Crescent Co. of Spartanburg, Inc. v. Insurance Co. of North America, 20228

• Decision Date: 02 June 1976
• Docket Number: No. 20228,20228
• Citation: 225 S.E.2d 656,266 S.C. 598
• Court: South Carolina Supreme Court
• Parties: The CRESCENT COMPANY OF SPARTANBURG, INC., Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Respondent.

Page 656

225 S.E.2d 656

266 S.C. 598

The CRESCENT COMPANY OF SPARTANBURG, INC., Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Respondent.

No. 20228.

Supreme Court of South Carolina.

June 2, 1976.

Toney J. Lister, of Henderson & Lister, Spartanburg, for appellant.

James Hudgens, of Ward, Howell, Barnes & Long, Spartanburg, for respondent.

NESS, Justice:

Appellant, the Crescent Company of Spartanburg, a land development company, contracted with respondent, Insurance Company of North America (INA), for insurance coverage for houses under construction. Several houses owned by appellant were allegedly vandalized and it sought compensation. INA denied liability, contending coverage was barred by certain exclusions in the policy, and moved for and was granted summary judgment. We affirm in part and reverse in part.

In April, 1972, INA issued a fire insurance policy to the Crescent Company. The Crescent Company paid an added premium for a vandalism and malicious mischief endorsement. It seeks recovery under the endorsement which contains the following provision:

'This company (INA) shall Not be liable for loss If the described building(s) had been vacant or unoccupied beyond a period of thirty (30) consecutive days immediately preceding the loss, whether or not such period commenced prior to the inception date of this coverage; but a Building in process of construction shall not be deemed vacant or unoccupied . . .' (Emphasis supplied)

In 1972 Crescent Company began constructing houses which could be sold under federally financed programs (235 houses) for low income families. By early 1973 all work on these houses completely ceased. No work was performed on these houses for approximately two years prior to the time the alleged vandalism took place. The houses were 96% Complete at the time the damage was discovered. The 4% Unfinished work involved installation of appliances, grading of the yards, interior painting and decorating and final preparation for sale. ¹ The two owners of the Crescent Company testified they did not complete the houses due to the discontinuance of federal financing which rendered the houses unmarketable. Any additional investment by appellant would not have been prudent.

The trial judge held that the houses were not in process of construction and had been vacant for more than thirty days. Therefore, he concluded INA was not liable for any damage resulting from the vandalism. In effect, the trial judge ruled as a matter of law that the houses were not 'in process of construction.'

The above recited facts are conceded in the instant appeal. However Crescent Company contends that the insurance policy is ambiguous in that it does not define 'in process of construction' and that such ambiguity must be resolved in favor of the insured. Second, it contends that it made written reports and paid premiums every month during the two year period for the endorsement coverage, that INA had knowledge both that the premiums relative to the vandalism coverage were paid and that the houses had been 96% Completed for over two years and had been unoccupied throughout this period. Therefore, Crescent Company alternatively argues INA is estopped from denying coverage or that it waived the conditions restricting its liability under the vandalism coverage.

It is often difficult to determine whether an insurance policy is ambiguous. The parties agree that no South Carolina cases have interpreted the phrase 'in process of construction.' Respondent would assign one of several dictionary definitions which would require an ongoing series of actions calculated to achieve the objective of completed houses. The appellant argues the failure of the policy to explicitly define the phrase 'in process of construction' creates an ambiguity and the settled law governing construction of insurance policies liberally in favor of the insured should apply.

Under certain circumstances, the term 'in process of construction,' without further definition, may be ambiguous. In the instant appeal, the testimony of the insured's officers revealed that the work on the houses had been interrupted and that for two years the houses were left dormant. The reasons assigned for the insured's failure to complete the houses were unrelated to considerations relative to construction. Rather, they involved the unmarketability of the houses resulting from cancellation of a government sponsored financing program.

We do not think it can be fairly said that the vandalism coverage for a house 'in process of construction' was to run in perpetuity from the time of ground breaking regardless of the insured's actions postponing completion of the houses. The reason for charging an extra premium for vandalism and for restricting it to houses in process of construction is obvious: excessive vandalism occurs when houses or buildings are vacant. Under other policy provisions, a house vacant for more than thirty consecutive days was not covered for vandalism. The 'in process of construction' clause was obviously designed to extend coverage for houses during normal periods of construction. Without it, coverage generally would have been unavailable due to the thirty day non-occupancy provision. Under the circumstances of this case, the term 'in process of construction' was not ambiguous and the application of it to the facts of this case was properly submitted and ruled upon by the circuit court.

The next issue is whether the appellant's claim of estoppel raised factual issues not properly disposed of by summary judgment. The appellant did not plead estoppel, nor did the lower court deal with this issue in...