B. A. Green Const. Co., Inc. v. Liberty Mut. Ins. Co., 47001
| Decision Date | 08 December 1973 |
| Docket Number | No. 47001,47001 |
| Citation | 517 P.2d 563,213 Kan. 393 |
| Parties | B. A. GREEN CONSTRUCTION COMPANY, INC., Appellee, v. LIBERTY MUTUAL INSURANCE COMPANY, Appellant. |
| Court | Kansas Supreme Court |
Syllabus by the Court
A general liability insurance policy containing a clause excluding property damage 'to work performed by or on behalf of the named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith;' is construed and it is held: A building being constructed by an insured general contractor is the work product of the contractor and under the above exclusion clause no coverage is provided for damage to the building.
James C. Wright, of Shaw, Hergenreter, Quarnstrom & Wright, Topeka, argued the cause and was on the brief for appellant.
Gerald L. Cooley, of Allen & Cooley, Lawrence, argued the cause and was on the brief for appellee.
Defendant, Liberty Mutual Insurance Company, issued a comprehensive general liability insurance policy to plaintiff, B. A. Green Construction Company. Green was sued by Huxtable and Associates, Inc., and Liberty Mutual refused to defend Green. The Huxtable claim was settled for $2,000.00 and in this action Green claims he is entitled to recover the $2,000.00 plus the cost of defending the Huxtable suit and the cost of prosecuting this action. Liberty Mutual appeals from an adverse judgment and the issue is whether the policy of insurance provides coverage to Green.
Green, a general contractor, contracted with the University of Kansas Endowment Association for construction of the Kenneth Spencer Memorial Library on the Kansas University campus at Lawernce. Green sub-contracted the mechanical work to Huxtable, who installed the heating and air conditioning system. On August 4, 1968, before the library facility was completed but after partial occupancy by the university, there occurred a malfunction in the air conditioning system installed by Huxtable which caused water to condense on the walls and ceiling and damaged the interior extensively. Green made repairs to the building and, under a clause in Huxtable's ocontract, charged the cost of such repairs to Huxtable as an offset of $18,504.54 against money due Huxtable from Green. Huxtable sued Green for $20,350.40, the balance of the contract price (Huxtable and Associates, Inc., v. B. A. Green Construction Co., Inc., No. 25,214, District Court of Douglas County, Kansas) and Green counter-claimed for cost of the repairs, alleging negligence. Huxtable defended against the counter-claim, alleging contributory negligence. Thereupon, Green demanded that Liberty Mutual assume the defense of the action brought by Huxtable. Liberty refused, asserting there was no duty defend because the action was in contract and because the policy did not cover the occurrence. Huxtable and Green settled their accounts by an agreement that Green pay Huxtable $2,000.00.
Green successfully sued Liberty in this action for the $2,000.00 paid to Huxtable, $2,940.87 attorney fees and expenses in defending the Huxtable suit, and $1,607.43 attorney fees and expenses incurred in prosecuting this action. The trial court concluded the liability policy issued by Liberty covered the occurrence in which the library building was damaged, and Liberty's refusal to defend against the Huxtable action was without just cause or excuse.
Liberty first contends the duty to defend is determined by the petition filed against the insured and not by facts elicited during a full-blown trial. Both parties on oral argument agree this is no longer the law in this state in view of Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212 Kan. 681, 512 P.2d 403, decided after the parties prepared briefs in this action. In Spruill, it was said:
'An insurer's duty to defend attaches where facts, extraneous to the allegations of the pleadings, known or reasonably ascertainable by insurer, make out a case against the insured covered by the policy.' (Syl. 2.)
We mention this because the point is emphasized in the parties' briefs and not because we entertain any thoughts it will aid in the final determination of this action.
The policy of insurance written by Liberty in favor of Green and in full force and effect at the time of the library damage, provided in Section I, Coverage B-Property Damage Liability, the following:
'The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of
Coverage A. bodily injury or
Coverage B. Property damage
to which this policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.'
Liberty claims exclusions from the general insuring clause, properly construed, resulted in no coverage of the occurrence, and if no coverage there was no duty to defend. The exclusions read as follows:
'Exclusions
'This policy does not apply:
* * *
* * *
'(i) to property damage to
* * *
* * *
'(3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising, physical control;
* * *
* * *
'(k) to bodily injury or property damage resulting from the failure of the named insured's products or work completed by or for the named insured to perform the function or serve the purpose intended by the named insured, if such failure is due to a mistake or deficiency in any design, formula, plan, specifications, advertising material or printed instructions prepared or developed by any insured; but this exclusion does not apply to bodily injury or property damage resulting from the active malfunctioning of such products or work;
'(l) to property damage to the named insured's products arising out of such products or any part of such products;
'(m) to property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith;'
If we find Liberty is correct in its interpretation of any one of the exclusionary provisions there is no coverge. As to exclusion (m), Liberty claims Spencer Library was clearly the work product of Green and the damage done was to work performed by and/or on behalf of Green; therefore, there was no coverage of the loss. Green claims exclusion (m) excludes from coverage damage to the walls and ceiling of the library resulting from failure in the work on said walls and ceiling.
The undisputed...
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