F & H Const. v. Itt Hartford Ins. Co.

• Citation: 12 Cal.Rptr.3d 896,118 Cal.App.4th 364
• Decision Date: 05 May 2004
• Docket Number: No. C042707.,C042707.
• Court: California Court of Appeals
• Parties: F & H CONSTRUCTION, Plaintiff and Appellant, v. ITT HARTFORD INSURANCE COMPANY OF THE MIDWEST, Defendant and Respondent.

12 Cal.Rptr.3d 896

118 Cal.App.4th 364

F & H CONSTRUCTION, Plaintiff and Appellant, v. ITT HARTFORD INSURANCE COMPANY OF THE MIDWEST, Defendant and Respondent.

No. C042707.

Court of Appeal, Third District.

May 5, 2004.

Ryan & Lifter, Joseph D. Ryan, Glenn Gould, Oakland, for Plaintiff and Appellant.

McCormick, Barstow, Sheppard, Wayte & Carruth, Robert K. Landen, Jay A. Christofferson, Fresno, for Defendant and Respondent.

BLEASE, Acting P.J.

F & H Construction (F & H) appeals from the judgment in favor of ITT Hartford Insurance Group¹ (Hartford) on the parties' cross-motions for summary judgment.

F & H brought suit against Hartford under a commercial general liability insurance (CGLI) policy issued to Hartford's insured, L. O'Reilly & Son, Inc. (O'Reilly), after O'Reilly declared bankruptcy.

F & H had contracted with Contra Costa Water District to build a water facility pumping plant. F & H entered into a subcontract with O'Reilly for the manufacture and delivery of grade A-50 steel pile caps with a load capacity of 50,000 pounds per square inch. After O'Reilly delivered the pile caps and F & H welded the majority of them to driven piles, F & H discovered the caps were made with grade A-36 steel rather than the agreed upon A-50 grade steel. F & H now seeks damages from Hartford under O'Reilly's CGLI policy for property damage.

The issue tendered by the parties is whether welding inadequate pile caps onto driven piles constitutes property damage under the CGLI policy when there is no physical injury to the piles or to other property, and the defective pile caps are ultimately used as modified to meet design specifications. We hold that under these circumstances, there is no "property damage." We shall therefore affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND²

A. The Construction Project

In September 1994, F & H contracted with Contra Costa Water District (CCWD) to build the Los Vaqueros Water Conveyance Facility Pumping Plants (Los Vaqueros). In furtherance of that contract, F & H entered into a subcontract with O'Reilly to supply 113 pile cap extensions to be welded into place on steel composite piles, which are driven into the ground. The specifications for the pile caps required that they be fabricated with grade A-50 steel, which has a load capacity of 50,000 pounds per square inch, referred to as 50 KSI.

Contrary to the project specifications and unbeknownst to F & H, O'Reilly manufactured and delivered grade A-36 steel caps instead of grade A-50 caps. Grade A-36 steel is comprised of steel of varying strengths and potentially includes some steel that lacks the tensile strength of the 50 KSI steel required by the subcontract.

F & H became aware that O'Reilly provided the lesser grade steel caps after it received the results of a mill certification indicating the pile caps did not meet the 50 KSI strength requirement. At that time, all 113 piles had been driven into place and 79 of the 113 pile caps made of grade A-36 steel had been welded onto 79 of the piles. Thirty-four caps had not yet been welded into place. The use of the lesser grade steel caps produced structural units which were not damaged but were inadequate for the intended purpose of supporting the pumping facility.³

In order to avoid the prohibitive cost of removing 79 piles at a cost of $30,000 to $40,000 each, eliminate delay, and not damage the piles by cutting off the 79 pile caps already welded into place, F & H decided to modify the existing grade A-36 pile caps to meet design requirements. Stiffener ribs or fins made of grade A-50/252 steel were designed and welded onto the grade A-36 pile caps and used with the original piles. The stiffener ribs provided the needed strength to avoid potential deforming, ripping, tearing, moving or failure of the caps in case of earthquake or other ground movement.

The modifications were carried out in two phases. The first phase consisted of modifying the 79 pile caps which had already been welded onto the piles. These caps were referred to as Phase I or "field" caps. The second phase consisted of modifying the 34 unwelded caps and then welding them as modified to the remaining 34 piles. These were referred to as Phase II or "shop" caps. By so modifying the pile caps, F & H was able to complete the project using the original piles and pile caps without damaging or weakening the piles in any way. The Los Vaqueros project was completed on time and no liquidated damages were assessed against F & H.⁴

B. Procedural History

On February 24, 1998, F & H filed suit against O'Reilly seeking recovery of damages in excess of $200,000. In March of that same year, O'Reilly filed a voluntary petition for bankruptcy, which stayed F & H's civil suit against O'Reilly. The bankruptcy court granted F & H's petition to lift the stay for the limited purpose of pursuing the civil action to obtain O'Reilly's insurance assets. O'Reilly did not respond to F & H's complaint and on June 13, 2000, the superior court entered a default judgment against O'Reilly in the amount of $243,064.37.

