Corder v. William W. Smith Excavating Co.

• Decision Date: 08 November 2001
• Docket Number: No. 29006.,29006.
• Citation: 556 S.E.2d 77,210 W.Va. 110
• Court: West Virginia Supreme Court
• Parties: Joseph W. CORDER, Jr., Executor of the Estate of Jane W. Mills, Deceased, Plaintiff Below, Appellant v. WILLIAM W. SMITH EXCAVATING CO., Defendant Below, Appellant, and United States Fidelity & Guaranty Company, Defendant Below, Appellee.

556 S.E.2d 77

210 W.Va. 110

Joseph W. CORDER, Jr., Executor of the Estate of Jane W. Mills, Deceased, Plaintiff Below, Appellant v. WILLIAM W. SMITH EXCAVATING CO., Defendant Below, Appellant, and United States Fidelity & Guaranty Company, Defendant Below, Appellee.

No. 29006.

Supreme Court of Appeals of West Virginia.

Submitted September 18, 2001.

Decided November 8, 2001.

John J. Polak, Rose & Atkinson, Charleston, for the Appellant, Joseph W. Corder, Jr., Executor.

Nelson R. Bickley, Bickley & Jacobs, Charleston, for the Appellant, William W. Smith Excavating Co.

Mary H. Sanders, James C. Stebbins, Huddleston, Bolen, Beatty, Porter & Copen, LLP, Charleston, for the Appellee.

ALBRIGHT, Justice.

Appellants Joseph Corder and the William W. Smith Excavating Company (hereinafter "Smith Excavating") jointly appeal from the June 27, 2000, order of the Circuit Court of Kanawha County granting summary judgment to Appellee United States Fidelity and Guaranty Company (hereinafter "USF & G") in an action brought by Mr. Corder against Smith Excavating and USF & G in connection with sewer line repair work performed by Smith Excavating on property owned by Mr. Corder.¹ Based on the allegations of the complaint, the lower court determined that there was no coverage under a commercial general liability policy issued by USF & G to Smith Excavating and that USF & G had no duty to defend Smith Excavating. Upon our review of the record, we determine that there is a question of fact that must be resolved and, accordingly, we remand this matter with directions set forth herein.

I. Factual and Procedural Background

In the complaint filed by Mr. Corder, as executor of the estate of Jane W. Mills, the following averments are made:

On or about September 21, 1995, Defendant Smith was hired by Plaintiff's agent to perform certain work including, but not limited to, sewer line repairs, storm drain repairs and slide correction, at the [Plaintiff's] subdivision.

On or about October 13, 1995, Defendant Smith completed its work at the subdivision.

On May 13, 1996, A-1 Rental Sales & Services performed a video pipe inspection for Plaintiff's agent, which evidenced that the sewer line had been damaged by Defendant Smith.

On October 3, 1996, the City of Charleston, West Virginia, informed Plaintiff's agent that the sewer system for the subdivision had failed a mandrel test because of the damage done by Defendant Smith to the sewer line. This failure delayed approval of the subdivision by the Municipal Planning Commission of the City of Charleston. The work performed by Defendant Smith was done in a negligent and careless manner.

As a direct and proximate result of Defendant Smith's negligence and carelessness, property which the Plaintiff owned and/or was responsible for, including but not limited to the sewer line, was damaged. As a direct and proximate result of the conduct of Defendant Smith, Plaintiff became obligated for repair work performed to correct the damage to the property and has suffered consequential damages including, but not limited to, loss of use of the property, aggravation, annoyance and inconvenience.

Based on these allegations, Mr. Corder sought damages from Smith Excavating under theories of negligence, breach of contract, and breach of warranty.² Given the policy exclusions applicable to the "work" of the insured,³ there was no dispute regarding the lack of coverage for all claims save one, because the other claims clearly arose out of the work of Smith Excavating.⁴ The sole coverage issue presented for the circuit court's determination was whether the policy applied to the "loss of use" damages Mr. Corder sought in connection with his negligence claim. These "loss of use" damages arise from allegations that further development of additional sections of the subdivision owned by Mr. Corder⁵ was delayed as a result of Smith Excavating's negligence.

