Assurance Co. of America v. Secura Ins. Co.

• Decision Date: 10 July 2012
• Docket Number: No. ED96627,ED96627
• Parties: ASSURANCE COMPANY OF AMERICA and DHP SYSTEMS, INC., Respondents, v. SECURA INSURANCE COMPANY and MISSOURI VALLEY GLASS Appellants.
• Court: Missouri Court of Appeals

ASSURANCE COMPANY OF AMERICA and DHP SYSTEMS, INC., Respondents,
v.
SECURA INSURANCE COMPANY and MISSOURI VALLEY GLASS Appellants.

No. ED96627

Missouri Court of Appeals Eastern District Division Two

Filed: July 10, 2012

Appeal from the Circuit Court of St. Louis County
Honorable Patrick Clifford

This appeal arises from an equitable garnishment action. Plaintiff DHP Systems, Inc., a contractor on a construction project, and its insurer, Assurance Company of America, filed their garnishment suit against sub-contractor Missouri Valley Glass and its insurer, Secura Insurance Company, to collect on a judgment entered in favor of DHP and against MVG in the underlying litigation. The court in that underlying judgment concluded that DHP was entitled to indemnity and contribution from MVG for monies expended by DHP in defending against, and settling, claims by the builder for damages due to MVG's work. The court in the garnishment action entered summary judgment in favor of the plaintiffs, and Secura appeals. The issues in this case are three-fold: first, whether a contract and agreement to indemnify existed between DHP and MVG; second, whether there was an "occurrence" within the terms of the policy issued to MVG by

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Secura; and third, whether the policy's "your work" exclusion nevertheless defeated coverage.

First, because Secura abandoned its insured, we hold it is bound by the underlying trial court's finding of liability against MVG, including the court's determination that MVG agreed to indemnify DHP. Second, because the summary-judgment record shows that the damages sustained were the result of MVG's negligence and contains no evidence that MVG foresaw or expected the damages, we hold that the damages were caused by an "occurrence." Third, because the "your work" exclusion only references damage to work performed by MVG and does not reference damage to work performed by others, we hold that the exclusionary provision does not bar coverage for damages to work or materials other than that performed or furnished by the insured, MVG. Thus, the summary-judgment court's legal conclusions were correct. However, because neither the underlying trial court nor the summary-judgment court made a finding that delineates between the amount of damages to MVG's work and the amount of damages to other parts of the property, and because the record contains insufficient evidence from which to make such a determination, we reverse the grant of summary judgment and remand the case for further proceedings.

Factual and Procedural Background

The litigation in this case stems from construction of Shaw Park Plaza, a fourteen-story office building in Clayton, Missouri. Builder Clayco Construction Company contracted with DHP to furnish and install the curtain wall system on the building and to glaze the windows installed in the curtain wall.¹ DHP, in turn, sub-contracted with MVG to furnish, install, and glaze the windows of the curtain wall system. Following

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construction and installation of the curtain wall, leaks were discovered in the curtain wall system. Those leaks caused damage to the curtain wall itself, as well as to structural components and finishes beyond the curtain wall system, including drywall, carpet, and ceiling tiles.

Clayco filed suit against DHP and MVG. The builder alleged that DHP acted negligently by improperly and defectively installing the curtain wall system; it alleged that MVG was liable for the cost of any repair of the curtain wall system. DHP, in turn, filed a cross-claim against MVG, seeking contribution and indemnification for Clayco's claims related to the damages to the Shaw Park Plaza project caused by or related to MVG's work.

At all relevant time periods, MVG maintained a commercial general liability insurance (CGL) policy issued by Secura. That policy provides coverage for property damage caused by an "occurrence." The policy also contains two exclusions relevant here. First, the policy contains a "contractual liability" exclusion, which excludes coverage for 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, however, to liability for damages assumed in an "insured contract." Second, the policy contains a "your work" exclusion, which excludes coverage for property damage to the insured's - MVG's - work.

