Alverson v. Northwestern Nat. Cas. Co.

Decision Date14 February 1996
Docket Number19306,Nos. 19296,s. 19296
Citation1997 SD 9,559 N.W.2d 234
PartiesSteve ALVERSON, Plaintiff and Appellee, v. NORTHWESTERN NATIONAL CASUALTY COMPANY, Defendant and Appellant. . Considered on Briefs
CourtSouth Dakota Supreme Court

David R. Gienapp and Chris S. Giles of Arneson, Issenhuth, Gienapp & Blair, Madison, for plaintiff and appellee.

William C. Garry of Cadwell, Sanford & Deibert, Sioux Falls, for defendant and appellant.

SABERS, Justice (on reassignment).

¶1 Summary judgment was granted to Alverson on the basis that the insurance policy issued by Insurer provided coverage for certain property damage caused by Alverson in his masonry business. Insurer appeals. We reverse and hold that the exclusion for property damage when it is caused by "your work" is unambiguous. By notice of review, Alverson argues that his summary judgment motion could have been granted by applying the doctrine of reasonable expectations. We disagree and affirm the denial of summary judgment on that issue.


¶2 Alverson subcontracted with Schmidt Construction (Schmidt) to perform masonry veneer and fireplace work on a new residence under construction in Sioux Falls. The masonry work left a residue of dirt and mortar on the house and its windows. Alverson's employees applied an acid solution with a nylon scrub brush to remove this residue. When they scoured the windows, sand granules in the mortar left permanent scratches in the glass. Schmidt withheld $10,546.16 from the final payment due Alverson to cover the expense of replacing the windows.

¶3 Alverson filed a claim under his commercial general liability insurance policy (CGL). Insurer denied coverage on the basis that the loss was specifically excluded under the policy. Alverson sued and both parties filed motions for summary judgment. Alverson's motion was granted and Insurer appeals. By notice of review, Alverson argues that the doctrine of reasonable expectations provides coverage under the policy as an alternative ground for summary judgment.


¶4 Our standard of review on a motion for summary judgment is well settled:

In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the non-moving party and reasonable doubts should be resolved against the moving party. The non-moving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.

Lamp v. First Nat'l Bank of Garretson, 496 N.W.2d 581, 583 (S.D.1993) (citation omitted). There are no genuine issues of material fact in this case. Therefore, summary judgment will be affirmed if the trial court has correctly decided the legal issues before it. Farmland Ins. Cos. v. Heitmann, 498 N.W.2d 620, 622 (S.D.1993) (citing Stroh v. Town of Java, 463 N.W.2d 923 (S.D.1990); Bego v. Gordon, 407 N.W.2d 801 (S.D.1987); Trapp v. Madera Pacific, Inc., 390 N.W.2d 558 (S.D.1986)).

¶5 The construction of a written contract is a question of law. Bell v. East River Elec. Power Coop. Inc., 535 N.W.2d 750, 754 (S.D.1995); American State Bank v. Adkins, 458 N.W.2d 807, 809 (S.D.1990); Dirks v. Sioux Valley Empire Elec. Ass'n, Inc., 450 N.W.2d 426, 427-28 (S.D.1990). We review questions of law de novo. Aadland v. St. Luke's Midland Regional Medical Ctr., 537 N.W.2d 666, 668 (S.D.1995); King v. John Hancock Mut. Life Ins. Co., 500 N.W.2d 619, 621 (S.D.1993).


¶7 Both parties claim the language of the policy exclusion is unambiguous, yet each reaches a different conclusion as to its meaning. Therefore, we must first determine whether the exclusion is ambiguous. The CGL policy excludes coverage for certain property damage:

2. Exclusions.

This insurance does not apply to:


(6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it.

¶8 "A contract is ambiguous when application of rules of interpretation leave a genuine uncertainty as to which of two or more meanings is correct." City of Watertown v. Dakota, Minnesota & E. R.R. Co., 1996 SD 82, p 13, 551 N.W.2d 571, 574 (citing Baker v. Wilburn, 456 N.W.2d 304, 306 (S.D.1990)). As we stated in Olson v. United States Fid. & Guar. Co., 1996 SD 66, p 6, 549 N.W.2d 199, 200, specific rules of construction apply to the interpretation of an insurance policy:

Where the provisions of an insurance policy are fairly susceptible of different interpretations, the interpretation most favorable to the insured should be adopted. This rule of liberal construction in favor of the insured and strictly against the insurer applies only where the language of the insurance contract is ambiguous and susceptible of more than one interpretation.... This rule does not mean, however, that the court may seek out a strained or unusual meaning for the benefit of the insured.