F & H then filed the present suit against Hartford for damages and breach of contract seeking $243,064.37. The suit was brought under a CGLI policy issued by Hartford to O'Reilly covering "property damage."

The parties filed cross-motions for summary judgment. By written opinion, the trial court granted Hartford's motion, denied F & H's motion, and entered summary judgment in favor of Hartford. F & H filed a timely appeal from the judgment.⁵

DISCUSSION

F & H contends welding the grade A-36 pile caps to the driven piles constitutes property damage within the meaning of the CGLI policy issued by Hartford to O'Reilly. Hartford contends F & H has failed to establish "property damage" as defined under the policy because there was no "physical injury" to the piles or to other property. We agree with Hartford.

A. Standard of Review

A motion for summary judgment shall be granted when "all the papers submitted show there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c); Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 356, 100 Cal.Rptr.2d 352, 8 P.3d 1089; Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476, 110 Cal.Rptr.2d 370, 28 P.3d 116.) We review the trial court's decision de novo to determine whether there is a triable issue of material fact, considering all the evidence the parties offered in connection with the motion and the uncontradicted inferences the evidence reasonably supports. (Code Civ. Proc., § 437c, subd. (c); Merrill v. Navegar, Inc., supra, at p. 476, 110 Cal.Rptr.2d 370, 28 P.3d 116.)

A moving party defendant is entitled to judgment as a matter of law when one or more elements of the plaintiff's case cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subds. (a) and (o)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849, 107 Cal.Rptr.2d 841, 24 P.3d 493; Guz v. Bechtel National, Inc., supra, 24 Cal.4th at p. 356, 100 Cal.Rptr.2d 352, 8 P.3d 1089.)

As the party claiming under the insurance policy, F & H has the burden of establishing that its claim is within the basic scope of coverage, i.e. that it suffered "property damage" within the meaning of the policy issued by Hartford. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 16, 44 Cal.Rptr.2d 370, 900 P.2d 619; Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787, 803, 26 Cal.Rptr.2d 391.)

Here, the material facts are undisputed and the interpretation of an insurance policy is a question of law which we review de novo. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18, 44 Cal.Rptr.2d 370, 900 P.2d 619; Marie Y. v. General Star Indemnity Co. (2003) 110 Cal.App.4th 928, 950, 2 Cal.Rptr.3d 135; Economy Lumber Co. v. Ins. Co. of North America (1984) 157 Cal.App.3d 641, 645, 204 Cal.Rptr. 135.) We shall therefore consider the parties' cross-motions for summary judgment as one to determine the legal issue before us. That question is whether welding defective pile caps to driven piles constitutes property damage within the meaning of the CGLI policy solely because the welded unit was inadequate to meet contractual design specifications.

B. Rules of Construction

In construing an insurance contract, we give effect to the mutual intention of the parties. (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821, 274 Cal.Rptr. 820, 799 P.2d 1253; Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 666, 42 Cal.Rptr.2d 324, 913 P.2d 878.) The parties' intent is determined by looking first to the language of the policy to determine its plain meaning interpreted in its ordinary and popular sense. (AIU Ins., supra, 51 Cal.3d at p. 822, 274 Cal.Rptr. 820, 799 P.2d 1253; Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18, 44 Cal.Rptr.2d 370, 900 P.2d 619.) Where the meaning is clear and unambiguous, we apply that meaning. (Civ.Code, § 1649; Montrose Chemical Corp., supra, 10 Cal.4th at p. 667, 42 Cal.Rptr.2d 324, 913 P.2d 878.) In so doing, we must give meaning to each word in the contract. (Civ.Code, § 1641; Collin v. American Empire Ins. Co., supra, 21 Cal.App.4th at p. 818, 26 Cal.Rptr.2d 391.) We therefore turn to the language of the policy.

C. The Comprehensive General Liability Insurance Policy

The CGLI policy issued by Hartford states in pertinent part: "We will pay those sums that the insured becomes legally obligated to pay as damages because of ... `property damage' .... [¶] ... if ... [t]he ... `property damage' is caused by an `occurrence' that takes place in the `coverage territory;' and ... occurs during the policy period." The policy defines "property damage" in two ways: (1) "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...