Secura initially defended MVG under a reservation of rights in the underlying litigation. In its reservation-of-rights letter to MVG, Secura acknowledged the potential for coverage by stating: "[t]here is some indication that there was property damage other than that related to the curtain wall system." Secura further conceded: "to the extent that

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the Plaintiff proves damage to property other than 'your work', there may be coverage as long as the damage 'occurred' during the policy period, and you are liable for it." Despite these acknowledgments, Secura ultimately denied coverage and withdrew its defense a month later, in October of 2005.

Clayco and DHP settled. Specifically, DHP agreed to pay Clayco $150,000 "in settlement of Clayco's claims against DHP directly resulting from MVG's work that caused damages to the curtain wall system and other structural components and finishes in the building, including drywall, carpet, structural members and the work of other contractors." Assurance, DHP's liability insurer, paid this settlement amount to Clayco on DHP's behalf. In addition, Assurance expended $288,927.97 on DHP's behalf, in attorneys' fees and costs, in defending against Clayco's claims related to damages from MVG's work.

The trial court held a trial on DHP's contribution and indemnity cross-claim against MVG in January of 2006. DHP presented testimony regarding the contract between DHP and MVG, as well as the damages to the project, and MVG's negligence in causing those damages.

James Deschler, the president of DHP, testified to the contract between the parties. He admitted that DHP did not have a written or oral contract with MVG for the Shaw Park Plaza project. He also acknowledged that while DHP had purchase orders with MVG in the past, it did not have one with MVG for the Shaw Park Plaza project. However, Mr. Deschler explained further that DHP understood that the contract between it and MVG would include the same terms and conditions as those in the purchase orders from the parties' prior business dealings, and that those purchase orders required MVG to

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indemnify DHP for any and all damages, including attorneys' fees and expenses, relating to or arising from MVG's negligent work.

Steve Moeller, director of technical services for Clayco, testified regarding MVG's negligence and the damage to the Shaw Park Plaza project. He stated that MVG was negligent in failing to inspect work previously done on the window openings into which MVG installed their windows. He explained this was important because if any prior work was defective, it would go unnoticed and be incapable of being detected because MVG's work would cover it up. Mr. Moeller further stated that MVG's negligence resulted in water coming into the building. He explained that the water damaged the curtain wall, as well as other parts of the building, such as ceiling tiles, carpet, and drywall, all of which had to be replaced. He also expressly testified that the water damaged work of other contractors, both on the curtain wall and in other parts of the building. He also noted that MVG's negligence caused the owner to tear out and reinstall every piece of glass in the building.

The trial court entered judgment concluding that DHP was entitled to indemnity and contribution from MVG. The court determined that DHP and MVG had entered into a contract, and that the contract included an agreement whereby MVG would indemnify DHP for any and all damages, including attorneys' fees, relating to or arising from MVG's work on the Shaw Park Plaza project. Accordingly, the court entered judgment in favor of DHP and against MVG for the sum of $438,927.97, representing DHP's settlement payment to Clayco, plus the attorneys' fees and costs expended in defending against Clayco's claims related to damages from MVG's work. The judgment further

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provided that collection of the judgment could only be from the proceeds of MVG's insurance policies, and not from any of MVG's other assets.²

Consequently, DHP filed an equitable garnishment action against MVG and Secura, to reach and apply the insurance proceeds of the policies issued to MVG, to satisfy the judgment. Assurance filed a corresponding declaratory judgment and equitable subrogation action against the two defendants. Plaintiffs then filed a joint motion for summary judgment, seeking recovery for the complete amount of the DHP's judgment against MVG. Plaintiffs asserted that under the insuring agreement between Secura and MVG, coverage existed for the underlying judgment because of an "occurrence" that caused property damage to the Shaw Park Plaza project, for which MVG had assumed liability through an "insured contract" with DHP. Plaintiffs further asserted that the "contractual liability" and "your work" exclusions did not apply to preclude coverage because DHP and MVG had formed an "insured contract" and because the damage caused by MVG went beyond its own work. Lastly, plaintiffs asserted that in addition to agreeing to indemnify DHP for any and all damages, MVG also agreed under the insured contract...