American Concept Ins. Co. v. Jones

Citation935 F. Supp. 1220
Decision Date03 September 1996
Docket NumberCivil No. 2:95cv634.
PartiesAMERICAN CONCEPT INSURANCE COMPANY, a South Dakota corporation, Plaintiff, v. Ralph JONES, Arlene Jones, and Utah Home Fire Insurance Company, a Utah corporation, Defendants. Ralph JONES and Arlene Jones, Third-Party Plaintiffs, v. INSURANCE BY KATHY, INC., a Utah corporation, Third-Party Defendant.
CourtU.S. District Court — District of Utah

COPYRIGHT MATERIAL OMITTED

Mark L. Anderson, Christensen & Jensen, Salt Lake City, UT, for Plaintiff.

Ray G. Martineau, Salt Lake City, UT, for Defendants/Third-Party Plaintiffs, Joneses.

Roger R. Fairbanks, Salt Lake City, UT, for Third-Party Defendant, Insurance By Kathy, Inc.

MEMORANDUM DECISION AND ORDER DENYING PLAINTIFF AMERICAN'S MOTION FOR SUMMARY JUDGMENT AND GRANTING THIRD-PARTY DEFENDANT KATHY'S MOTION FOR SUMMARY JUDGMENT

WINDER, Chief Judge.

This matter is before the court on Plaintiff American Concept Insurance Company's ("American") and Insurance by Kathy, Inc.'s ("Kathy") motions for summary judgment. A hearing was held on June 25, 1996. At the hearing, American was represented by Mark L. Anderson, Defendants Ralph Jones and Arlene Jones (the "Joneses") were represented by Ray G. Martineau, and Kathy was represented by Roger R. Fairbanks. Prior to the hearing, the court had read the memoranda, affidavits, and other materials submitted by the parties. After taking the matter under advisement, the court has further considered the law and the facts relating to these motions. Now being fully advised and good cause appearing, the court enters the following Memorandum Decision and Order.

I. BACKGROUND

The memoranda and affidavits submitted by the parties reveal the following undisputed facts.

During June of 1990, construction began on a home that the Joneses were building in Ivins, Utah and on June 20, 1990, the Joneses purchased a course-of-construction insurance policy from Utah Home Fire. On December 7, 1990, the Utah Home Fire course-of-construction insurance policy was converted into a homeowners policy. During January of 1991, construction of the home was substantially completed. After construction on the home was completed, the Joneses began noticing cracking and settling of the interior walls and concrete floor slabs.

Sometime after the Joneses' course-of-construction insurance policy was converted into a Utah Home Fire homeowners policy, the Joneses' insurance agent Kathryn Allen ("Allen"), an agent of Kathy, advised the Joneses that Utah Home Fire had decided not to renew any of its homeowners policies in Utah and that the Joneses would have to choose another insurer. Allen suggested that the Joneses purchase replacement coverage from American which she represented as providing coverage of the "same type, quality and approximate cost as the Utah Home Fire coverage." Accordingly, on December 15, 1993,1 the Joneses transferred their homeowners policy to American.

By January of 1994, the damage to the Joneses' home was becoming severe enough that the Joneses hired Southwest Testing Laboratories, Alpha Engineering, Atlas Piers of Utah and, later, a professional engineer, Arnold W. Coon ("Mr. Coon"), to evaluate the cause of the damage. On June 1, 1994, Mr. Coon issued a report regarding his "investigation of settlement of the Ralph Jones Home." Mr. Coon described the damage as "cracking and settlements" and indicated that the damage was caused by "a connection at a fitting in a 3 inch plastic sewer line under the slab in the Bathroom which had not been cemented together properly." Because of this faulty fitting connection, "whenever there was water in the sewer line, some of it drained out into the soil under the slab." Quoting from a report issued by Southwest Testing, Mr. Coon indicated that the home settlement was caused by "sustained saturation" of the soil under the home "due to leakage from a 3 inch sewer drain line" which likely began shortly after construction of the home and continued "undetected for the next two years." Mr. Coon more specifically described how the water escaped from the pipe into the soil under the home:

Usually, a leak in a pressurized supply line is detected quite soon after the leak occurs. Damage may be much more localized. In this case, however, the leak was in a drainage line which was not under pressure. Every time a toilet was flushed, a shower was taken, a bath tub was drained, dishes were washed, hands were washed, laundry was done, etc. water would flow in the drain line to the septic tank. Some of this drain water probably flowed out into the surrounding soil every time one of these activities took place. If the area of leakage had been exposed to the atmosphere, much of this water would have evaporated. In this case, the building and its floor slab helped prevent evaporation from taking place. Thus, essentially all of the water which leaked out was trapped in the soil under the home.

