of 2005 WXIV/Broadway was sole fee owner of the entire 40 Mercer property. Regardless of Intestate’s argument that 40 Mercer was ultimately intended to be a condo development, under governing New York law a building does not become a condominium until a condominium declaration is filed. No such declaration was filed until February 2007, well after Ment completed its work on 40 Mercer.