Crossmann Cmtys. of N.C., Inc. v. Harleysville Mut. Ins. Co., Case No. 4:09-CV-1379-RBH

CourtUnited States District Courts. 4th Circuit. United States District Court of South Carolina
Writing for the CourtR. Bryan Harwell
PartiesCROSSMANN COMMUNITIES OF NORTH CAROLINA, INC.; CROSSMANN COMMUNITIES, INC.; BEAZER HOMES INVESTMENT CORPORATION; BEAZER HOMES CORP., INC., Plaintiffs, v. HARLEYSVILLE MUTUAL INSURANCE COMPANY, Defendant.
Decision Date27 September 2013
Docket NumberCase No. 4:09-CV-1379-RBH

CROSSMANN COMMUNITIES
OF NORTH CAROLINA, INC.;
CROSSMANN COMMUNITIES, INC.;
BEAZER HOMES INVESTMENT CORPORATION;
BEAZER HOMES CORP., INC., Plaintiffs,
v.
HARLEYSVILLE MUTUAL INSURANCE COMPANY, Defendant.

Case No. 4:09-CV-1379-RBH

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA FLORENCE DIVISION

Dated: September 27, 2013


FINDINGS OF FACT,
CONCLUSIONS OF LAW,
AND ORDER

This matter is before the Court following a bench trial held on August 12 and 13, 2013. Having considered the testimony of the witnesses, both in court and by way of deposition, the exhibits, and arguments of counsel, the Court issues the following Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure. To the extent that any findings of fact constitute conclusions of law, or vice-versa, they shall be so regarded.

Introduction and Procedural History

This insurance coverage action was filed on May 26, 2009 by Cincinnati Insurance Company ("Cincinnati") against Crossmann Communities of North Carolina, Inc. ("CCNC"), Crossmann Communities, Inc. ("CCI"), and Beazer Homes Investment Corp. ("BHIC").1

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Cincinnati's Complaint, ECF No. 1.]2 Cincinnati sold "umbrella" insurance policies to CCI as the first named insured. The "umbrella" Cincinnati Policies were triggered upon exhaustion of underlying primary insurance and were in effect from July 1, 1998 until July 1, 2002. [The Cincinnati Policies, ECF No. 1-2, 1-3.] In this coverage lawsuit, Cincinnati sought a declaration that, among other things, it owed no coverage or defense obligations to Beazer under its insurance policies for losses arising from the construction-related property damage case filed in the South Carolina Court of Common Pleas in Georgetown County captioned "True Blue Golf & Racquet Resort Homeowners Association, Inc. and True Blue Golf & Racquet Resort Horizontal Property Regime, plaintiffs versus Beazer Homes Corp., Inc. and Structure Home Builders, LLC, defendants," Civil Action No. 2009-CP-22-00912 [hereinafter referred to as the "Underlying Lawsuit"]. [PX-208; ECF No. 186-7.

On July 16, 2009, Beazer filed an Answer and Counterclaim in which it sought a declaration from this Court that the policies of insurance issued by Cincinnati provided both indemnification and a defense for the claims asserted and damages sought in the Underlying Lawsuit. Beazer also asserted a claim against Cincinnati for breach of contract.

Subsequently, on August 31, 2009, Beazer moved to amend its Answer to assert a third-party Complaint against Harleysville Mutual Insurance Company ["Harleysville"]. This motion was granted on October 22, 2009, and on that same date, Beazer filed a Third-Party Complaint against Harleysville. In that Third-Party Complaint, Beazer sought a declaration from this Court that Harleysville provided coverage and a duty to defend to Beazer Homes Corp. for the Underlying Lawsuit under policies of insurance that Harleysville had issued to a predecessor-in-interest to Beazer Homes, specifically Pinehurst Builders, Inc., and later Crossmann

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Communities of North Carolina, Inc. d/b/a Pinehurst Builders. Harleysville filed an Answer and Counterclaim against Beazer and also a Crossclaim against Cincinnati on November 25, 2009, in which it sought a declaration that the Harleysville Policies did not provide coverage or a duty to defend to Beazer Homes Corp. for the Underlying Lawsuit. On December 11, 2009, Harleysville filed a Fourth-Party Complaint against Indiana Insurance Company, Massachusetts Bay Insurance Company, Regent Insurance Company, Illinois Union Insurance Company, Liberty Mutual Insurance Company, and Zurich American Insurance Company alleging that if Harleysville was adjudicated to have coverage for Beazer Homes Corp. in the Underlying Lawsuit, one or more of these insurance companies, who issued policies of insurance to Crossmann Communities, Inc. or Beazer Homes Corp., had a duty to defend and should be held liable in contribution for any amounts to be paid by Harleysville.

