Gar-Tex Const. Co. v. Employers Cas. Co.

• Decision Date: 15 May 1989
• Docket Number: GAR-TEX,No. 05-88-00657-CV,05-88-00657-CV
• Citation: 771 S.W.2d 639
• Parties: CONSTRUCTION COMPANY, Appellant, v. EMPLOYERS CASUALTY COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 639

771 S.W.2d 639

GAR-TEX CONSTRUCTION COMPANY, Appellant, v. EMPLOYERS CASUALTY COMPANY, Appellee.

No. 05-88-00657-CV.

Court of Appeals of Texas,

Dallas.

May 15, 1989.

Rehearing Denied June 26, 1989.

Steven E. Clark, Leland C. de la Garza, Dallas, for appellant.

Randy A. Nelson, Beth D. Bradley, Dallas, for appellee.

Before HOWELL, LAGARDE and WHITTINGTON, JJ.

LAGARDE, Justice.

Gar-Tex Construction Company (Gar-Tex) appeals a summary judgment rendered in favor of the defendant, Employers Casualty Company (Employers) denying Gar-Tex's insurance claim under a liability insurance policy issued to Gar-Tex by Employers. In three points of error, Gar-Tex contends that the trial court erred: (1) in granting Employers' motion for summary judgment because Gar-Tex was entitled to judgment as a matter of law; (2) in denying Gar-Tex's motion for summary judgment because Gar-Tex was entitled to judgment as a matter of law; and (3) in granting Employers' motion for summary judgment because genuine issues of material fact existed. We disagree and affirm.

On October 14, 1985, the City of Ennis entered into a contract with Red River Construction Company for construction of an addition to the Ennis Water Treatment Plant, which was to include construction of a clearwell (an underground, concrete water storage tank). The contract included plans and specifications designed by Black & Veatch Engineers and Architects. On October 16, 1985, Red River entered into a subcontract with Gar-Tex pursuant to which Gar-Tex was to provide labor and equipment for the construction of the clearwell. Gar-Tex's responsibilities included the construction of the concrete slab, walls, and ceiling for the clearwell, and the formulation of methods to prevent water damage to the clearwell during its construction. The potential for water damage, including the possibility of the structure "floating," was specifically mentioned in the job specifications which were prepared by Black & Veatch. Thus, Gar-Tex implemented the following precautionary measures to prevent water damage: (1) a cofferdam was built around two sides of the clearwell excavation site to divert surface flow away from the site; (2) the clearwell was partially backfilled; and (3) two electrically powered water pumps were placed in the excavation site to remove any excess water.

During the weekend of May 24-25, 1986, significant rainfall resulted in surface runoff, and the runoff entered the clearwell excavation site. Although there is a question of fact regarding whether the electricity was off for an extended period of time, thereby rendering the pumps inoperable, it is clear from the record that the pumps failed to keep the excavation site dry, and sufficient runoff accumulated in the excavation site to cause the clearwell to float, resulting in structural damage. Thereafter, Red River requested that Gar-Tex repair the water damage to the clearwell and complete its construction. Gar-Tex repaired the damage at a cost of $50,789.49. Prior to making the repairs, Gar-Tex notified Employers of the damage. Employers inspected the damaged structure and determined that the loss was not covered by the policy. Employers notified Gar-Tex in writing that the loss was not covered and explained that it denied coverage because the damage was to Gar-Tex's work product and because the damage arose out of Gar-Tex's own actions.

On February 11, 1987, Gar-Tex filed suit against Employers for recovery under the terms of the policy. Gar-Tex first moved for partial summary judgment on December 29, 1987, requesting an interpretation and declaration as to the terms of the policy and its effect on the burden of proof. The court, by order dated February 4, 1988, denied Gar-Tex's motion. Subsequently, Employers filed its motion for summary judgment. The trial court agreed to consider Employers' motion and to reconsider Gar-Tex's motion for partial summary judgment. On March 30, 1988, the trial court heard the motions and arguments of the respective parties and, on April 8, 1988, granted Employers' motion and denied Gar-Tex's motion.

