Bruce-Terminix Co. v. Zurich Ins. Co.

Decision Date15 September 1998
Docket NumberNo. COA97-1389.,COA97-1389.
Citation130 NC App. 729,504 S.E.2d 574
CourtNorth Carolina Court of Appeals
PartiesBRUCE-TERMINIX COMPANY, Plaintiff, v. ZURICH INSURANCE COMPANY and Harleysville Mutual Insurance Company, Defendants.

Hill, Evans, Duncan, Jordan, & Davis, PLLC by Lindsay R. Davis, Jr., Greensboro, for plaintiff Bruce-Terminix Company.

Wishart, Norris, Henninger & Pittman, P.A. by John C. Lattanza, Charlotte, for defendant Zurich Insurance Company.

Teague, Rotenstreich & Stanaland, L.L.P. by Stephen G. Teague, Greensboro, for defendant Harleysville Mutual Insurance Company.

SMITH, Judge.

On 15 April 1996, Susan L. Gibson (Gibson), having discovered property damage caused by a termite infestation in her home, filed suit against Bruce-Terminix Company (Terminix) and Milton and Rachel Jessup (the Jessups). In that suit Gibson alleged that when she purchased the home from the Jessups, the home was covered by a Terminix termite protection plan and that she received a continuation of that plan from Terminix. She further alleged that when she received the continuation plan, Terminix did not furnish or disclose an inspection graph it had completed 13 May 1987 showing extensive termite damage. Terminix did, however, provide a HUD form, prepared 29 July 1987 for Gibson's real estate closing, stating there was no termite damage.

In February or March 1988, Gibson contacted Terminix when she found indications of a possible swarm of termites in the kitchen area of her home. Terminix responded by treating the home and promising to make any necessary repairs to the structure. Gibson attempted to contact Terminix and its carpenter several times before Terminix indicated to her that everything was "okay."

On 26 March 1993, Gibson detected several soft spots in the walls of her living room and had a contractor inspect the house for termite damage. When the contractor tore away the existing wood in the living room, he discovered extensive termite and water damage. Gibson filed her suit against Terminix and the Jessups on 15 April 1996 for fraud and misrepresentation, unfair and deceptive trade practices, breach of contract/warranty, and negligence.

In response to Gibson's complaint, Terminix contacted both of its insurance providers for the time periods during which the alleged damage occurred. Harleysville Mutual Insurance Company (Harleysville) provided Terminix commercial general liability insurance coverage from 31 December 1986 through 1 January 1989. Zurich Insurance Company (Zurich) provided Terminix commercial general liability insurance coverage from 1 January 1989 through 1 July 1994. Both Harleysville and Zurich refused to defend Terminix against Gibson's suit. Harleysville stated that it was not the commercial general liability insurance provider for Terminix when the property damage occurred. Zurich claimed that not only was it not the commercial general liability insurance carrier when the damage occurred, but also that the insurance policy included exclusion clauses for each of Gibson's claims.

Terminix hired counsel to represent its interests in the Gibson suit. The lawsuit was eventually settled through mediation. Gibson had incurred $22,816.00 in actual property damage. Terminix contributed $16,500.00 toward a total settlement of $19,000.00 and incurred $14,393.45 in legal expenses for a total of $30,893.45.

Terminix filed a complaint and request for declaratory judgment in the instant case against Zurich and Harleysville on 19 July 1996. Terminix alleged that Zurich and Harleysville owed it a defense and indemnity. Harleysville and Zurich answered the complaint denying any liability or coverage in connection with the Gibson suit and filed counterclaims for declaratory judgment against Terminix and cross claims against each other for a declaration that the other was responsible for coverage.

Terminix moved for summary judgment against both defendants, claiming that one or both were responsible to defend and indemnify it. Harleysville also moved for summary judgment against both Terminix and Zurich. The trial court granted Terminix's motion for summary judgment against Zurich, denied its motion for summary judgment against Harleysville and granted Harleysville's motion for summary judgment against Terminix.

