City of Barre v. New Hampshire Ins. Co.

• Decision Date: 30 October 1978
• Docket Number: No. 319-76,319-76
• Citation: 136 Vt. 484,396 A.2d 121
• Court: Vermont Supreme Court
• Parties: CITY OF BARRE, Vermont, and R. E. Bean Construction Company, Inc. v. NEW HAMPSHIRE INSURANCE COMPANY.

Page 121

396 A.2d 121

136 Vt. 484

CITY OF BARRE, Vermont, and R. E. Bean Construction Company, Inc. v. NEW HAMPSHIRE INSURANCE COMPANY.

No. 319-76.

Supreme Court of Vermont.

Oct. 30, 1978.

Motion for Reargument Denied Nov. 15, 1978.

Hoff, Wilson & Jenkins, P. C., Burlington, for plaintiff, R. E. bean.

Gary D. McQuesten of Richard E. Davis Associates, Inc., Barre, for defendant.

Before BARNEY, C. J., and DALEY, LARROW, BILLINGS and HILL, JJ.

LARROW, Justice.

This is an action brought upon a "builder's risk" policy of insurance, under which the plaintiffs were named insureds. It was originally purchased by City of Barre, for reasons not here material no longer a party in this action. The premises insured were a recreation building being constructed for the City by Plaintiff R. E. Bean Construction Company, Inc., also a named insured. The trial court made extensive findings and conclusions, and rendered judgment for the defendant upon the general ground that the loss was within a specific exclusion under the terms of the policy. We disagree, and reverse.

The loss in question occurred during construction, when ten (of twelve) laminated wooden arches, then in place, were blown down by a wind of some twelve knots, gusting to thirty. These were well within the anticipated wind range. The collapse was found to have occurred because only two guy cables were in use instead of the six called for by the erection plans, an inadequate support, and because the cables, used, had only about one-third of their original tensile strength. While variously characterized, the conclusions of the trial court may be fairly summarized as findings that Bean was negligent in the course of construction, having failed to observe contract and recommended erection standards, and having failed to secure architect approval of the methods and materials used in the course of construction.

The policy in question insured the structure during construction, together with materials, equipment and supplies to be used therein, against "all risks of direct physical loss or damage from any external cause (except as hereinafter provided)." The exclusion in question was as to "any loss caused directly or indirectly by faulty materials or faulty workmanship or error in design or latent defect. . . ." Plaintiff Bean says the exclusion does not apply; the trial court followed defendant's contention that it did, and denied liability, therefore making no finding as to damages. Its conclusion was that plaintiff's procedures were "faulty workmanship" and the cable used by it "faulty material" within the policy exclusion.

It is difficult to summarize the close reasoning of the parties. But, in general, the plaintiff contends that "workmanship" connotes a quality inherent in the product itself, rather than the process or procedure in producing the product, under Equitable Fire & Marine Insurance Co. v. Allied Steel Construction Co., 421 F.2d 512 (10th Cir. 1970). It also says "faulty materials" refers to substances incorporated in the structure itself, not to equipment, such as the cable, used only to facilitate construction. Appellee argues that "faulty" is the equivalent of "negligent." It would, in effect, deny liability under the quoted exclusion where the loss resulted from negligence on the part of the contractor during the construction process.

There is little point in...