Erie Ins. v. Pioneer Home Improvement

• Decision Date: 10 December 1999
• Docket Number: No. 26216.,26216.
• Citation: 526 S.E.2d 28,206 W.Va. 506
• Court: West Virginia Supreme Court
• Parties: ERIE INSURANCE PROPERTY AND CASUALTY COMPANY, Plaintiff Below, Appellee, v. PIONEER HOME IMPROVEMENT, INC., Defendant Below, Appellant, Gerald Skanes and Mary E. Skanes, Defendants Below, Appellees.

526 S.E.2d 28

206 W.Va. 506

ERIE INSURANCE PROPERTY AND CASUALTY COMPANY, Plaintiff Below, Appellee, v. PIONEER HOME IMPROVEMENT, INC., Defendant Below, Appellant, Gerald Skanes and Mary E. Skanes, Defendants Below, Appellees.

No. 26216.

Supreme Court of Appeals of West Virginia.

Submitted October 6, 1999.

Decided December 10, 1999.

Ancil G. Ramey, Esq., Steptoe & Johnson, Charleston, West Virginia, Attorney for Plaintiff Below, Appellee.

Paul A. Ryker, Esq., Huntington, West Virginia, Attorney for Pioneer Home Improvement, Inc.

Mark R. Staun, Esq., John F. Dascoli, Esq., The Segal Law Firm, Charleston, West Virginia, Attorneys for Skanes.

MAYNARD, Justice:

The appellant, Pioneer Home Improvement, Inc. (Pioneer), appeals the December 17, 1998 order of the Circuit Court of Cabell County, West Virginia, wherein the court determined that the appellee, Erie Insurance Property and Casualty Company (Erie), had no duty to defend or indemnify Pioneer under Pioneer's commercial general liability (CGL) policy of insurance. Pioneer argues the court erred in finding that the policy did not provide coverage for defective work and in failing to find that Erie had a duty to continue to defend Pioneer. We disagree and affirm.

Pioneer is a corporation which performs construction work including the installation of siding, doors, and windows. On July 22, 1996, Gerald and Mary Skanes contracted with Pioneer to do some work on their home, including installation of new siding. The Skanes advanced an initial payment to Pioneer prior to the commencement of construction. The work was not performed to the Skanes' satisfaction nor did it progress as quickly as they had hoped. Nonetheless, at Pioneer's urging, the Skanes paid the second installment. Relations deteriorated between Pioneer and the Skanes to the point that Pioneer terminated work operations on the property and the Skanes refused to pay the balance of the contract. Pioneer filed a mechanics' lien against the Skanes' property. The Skanes filed a lawsuit against Pioneer, alleging breach of contract in the performance of certain home improvements and slander of title in the filing of a mechanics' lien.¹

During this time, Pioneer was insured by Erie under a policy titled "Ultraflex Package Policy." Erie provided defense counsel services to Pioneer under a reservation of rights. After Pioneer refused to withdraw its demand for defense and indemnification, Erie filed a declaratory judgment action, seeking a declaration of its obligations under the insurance policy. The circuit court granted summary judgment to Erie, stating that

the plaintiff, Erie Insurance Property and Casualty Company, has no duty to defend or indemnify the defendant, Pioneer Home Improvement, Inc., under the policy of insurance which is the subject of this action, with respect to a civil suit filed by the defendants, Gerald Skanes and Mary E. Skanes, alleging breach of contract and slander of title.

Erie was permitted to withdraw from its defense of Pioneer. However, Pioneer's private counsel continued to represent Pioneer during the remainder of the litigation. According to the briefs filed on appeal, a trial was held in the underlying action which resulted in a verdict for the Skanes in the amount of $26,500.00, which Pioneer has since paid.

Pioneer subsequently filed a motion to alter or amend the judgment of the court on the issue of whether Erie had a duty to defend or indemnify Pioneer. The court entered an order denying the motion. It is from this order that Pioneer appeals.

On appeal, Pioneer contends the circuit court erred in finding that no coverage existed under the policy of insurance provided by Erie to Pioneer regarding the Skanes' claim for defective work on their home. Pioneer argues the court should have held that the claim was covered under the "completed operations hazard" coverage and that the use of the term "occurrence" in certain sections of the policy does not preclude a finding in favor of coverage regarding the Skanes' liability claim.² Pioneer also contends the circuit court erred in finding that Erie had no duty under the policy of insurance to continue to provide it with a defense. Erie argues that Pioneer purchased a commercial general liability policy of insurance which specifically excludes coverage for such breach of contract actions in clear and unambiguous language. The question we must decide is whether the insurance policy in question indemnifies Pioneer against damages in an action for breach of contract and faulty workmanship on a project where the damages are the cost of correcting the work itself.