I. Standard of Review

At the outset, we note that the standard of review on appeal from summary judgment is whether there is any genuine issue of material fact and whether the moving party is entitled to a judgment as a matter of law. Wilmington Star-News, Inc. v. New Hanover Regional Medical Center, Inc., 125 N.C.App. 174, 178, 480 S.E.2d 53, 55, appeal dismissed, 346 N.C. 557, 488 S.E.2d 826 (1997). Further, the evidence presented by the parties must be viewed in the light most favorable to the non-movant. Id. The court should grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen.Stat. § 1A-1, Rule 56(c)(1990).

II. Terminix's Appeal

Terminix's sole contention on appeal is that the trial court erred by granting summary judgment for Harleysville. According to Terminix, since Harleysville's coverage was in effect from 31 December 1986 to 1 January 1989, it was "triggered" by the claims asserted by Gibson for property damage caused during that time. Terminix states that there can be "multiple times of discovery" and that each carrier is liable for damages occurring during their policy period.

This court set the standard for determining the date when property damage "occurs," for insurance purposes, in West American Insurance Co. v. Tufco Flooring East, 104 N.C.App. 312, 409 S.E.2d 692 (1991), disc. review improvidently allowed, 332 N.C. 479, 420 S.E.2d 826 (1992). In Tufco, the court applied the discovery rule to a property damage case and stated that "for insurance purposes, property damage `occurs' when it is manifested or discovered." Id. at 317, 409 S.E.2d at 695 (quoting Mraz v. Canadian Universal Ins. Co., Ltd., 804 F.2d 1325, 1328 (4th Cir.1986)).

Terminix argues that Tufco does not require there to be only one date of discovery and thus both Harleysville and Zurich should be found responsible for Terminix's defense and indemnity in the Gibson suit. However, we hold that while the Tufco decision does not explicitly limit the discovery rule to only one date of discovery, we believe there can only be one date. To allow more than one date of discovery would destroy the clarity and purpose of the rule.

Terminix also argues that Gibson first became aware of termite damage in 1987 when the Harleysville insurance policy was in effect. However, while there may have been indications of termites in Gibson's home in 1987 and 1988, Gibson was assured by Terminix that any damage associated with those incidents was taken care of and that everything was "okay." The property damage which triggered Gibson's suit was not discovered by her until March 1993.

Viewed in the light most favorable to Terminix, the trial court determined that no issue of material fact existed with regard to the date of discovery in 1993 and that Harleysville was entitled to judgment as a matter of law. The trial court was correct in granting summary judgment for Harleysville.

III. Zurich's Appeal

Zurich first contends the trial court erred in granting summary judgment for Terminix on the grounds that the property damage alleged in the Gibson suit was discovered prior to Zurich's insurance coverage, i.e. during the period of Harleysville's coverage. According to Zurich, the termite damage manifested itself to Gibson on two occasions before Zurich began to insure Terminix. Zurich alleges that the first manifestation of the termite damage occurred when Gibson observed the prior owner repairing a termite damaged window sill in 1987 and the second manifestation of damage occurred when Gibson observed "a possible swarm of termites in the kitchen area" in 1988.

We do not agree with Zurich's contention that the manifestations in 1987 and 1988 triggered "discovery" for the purpose of the Gibson suit. In 1987, when Gibson saw Mr. Jessup repairing the damaged window area, he assured her that Terminix had treated the home and that he was repairing all of the damage. In addition, the HUD form prepared by Terminix for the Gibson property closing in 1987 indicated there was no termite damage. Further, in 1988, when Gibson reported a swarm of termites in the kitchen area of her home, she was assured by Terminix that the termites had been treated and everything was "okay." While there may have been indications of termites in Gibson's home prior to March 1993, termite damage did not manifest itself to her, as stated in her deposition, until March 1993, and therefore, as supported by Tufco, that date is the date of discovery.

Zurich next contends the trial court erred in granting summary judgment to Terminix because the events alleged in the Gibson suit are not covered by the terms of Zurich's insurance policy. The Gibson complaint alleged claims for...

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