Id. (citing Rogers v. Allied Mutual Ins. Co., 520 N.W.2d 614, 616 (S.D.1994)). "[A]n ambiguity is not of itself created simply because the parties differ as to the interpretation of the contract." Johnson v. Johnson, 291 N.W.2d 776, 778-79 (S.D.1980) (citations omitted). "An insurance contract's language must be construed according to its plain and ordinary meaning and a court cannot make a forced construction or a new contract for the parties." St. Paul Fire & Marine Ins. Co. v. Schilling, 520 N.W.2d 884, 887 (S.D.1994) (citations omitted).

¶9 The policy defines "property damage" as "[p]hysical 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." "Your work" is defined as "work or operations performed by you or on your behalf" and "materials, parts or equipment furnished in connection with such work or operations."

¶10 Alverson and his employees worked on the windows to remove the mortar from them. The key fact is that the windows were not damaged before the cleaning and could have been cleaned without being damaged. Alverson cleaned some of the windows himself and they were neither scratched nor damaged. His employees cleaned the other windows and scratched and damaged them. His employees did the work incorrectly and the windows had to be replaced.

¶11 Section (6) excludes damage to any property, which includes the windows, that must be replaced because "your work" was incorrectly performed on it. The trial court concluded that the exclusion is ambiguous because the term "your work" is subject to two interpretations. However, "your work" is defined in the policy as "work or operations performed by you or on your behalf." The window cleaning was "work" done "by" Alverson and his employees and it was done as part of the masonry contract. While work on windows was not included in the masonry contract, it became Alverson's work to clean them incidental to the contract. This was admitted by Alverson in his deposition. Therefore, "This insurance does not apply to: (6) That particular part of any property [the windows] that must be restored, repaired or replaced because 'your work' [window cleaning] was incorrectly performed on it." Accordingly, the exclusion applies and there is no coverage. 1


¶13 Alverson argues alternatively that the doctrine of reasonable expectations applies in this case and that we should adopt that doctrine.

The doctrine of reasonable expectations directs "[t]he objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations." Dairyland Ins. Co. v. Wyant, 474 N.W.2d 514, 516 (S.D.1991) (quoting Keeton, Insurance Law Rights At Variance With Policy Provisions, 83 HarvLRev 961, 967 (1970)). Although this doctrine governs interpretation of insurance contracts in other states, it has not been declared law in South Dakota. Wyant, 474 N.W.2d at 516; Trammell v. Prairie States Ins. Co., 473 N.W.2d 460, 463 (S.D.1991).

American Family Mut. Ins. Co. v. Elliot, 523 N.W.2d 100, 103 (S.D. 1994). As was the case in Elliot, we are not confronted with the issue of whether this doctrine might apply to an insurance contract which contained ambiguous language:

This Court expresses no opinion whether the doctrine of reasonable expectations would govern construction of an insurance contract if the terms of that contract were ambiguous, or may otherwise lead a policyholder to reasonably, but incorrectly, conclude that coverage existed. As in Wyant, that issue is not before us today because we have held that there is nothing ambiguous about this policy. The clear and plain meaning of the terms of the policy read as a whole exclude coverage[.]


¶14 There is nothing ambiguous about the policy exclusion in this case, and therefore, the doctrine of reasonable expectations simply does not apply to this policy language in these circumstances. We affirm on issue 2.

¶15 The damage was excluded under the terms of this policy. We reverse the trial court on issue 1 and remand for judgment in Insurer's favor.

¶16 MILLER, C.J., and KONENKAMP and GILBERTSON, JJ., concur.

¶17 AMUNDSON, J., dissents.

AMUNDSON, Justice (dissenting).

¶18 The purpose of a general liability policy is to provide coverage for injury to persons and damage to property. 11...

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