Geurin Contractors, Inc. v. Bituminous Cas. Corp., CA

• Decision Date: 23 June 1982
• Docket Number: No. CA,CA
• Citation: 636 S.W.2d 638,5 Ark.App. 229
• Parties: GEURIN CONTRACTORS, INC., Appellant, v. BITUMINOUS CASUALTY CORPORATION, Appellee. 81-382.
• Court: Arkansas Court of Appeals

Page 638

636 S.W.2d 638

5 Ark.App. 229

GEURIN CONTRACTORS, INC., Appellant, v. BITUMINOUS CASUALTY CORPORATION, Appellee.

No. CA 81-382.

Court of Appeals of Arkansas.

June 23, 1982.

Supplemental Opinion on Denial of Rehearing Aug. 25, 1982.

Highsmith, Gregg, Hart & Farris by John C. Gregg, Batesville, for appellant.

Bailey, Trimble, Pence & Sellars by Rick Sellars, Little Rock, for appellee.

CLONINGER, Judge.

On February 22, 1978, John Reaves filed suit against Geurin Contractors for the alleged negligent performance of a contract between Geurin and the Arkansas State Highway Department for the paving of Highway No. 67 in Jackson County. Mr. Reaves alleged that because the road was closed in front of his store, he was damaged in the amount of $22,227.00 in lost profits. Geurin Contractors notified its insurance carrier, Bituminous Casualty Corporation, of the litigation and demanded a defense to the civil action. Bituminous notified Geurin that it would provide a defense to the cause of action under a reservation of rights and advised appellant to employ its own attorney at its own expense in the defense of the lawsuit. Bituminous, after trial but before entry of the judgment, advised Geurin that no coverage was available to it under the policy and that Bituminous would take no further action or provide any further legal defense. Judgment was entered against Geurin for $22,227.00. Geurin appealed the decision and the verdict was affirmed on October 15, 1980.

On April 7, 1980, Geurin sued on the policy of insurance seeking reimbursement from Bituminous for the amount spent in satisfaction of the judgment, payment of costs, and attorneys' fees, plus penalty and costs. On May 7, 1981, the trial court dismissed Geurin's complaint with prejudice. Geurin now brings this appeal.

This case is primarily one of interpretation of an insurance policy. Appellant's sole point for reversal is that the circuit court erred in dismissing the complaint of Geurin's because it misconstrued the insurance policy.

The construction and legal effect of written contracts are matters to be determined by the court, not by the jury, except when the meaning of the language depends upon disputed extrinsic evidence. Southall v. Farm Bureau Mutual Insurance Co., 276 Ark. 58, 632 S.W.2d 420 (1982). It is a question of law and not one of fact. Arkansas Rock and Gravel Co. v. Chris-T-Emulsion Co., 259 Ark. 807, 536 S.W.2d 724 (1976). Under Arkansas law insurance contract language is to be given its common and ordinary meaning under the situation and words of limitation are to be construed strictly against the insurer. Courson v. Maryland Casualty Co., 475 F.2d 1030 (C.A.Ark.1973). Courts are required to strictly interpret exclusions to insurance coverage and to resolve all reasonable doubt in favor of an insured who had no part in the preparation of the contract. State Farm Mutual Automobile Insurance Co. v. Traylor, 263 Ark. 92, 562 S.W.2d 595 (1978). Insurance policies should always be construed most favorably to the insured and against the insurer. Ritchie Grocer Co. v. Aetna Casualty & Surety Co., 426 F.2d 499 (C.A.Ark.1970).

Appellant first contends that the situation which resulted in the claim by John Reaves constituted an "occurrence" within the meaning of the policy of insurance. Under the insurance policy, "occurrence" is defined as:

An accident, including continuous repeated exposure to conditions, which results in bodily injury or property damage, neither expected nor intended from the standpoint of insured.