It is well settled that "`"[a] circuit court's entry of summary judgment is reviewed de novo." Syl. pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).' Sy. pt. 1, Davis v. Foley, 193 W.Va. 595, 457 S.E.2d 532 (1995)." Syllabus Point 1, Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995). Moreover, "`[a] circuit court's entry of a declaratory judgment is reviewed de novo.' Syl. pt. 3, Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995)." Syllabus Point 1, Bruceton Bank v. U.S. Fid. and Guar. Ins., 199 W.Va. 548, 486 S.E.2d 19 (1997).

As we stated previously, the insurance policy at issue here is titled "Ultraflex Package Policy." This policy of insurance is a commercial general liability or CGL policy which contains completed operations hazard coverage. Under "PROPERTY DAMAGE LIABILITY—COVERAGE G," the policy reads as follows:

We will pay for damages because of personal injury or property damage for which the law holds anyone we protect responsible and which are covered by your policy. We cover only personal injury and property damage which occurs during the policy period. The personal injury or property damage must be caused by an occurrence which takes place in the covered territory.

In the definitions section, the policy states that "`[o]ccurrence' means an accident, including continuous or repeated exposure to the same general, harmful conditions." Pioneer admits that paragraph B.8.e. of the policy section titled "WHAT WE DO NOT COVER—EXCLUSIONS" excludes coverage for "that particular part of any property that must be restored, repaired or replaced because your work was faulty." However, Pioneer contends coverage is extended under the next sentence of the paragraph, which states, "We will cover property damage included in the products hazard and completed operations hazard." Completed operations hazard is defined as "includ[ing] all personal injury and property damage occurring away from premises you own or rent arising out of your work that has been completed or abandoned."

This Court has previously said, "In determining the coverage afforded by an insurance policy such policy must receive a practical and reasonable interpretation, consonant with the apparent object thereof and the intent of the parties." Syllabus Point 1, McGann v. Hobbs Lumber Co., 150 W.Va. 364, 145 S.E.2d 476 (1965). It must be kept in mind that the insurance policy issued in the instant case is a liability policy, not a builder's risk policy, and Pioneer is seeking indemnity from Erie in an action brought by contracting property owners grounded upon breach of contract.

In Helfeldt v. Robinson, 170 W.Va. 133, 290 S.E.2d 896 (1981), a judgment was entered against William and Colleen Robinson, d/b/a Robinson Construction Company, for the faulty construction of a home. The Robinsons were insured by United States Fidelity and Guaranty Company (U.S.F. & G.) under a comprehensive general automobile and property liability insurance policy. The Robinsons filed a third party complaint against U.S.F. & G., claiming the insurance company had improperly failed to defend the Robinsons in the Helfeldt action and that U.S.F. & G. was liable for all sums adjudged against the Robinsons in favor of the Helfeldts. The circuit court entered judgment in favor of the Robinsons and against U.S.F. & G. On appeal, this Court reversed, concluding that the insurance policy did not extend coverage for the defective construction of a home. The Helfeldt court's decision was based in part on the earlier McGann opinion.

In McGann, supra, F.D. and Margaret McGann retained Hobbs Lumber Company, a building contractor, to build a home for them. Six months after construction was completed and the McGanns moved into the house, a portion of the foundation wall collapsed, resulting in substantial damage. Hobbs Lumber Company was insured by a liability policy issued by Aetna Casualty and Surety Company. The McGanns sued Hobbs, who then joined Aetna as a third party defendant, claiming it was entitled to recover from Aetna any sums which might be adjudged against it in favor of the McGanns. The circuit court found that the claim was covered by Hobbs' insurance. On appeal, this Court reversed, holding that "[a] liability insurance policy, unlike a builder's risk policy, is designed to indemnify the insured against damage to other persons or property caused by his work or property and is not intended to cover damage to the insured's property or work completed by him." Syllabus Point 2, McGann v. Hobbs Lumber Co., 150 W.Va. 364, 145 S.E.2d 476 (1965). Other jurisdictions have held similarly.

In Bor-Son Bldg. Corp. v. Employers Com'l Union, 323 N.W.2d 58 (Minn.1982), Bor-Son was awarded a contract to build a high-rise apartment complex for the Duluth Housing and Redevelopment Authority (HRA). Bor-Son was required to furnish a performance bond and comprehensive general liability insurance coverage. Arrangements were made with Employers Commercial Union Insurance Company of America and Employers Liability Assurance Corporation, Ltd.(Commercial Union) to provide both. Shortly after the buildings were completed and turned over to HRA, severe water leakage problems developed. All attempts to cure the problems were unsuccessful. HRA brought suit against Bor-Son and Commercial Union, alleging the water leakage was due...