In ruling on cross motions for summary judgment,⁶ the circuit court applied this Court's decision in Erie Insurance Propety & Casualty Co. v. Pioneer Home Improvement, Inc., 206 W.Va. 506, 526 S.E.2d 28 (1999), in which we held that faulty workmanship claims are not within the scope of coverage extended by commercial general liability policies. Based upon its determination that "[a]ll of plaintiff's claims in the instant case arise from the `workmanship' of the insured," the lower court concluded that there was no duty to defend and that the damages sought by Mr. Corder were not within the scope of the coverage extended by the commercial general liability policy. Additionally, the lower court determined that coverage was not invoked due to the lack of an "occurrence." Even assuming the existence of an "occurrence," the circuit court ruled that the applicability of policy exclusion M, which expressly excludes coverage for "property damage"⁷ to "property that has not been physically injured, arising out of ... [a] defect, deficiency, inadequacy or dangerous condition" in the work performed by Smith Excavating, would defeat coverage. As support for their contention that the lower court erred in granting summary judgment, Appellants argue that an "occurrence" sufficient to trigger coverage does exist and furthermore, that an exception to exclusion M prevents that exclusion from defeating coverage.

II. Standard of Review

Our review of this matter is de novo as the order appealed from is a summary judgment ruling.⁸ See Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).

III. Discussion

We begin our analysis with a recognition that in determining whether an insurer has a duty to defend, the determination is made based upon the allegations of the complaint. "As a general rule, an insurer's duty to defend is tested by whether the allegations in the plaintiff's complaint are reasonably susceptible of an interpretation that the claim may be covered by the terms of the insurance policy." Aetna Can. & Sur. Co. v. Pitrolo, 176 W.Va. 190, 194, 342 S.E.2d 156, 160 (1986). We have further recognized that "the duty to defend an insured may be broader than the obligation to pay under a particular policy. This ordinarily arises by virtue of language in the ordinary liability policy that obligates the insurer to defend even though the suit is groundless, false, or fraudulent." Id. at 194, 342 S.E.2d at 160. With these general principles in mind, we turn to the issue of whether coverage exists under the USF & G policy.

In making their argument for coverage, Appellants look to the "Products-Completed Operations Hazard" provisions of the policy, which provides as follows:

a. "Products-completed operations hazard" includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work" except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned.

b. "Your work" will be deemed completed at the earliest of the following times:

(1) When all of the work called for in your contract has been completed.

(2) When all of the work to be done at the site has been completed if your contract calls for work at more than one site.

(3) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair, or replacement, but which is otherwise complete, will be treated as completed.

c. This hazard does not include "bodily injury" or "property damage" arising out of:

(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle created by the "loading or unloading" of it;

(2) The existence of tools, uninstalled equipment or abandoned or unused materials;

(3) Products or operations for which the classification in this Coverage Part or in our manual of rules includes products or completed operations.

The "loss of use" damages sought by Mr. Corder constitute "property damage," which is defined under the policy as:

a. Physical 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 "occurrence" that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss shall be deemed to occur at the time of the "occurrence" that caused it.

Before any coverage can be found to exist under the "products-completed operations hazard," or any other portion of the commercial general liability policy, an "occurrence,"⁹ within the policy definition of that term, must be determined to have occurred. An "occurrence" is defined by the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Appellants rely solely on the "accident" portion of this definition, rather than on the alternate definitional language concerning continuous or repeated exposure.

In its order granting summary judgment, the lower court states that: "It is the plaintiff's position that the Court should adopt the definition and interpretation of `occurrence' set forth in Calvert Ins. Co. v. Herbert Roofing & Insulation, 807 F.Supp. 435 (E.D.Mich.1992) and Ohio Casualty Ins. Co. v. Terr[a]ce Enterprises, 260 N.W.2d 450 (Minn.197[7] ).¹⁰ In examining whether resulting damage from a leaky roof was the result of negligent workmanship performed by the defendant contractor in Calvert, the Michigan district court observed:

whether something is an "accident" within the meaning of the standard liability policy depends in part upon whether the resulting damage is unforeseen and unexpected by the person injured or affected thereby. When the damage caused by an insured's defective workmanship is unforeseen and unexpected by the person injured thereby, the damage is accidental. Thus the property

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