D.R. Sherry Constr. v. Am. Family Mut. Ins. Co.

Decision Date31 August 2010
Docket NumberNo. SC 90442.,SC 90442.
Citation316 S.W.3d 899
CourtMissouri Supreme Court

316 S.W.3d 899

Supreme Court of Missouri,
En Banc.


No. SC 90442.

June 15, 2010.
Rehearing Denied Aug. 31, 2010.

316 S.W.3d 900


316 S.W.3d 901
Keigh A. Cary and John E. Franke of Franke, Schultz & Mullen P.C., Kansas City, for appellant.

Jonathan Sternberg of Jonathan Sternberg, Attorney, P.C., and Jason Davey of Costello Davey & Fera LLC, Kansas City, for respondent.


American Family Mutual Insurance Company appeals a judgment for D.R. Sherry Construction, LTD., on Sherry's claims for breach of contract and vexatious refusal to pay. The judgment is affirmed.


Sherry is a general contractor engaged in the business of building homes. In March 2003, Sherry began constructing a home at 13395 Sycamore Drive in Platte County. In July 2003, Sherry finished construction of the home. On August 8, 2003, Sherry's president and sole shareholder, Darrin Sherry, completed a walk-through of the house with the future homeowners and found no evidence of any structural damage to the house. The homeowners expressed satisfaction with the house and closed on its purchase on

316 S.W.3d 902
August 15, 2003. During this time, Sherry was insured under a commercial general liability policy issued by American Family.

In April 2004, the homeowners notified Darrin Sherry that the foundation and drywall were cracking. Mr. Sherry inspected the house and confirmed existence of the cracks. In July 2004, the homeowners sent a letter notifying Sherry that there were numerous re-appearing and new cracks in the foundation of the house. The letter notified Sherry that the homeowners had hired a professional engineer to inspect the house and that he had determined that the structural problems with the house were happening because the house was out of level by as much as 8 inches. The letter led Mr. Sherry to conclude in July 2004 that there was a problem with the house. Mr. Sherry investigated the house further and determined that repeated exposure of the foundation to poor soil conditions caused structural damage to the home and resulted in the house being 8 inches out of level. The homeowners threatened to file suit and demanded that Sherry repurchase the house. In March 2005, Sherry entered into an agreement with the homeowners to repurchase the house for approximately $265,000. Sherry then made a claim on the American Family insurance policy. American Family declined coverage.

In November 2005, Sherry filed suit against American Family asserting claims of breach of contract and vexatious refusal to pay. Sherry alleged that it had been insured by American Family since 1991 but did not receive a complete copy of the policy until June 2005. Sherry alleged that it was insured under policy 24 X35041-17, which expired December 5, 2003. American Family asserted that Sherry cancelled the policy in September 2003. Although the full extent of the damage was not apparent until after the policy had expired, Sherry alleged that the house's foundational problems began during the policy period and caused progressive damage that was not apparent until after expiration of the coverage period. Consequently, Sherry maintained that there was an insurable “occurrence” during the policy period.

The trial court did not determine, as a matter of law, the scope of the coverage provided by the American Family policy. Instead, the trial court submitted the case to the jury to determine whether the American Family policy covered the damages claimed by Sherry and, if so, whether Sherry proved those damages. The trial court entered judgment on the jury's verdict in favor of Sherry. American Family raises six points on appeal.

I Jury Instructions

American Family asserts that the jury instructions were improper because the court did not determine the scope of coverage provided by the insurance policy and, instead, submitted the issue of coverage to the jury.1 As with any other contract, the interpretation of an insurance contract is generally a question of law, particularly in reference to the question of coverage. H.K. Porter Co. v. Transit Cas. Co., 215 S.W.3d 134, 140-41 (Mo.App.2006). The issue of coverage becomes a jury question only when the court determines that the contract is ambiguous and that there exists a genuine factual dispute regarding the intent of the parties.

316 S.W.3d 903
See Graham v. Goodman, 850 S.W.2d 351, 354 (Mo. banc 1993).

The trial court instructed the jury pursuant to MAI 26.06, which is the proper instruction when there is a genuine dispute as to what agreement was made and whether that agreement was breached. See Porta-Fab Corp. v. Young Sales Corp., 943 S.W.2d 686, 689 (Mo.App.1997). In pertinent part, the trial court instructed the jury as follows:

Your verdict must be for the plaintiff if you believe:
First, that there is damage to a residence located at 13395 Sycamore Dr. and the cause of the damage thereto is specifically covered in plaintiff's insurance contract with defendant, and
Second, plaintiff performed his agreement, and
Third, defendant failed to perform his agreement, and
Fourth, plaintiff was thereby damaged.

(Emphasis added.)

As American Family notes, the emphasized language requires the jury to determine whether Sherry's property damage claim falls within the scope of coverage provided by the insurance policy. Sherry does not dispute that the instructions require the jury to make a determination as to coverage and does not argue that the language of the policy is ambiguous. Instead, Sherry asserts that it never was provided a complete copy of the insurance policy and that documents sent by American Family to Sherry reflect substantial confusion as to the terms of coverage. As such, Sherry maintains that the very terms of coverage are uncertain and that this presents a factual question regarding the parties' intent that properly was resolved by the jury.

The record does not support Sherry's claim of ambiguity. In its petition, Sherry alleged that it was insured by American Family pursuant to policy 24 X35041-17. Likewise, when American Family filed its motion for summary judgment, Sherry asserted in its cross-motion for summary judgment that it was covered by policy 24 X35041-17 and attached a copy of the policy to its motion. The facts set forth in American Family's motion for summary judgment, including the factual allegation that policy 24 X35041-17 is the applicable policy, are taken as true unless contradicted by the Sherry's response to the motion. See ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Therefore, from the initial pleadings in the case and continuing through the summary judgment litigation, Sherry and American Family relied on the same policy, which, in pertinent part, provides the following terms of coverage:

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies....
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) This “bodily injury” or' “property damage” is caused by an “occurrence” that takes place

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