Because of the damage to the Joneses' home, Mr. Coon recommended that the leaky fitting connection be repaired, the settled walls be stabilized, the surface of the floor slabs be ground down so as to achieve evenness on both sides of the cracks, the cracks in the floor slabs be sealed, and the cracks in the interior and exterior walls be repaired. By an affidavit signed March 11, 1996, Mr. Coon stated that in his opinion "as of June 1, 1994 the Jones Residence had suffered a very substantial impairment to its basic structural integrity which required that the recommendations he made in his June 1, 1994 report be implemented in order to restore the basic structural integrity of the Jones Residence and render it habitable and safe for occupancy as a residence."

On January 27, 1994, Ralph Jones telephoned Allen and advised her of the problems with the home. Allen responded by stating that the Joneses would "just have to pursue the plumber's liability insurance first before pursuing any claim against Utah Home Fire or American Concept."2 The Joneses then began pursuing a lawsuit against the plumber who had installed the faulty fitting connection. During January, May, and September of 1994, Ralph Jones telephoned Allen several times to advise her concerning the progress of the Joneses' claim against the plumber. The lawsuit against the plumber was ultimately unsuccessful.

The Joneses eventually made claims on both their Utah Home Fire and American homeowners policies for the damage to their home. The Joneses settled their claim with Utah Home Fire. However, American denied their claim citing a number of exclusions in the homeowners policy. Subsequently, American filed the present declaratory action seeking a ruling from this court that the Joneses are not entitled to coverage under the American policy. In turn, the Joneses filed a counterclaim against American seeking payment under the policy and a third-party complaint against Kathy seeking damages for Allen's allegedly improper advice that the Joneses pursue recovery from the plumber before making claims on their policies with Utah Home Fire and American.3 In response, American filed a motion for summary judgment seeking a declaration from this court that the damage to the Joneses' home is not covered by the American policy and a dismissal of the Joneses' counterclaim against American. Kathy filed a motion for summary judgment seeking dismissal of the Joneses' third-party complaint. The court now addresses the issues raised by these two motions.

II. STANDARD OF REVIEW

Summary judgment is proper "if 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 the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In applying this standard, the court must construe all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Wright v. Southwestern Bell Tel. Co., 925 F.2d 1288, 1292 (10th Cir.1991).

Once the moving party has carried its burden, Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by ... affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Gonzales v. Millers Casualty Ins. Co., 923 F.2d 1417, 1419 (10th Cir.1991).4 The non-moving party must "make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322, 106 S.Ct. at 2552.

In considering whether there exist genuine issues of material fact, the court does not weigh the evidence but instead inquires whether a reasonable jury, faced with the evidence presented, could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Clifton v. Craig, 924 F.2d 182, 183 (10th Cir.), cert. denied, 502 U.S. 827, 112 S.Ct. 97, 116 L.Ed.2d 68 (1991).5 Finally, all material facts asserted by the moving party shall be deemed admitted unless specifically controverted by the opposing party. D.Utah R. 202(b)(4).

III. DISCUSSION
A. American's Motion for Summary Judgment

The Joneses claim that the damage to their home is covered by two provisions of the American policy, Coverage A and Additional Coverage, described as follows:

SECTION I — PROPERTY COVERAGES
COVERAGE A — Dwelling
We cover:
1. the dwelling on the residence premises shown in the Declarations, including structures attached to the dwelling;
* * * * * *
ADDITIONAL COVERAGES
* * * * * *
8. Collapse. We insure for direct physical loss to covered property involving
...

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