On March 27, 2013, this Court issued Orders on the parties' respective motions for summary judgment. In those Orders, this Court found that Beazer Homes Corp. was entitled to coverage under the policies issued by Harleysville to Pinehurst Builders, Inc. and Crossmann Communities of North Carolina, Inc. d/b/a Pinehurst Builders, because coverage passed to successors-in-interest through merger. The Court further found that the allegations of the Underlying Lawsuit and the evidence from the affidavit in support of the motion for partial summary judgment showed at least the potential for property damage caused by an occurrence during the Harleysville policy period. Accordingly, this Court found that Harleysville had a duty to defend Beazer Homes Corp. in the Underlying Lawsuit. This Court separately found that Harleysville was not entitled to contribution from the Fourth-Party Defendants.

The Court subsequently set for trial the remaining issues in this case, specifically whether there was coverage for any portion of the amount eventually paid by Beazer to settle the

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Underlying Lawsuit, and if so, what amount, if any, Harleysville owed to Beazer for its pro-rata time-on-risk portion of those covered damages. In addition, the Court set for trial the issue of what amount, if any, Harleysville owed to Beazer in reimbursement of the reasonable, necessary and related defense costs in the Underlying Lawsuit. The parties agreed to submit the remaining issues for a bench trial. On the morning of the first day of trial, August 12, 2013, Cincinnati was dismissed from this lawsuit by stipulation of the parties.

FINDINGS OF FACT

A. Policies of Insurance Issued by Harleysville Mutual Insurance Company

1. Harleysville Mutual Insurance Company ("Harleysville") issued a Contractors' Business Owners Policy to "Pinehurst Builders, Inc.," Policy No. CB 9A 5801, for the policy period of July 29, 1997 through July 29, 1998. The policy included coverage for commercial property as well as general liability. Effective June 26, 1998, the named insured on the policy was changed to "Crossmann Communities of North Carolina, Inc. dba Pinehurst Builders."

2. The Contractors' Business Owners Policy issued by Harleysville was subsequently renewed for the policy period beginning on July 29, 1998. This policy was cancelled by the insured on August 29, 1998. (These two policies will hereinafter be referred to as "Harleysville Policies.")

3. Defendant Harleysville's Exhibits 1 and 2 are true and accurate copies of the Harleysville Policies at issue in the present case.

4. The insuring agreements contained in the Harleysville Policies state:

1. Business Liability. We will pay those sums that the Insured becomes legally obligated to pay as damages because of "bodily injury," "property damage," ... to which this insurance applies. ...
a. This insurance applies only:

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(1) To "bodily injury" or "property damage:"
(a) that occurs during the policy period; and
(b) that is caused by an "occurrence." The "occurrence" must take place in the coverage territory. . .
b. We will have the right and duty to defend any "suit" seeking those damages.

The policy defines "suit" as a "civil proceeding in which damages because of . . . "property damage" . . . to which this insurance applies are alleged".

5. The Harleysville Policies contain the following exclusion:

B. EXCLUSIONS

1. Applicable to Business Liability Coverage. This insurance does not apply to:

n. "Property damage" to "impaired property" ... arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your work," or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.

6. The Policies define "impaired property" as:

5. "Impaired property" means tangible property, other than "your product" or "your work" that cannot be used or is less useful because:
a. It incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate or dangerous, or
b. You have failed to fulfill the terms of a contract or agreement; If such property can be restored to use by:
(1) The repair, replacement, adjustment or removal of "your product" or "your work;" or
(2) Your fulfilling the terms of the contract or agreement.

The Policies further define "your work" as:

15. "Your work" means:
a. Work or operations performed by you or on your behalf; and

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b. Materials, parts or equipment furnished in connection with such work or operations.
"Your work" includes warranties or representations made at any time with respect to the fitness, quality, durability or performance of any of the items included in a. or b. above.

B. True Blue Golf & Racquet Resort

7. The True Blue Resort is a residential condominium complex located in Pawley's Island, Georgetown County, South Carolina. Construction on the True Blue Resort began in February 1997. The first building was completed on July 31, 1997. Construction on the True Blue Resort continued in ten separate phases, with the last building being completed on March 10, 2005. Ultimately, eighty-four (84) buildings were constructed at the True Blue Resort.

8. Although eighty-four (84) buildings were constructed at the True Blue Resort, only seventy-seven (77) buildings were at issue in the Underlying Lawsuit.

9. Certificates of Occupancy were issued for each of the buildings at the True Blue Resort on the following dates:


Building

CO Date

Building

CO Date

Building

CO Date

7

07/31/1997

72

07/16/2003

6

08/07/1997

54

12/21/1999

62

08/12/2003

2

08/14/1997

40

06/27/2000

64

09/04/2003

4

09/04/1997

74

09/12/2003

5

09/25/1997

63

10/03/2003

3

10/07/1997

41

12/28/2000

82

10/08/2003

1

11/25/1997

75

11/18/2003

10

05/05/1998

...

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