With these facts in mind, we address Gar-Tex's first two points of error. In those points, specifically contending that its loss was a covered risk, Gar-Tex claims that it is entitled to judgment as a matter of law. Gar-Tex argues that the water damage to the clearwell was caused by an "accident" or "act of God" and was neither expected nor intended. See American Cas. Co. v. Timmons, 352 F.2d 563, 565-66 (6th Cir.1965). Gar-Tex concedes that it was legally obligated to make the clearwell repairs and recognizes that it would otherwise be in breach of its subcontract. Gar-Tex asserts that by breaching its subcontract, it would then be exposed to a suit by Red River for the cost of the repairs, regardless of whether Gar-Tex was at fault in causing the damage. Thus, Gar-Tex maintains that the broad form policy and the endorsement to the policy are designed to protect Gar-Tex from this type of damage which results from fortuitous losses occurring in connection with its work. See Ohio Cas. Ins. Co. v. Terrace Enter., Inc., 260 N.W.2d 450, 452 (Minn.1977). We disagree.

It is undisputed that the comprehensive general liability insurance policy (broad form policy) issued by Employers to Gar-Tex was in force at the time the loss occurred. The broad form policy provides:

The company [Employers] will pay on behalf of the insured [Gar-Tex] all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage....

(Emphasis added.)

The next section in the broad form policy is entitled "Exclusions." Section VI of the endorsement ¹ to the broad form policy replaces two of the subsections under the Exclusions. The Exclusion section and the endorsement, when read together, state, in pertinent part:

Exclusions

This insurance does not apply:

* * * * * *

(2) except with respect to liability under a written sidetrack agreement or the use of elevators

* * * * * *

(d) to that particular part of any property, not on premises owned by or rented to the insured,

(i) upon which operations are being performed by or on behalf of the insured at the time of the property damage arising out of such operations, or

(ii) out of which any property damage arises, or

(iii) the restoration, repair or replacement of which has been made or is necessary by reason of faulty workmanship thereon by or on behalf of the insured;

(3) with respect to the completed operations hazard and with respect to any classification stated in the policy or in the company's manual as "including completed operations," to property damage to work performed by the named insured arising out of such work or any portion thereof, or out of such materials, parts or equipment furnished in connection therewith.

(Emphasis added.)

Gar-Tex asserts that sections VI(A)(2) and (3) ² of the endorsement are not applicable in this particular instance, and that if the ordinary definitions of "operations," "arising out of," and "arises" are used, the policy will be construed as covering Gar-Tex's loss. Gar-Tex maintains that because no actual work was being performed on the clearwell during the weekend of May 24-25, 1986, there were no "operations," and because its work on the clearwell was not defective, the exclusions do not apply.

"Operations," as used in the policy, does not require active construction. Gar-Tex was in possession of and occupied the clearwell and the various precautionary structures until its subcontract was completed. Otherwise, Gar-Tex could not effectively carry out its contractual obligations to build and complete the clearwell. See McCord, Condron & McDonald, Inc. v. Twin City Fire Ins. Co., 607 S.W.2d 956, 958 (Tex.Civ.App.--Fort Worth 1980, writ ref'd n.r.e.). Moreover, Gar-Tex did not establish that it had "turned over" the partially completed clearwell to Red River or the City of Ennis. See id. Thus, we conclude that the damage was sustained by property upon which operations were being performed by Gar-Tex. Further, Gar-Tex contends that there is no summary judgment evidence of negligence or faulty workmanship on the part of Gar-Tex; therefore, Gar-Tex maintains that its factual situation is clearly outside the scope of the express language of section VI(A)(2) of the endorsement.

The excerpts from the broad form policy clearly show that the policy is designed to provide indemnity to the insured for "all sums which the insured shall become legally obligated to pay as damages because of ... bodily injury [and] ... property damages ... caused by an occurrence." (Emphasis added.) The broad form policy "does not insure the contractor against his own failure to perform his contract, but [it] does insure him against liability for damages other than to the building itself as the result of his performance, whether defective or otherwise." See McCord, 607 S.W.2d at 958, quoting Eulich v. Home Indem. Co., 503 S.W.2d 846, 849 (Tex.Civ.App.--Dallas 1973, writ ref'd n.r.e.) (construing a broad form policy which is identical to the broad form policy issued by Employers in this instance). The endorsement narrows the application of the broad form policy to the particular part of the property with which the insured or its subcontractor had contact in causing the loss. This type of insurance is described as a liability policy, not a "builder's risk policy." Employers Cas. Co. v. Brown-McKee Inc., 430 S.W.2d 21, 25 (Tex.Civ.App.--Tyler 1968, writ ref'd n.r.e.). Thus, we conclude that the broad form policy and endorsement were not intended to insure damage to that particular part of the property that was damaged by reason of faulty workmanship. In...