In Ohio Casualty Insurance Co. v. Terrace Enterprises, Inc., 260 N.W.2d 450 (Minn.1977), the Supreme Court of Minnesota held that the settling of an apartment building caused by Terrace Enterprises' failure to backfill adequately and to adequately protect the soil and concrete from the cold was an "occurrence" within the meaning of the policy. The insurance policy provided by Ohio Casualty Co. contained essentially the same definition for "occurrence" as is provided for in the policy by Bituminous Casualty Corporation. Similarly, in Grand River Lime Co. v. Ohio Casualty Insurance Co., 32 Ohio App.2d 178, 289 N.E.2d 360 (1972) the In another case, Elco Industries, Inc. v. Liberty Mutual Insurance Co., 90 Ill.App.3d 1106, 46 Ill.Dec. 319, 414 N.E.2d 41 (1980), the Appellate Court of Illinois held that the installation of defective governor-regulating pins installed into engines by the insured, necessitating their removal and replacement, was an "occurrence" under the terms of the policy. The Court of Appeals of Washington held in Gruol Construction Co. v. Insurance Co. of North America, 11 Wash.App. 632, 524 P.2d 427 (1974) that substantial evidence supported the trial court's finding that damage to a building caused by dry rot which resulted from the insured's action of piling dirt against boxsills of the apartment building by backfilling during construction came within the definition of "occurrence" as used in the policy.

Court of Appeals of Ohio held that alleged nuisance and trespass by damage-causing emission of industrial wastes into the air in the course of insured's manufacturing operation could [5 Ark.App. 233] constitute an "occurrence" within the meaning of the policy, but knowing and intentional malfeasance in such emission of wastes could not. The court reversed a summary judgment in favor of the insurer, Ohio Casualty Insurance Company. The court went on to say that the word "occurrence" is much broader than the term "accident". Furthermore, the court held that the word "occurrence" should not be interpreted in a sudden or momentary sense, but permit such term to encompass a period of time.

There is one Arkansas case which construes the meaning of "occurrence", Continental Insurance Co. v. Hodges, 259 Ark. 541, 534 S.W.2d 764 (1976). In that case the sole issue on appeal was whether Continental Insurance Company was obligated to defend the Hodgeses in an action brought against them for allegedly casting surface water upon their neighbor's property. The word "occurrence" was defined in the policy as:

An accident ... which results ... in property damage neither expected nor intended from the standpoint of the insured.

The trial court held in favor of the Hodgeses. On appeal, the Arkansas Supreme Court reversed the trial judge's decision. The court held that the damages alleged could not have taken place without foresight or expectation and did not involve any negligence on the part of appellees. Nor could it be said that the damages alleged proceeded from an unknown cause or were an unusual effect of a known cause within the meaning of "accident." Rather, the court recognized that the complaint stated that appellees, after pumping the water onto their lands for use of irrigating the rice crops, drained it into a ditch crossing their land and cast it upon the lands of their neighbor. It followed that the trial court erred in holding that appellees' conduct constituted "an accident" within any reasonable definition of the word.

In applying the above stated rules to the facts of this case, we hold that the damage which resulted in the John Reaves claim was an "occurrence" within the meaning of the policy. The key issue in determining whether an "occurrence" is within the coverage of an insurance policy such as this is whether the occurrence was expected or intended by the insured. See Continental Insurance Co., supra. In the instant case, Geurin Contractors began work on the portion of Highway 384 in front of John Reaves' store on July 13, 1977. Geurin specifically chose to do the work during the summer months to avoid potential wet weather problems. They first began grading operations on the road. They encountered soil cement during the grading operations and the highway department made the decision that the soil cement had to be removed. Geurin began removing the soil cement at the direction of the highway department. When the soil cement was removed it was discovered that the underlying soil was unstable and not suitable for a road bed. The highway department then made the decision that the unstable soil would have to be removed and refilled with stable material. This is called undercutting and consists of a contractor digging out the The undercut area of Highway 384 was partially backfilled by Friday evening, July 15. On Friday night a heavy rain occurred which filled the undercut area with water. The road was closed the following day with the approval of the highway department. It rained every day thereafter through Thursday, July 21. The road was closed through July 22. During this period, there was evidence to show that attempts were made to provide access to Reaves' store by Geurin and the highway department.

unstable soil and moving it, then refilling the area with the dry soil sufficient to stabilize the road area. During these operations, the road was kept open by closing one-half of the road and leaving the other half open.

Based upon the above evidence, we hold that the occurrence which brought about the damage to Reaves' store was not expected nor intended by the insured and comes within the purview of an occurrence within the meaning of the policy.

Appellant next argues that the court erred in holding that even if there was coverage, these damages were specifically excluded from coverage under the policy of insurance. The policy provides in pertinent part:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... the property damage to which this insurance applies, caused by an occurrence.

Property damage in the policy is defined as:

(1) Physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or

(2) Loss of use of tangible property which has not been physically injured or destroyed provided...