Gruol Const. Co., Inc. v. Insurance Co. of North America

• Decision Date: 15 July 1974
• Docket Number: No. 2198--I,2198--I
• Citation: 524 P.2d 427,11 Wn.App. 632
• Parties: GRUOL CONSTRUCTION COMPANY, INC., a Washington corporation, et al., Respondents, v. INSURANCE COMPANY OF NORTH AMERICA, a Pennsylvania corporation, and Northwestern Mutual Insurance Company, a Washington corporation, Appellants, Safeco Insurance Company of America, a Washington corporation, et al., Defendants.
• Court: Washington Court of Appeals

Page 632

11 Wn.App. 632

524 P.2d 427

GRUOL CONSTRUCTION COMPANY, INC., a Washington corporation et al., Respondents, v. INSURANCE COMPANY OF NORTH AMERICA, a Pennsylvania corporation, and Northwestern Mutual Insurance Company, a Washington corporation, Appellants Safeco Insurance Company of America, a Washington corporation, et al., Defendants.

No. 2198--I.

Court of Appeals of Washington, Division 1.

July 15, 1974.

Detels, Draper & Marinkovich, Frank W. Draper, Seattle, for appellant, Ins. Company of North America.

William F. Brosche, Jr., Seattle, for appellant, Northwestern Mut. Ins. Co.

Monheimer, Schermer, Van Fredenberg & Smith, Stephen P. Ryder, Seattle, for respondents.

FARRIS, Judge.

Insurance Company of North America and Northwestern Mutual Insurance Company appeal from the trial court's finding that each of them is jointly and severally liable to Gruol Construction Company, Inc. and Kenneth R. Gruol and Carol Gruol, his wife, for damages caused by dry rot to the foundation of an apartment building.

Gruol entered the construction business in 1946 and since that time has engaged in both residential and commercial construction. In 1963 he built the apartment building in question. In December, 1963, he entered into an earnest money agreement for the sale of the building to one Donovan; the sale was concluded in January, 1964, after construction of the building was complete. The earnest money agreement provided:

Builder agrees to complete the building in a workmanlike manner and according to architect and City Building Department approved plans and specifications.

In 1968, Donovan sued Gruol for damage to the building caused by dry rot which resulted from dirt having been piled against the box sills of the building by backfilling during construction. Gruol tendered the defense to his insurance carriers (Safeco covered 1962--February, 1965; Insurance Company of North America covered February, 1965--February, 1966; and Northwestern Mutual covered February, 1966--February, 1968). All three refused to defend. Gruol settled the claim with Donovan and brought action against all three insurance carriers for breach of contract. The trial court entered judgment against the three, finding them jointly and severally liable in the amount of $15,212.30. INA and Northwestern Mutual appeal; we affirm.

In entering judgment for Gruol, the trial court found that (1) the dry rot was an 'accident' or 'occurrence' since it was a condition which unexpectedly and unintentionally caused injury, and (2) that the injury and damage was a continuing process until its discovery in 1968. Accordingly, the trial court found that the insurance policies of all three carriers covered the injury and damage and that each had breached its contract when it declined to defend the suit by Donovan against Gruol.

The initial question is whether the dry rot was an 'accident' or 'occurrence' under the provisions of the insurance contracts. The Safeco policy provided coverage for 'accidents' and except for the first 6 months of the coverage of the INA policy wherein 'accident' was the term used, both INA and Northwestern Mutual provided coverage for damages due to an 'occurrence.' The term 'accident' is not defined in the policies, however, the INA policy defined 'occurrence' as

either an accident happening during the policy period or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to or destruction of property during the policy period.

Northwestern defined 'occurrence' as

an event, or a continuous or repeated exposure to substantially the same general conditions, which causes . . . property damage during the policy period resulting from acts or omissions by the Insured which would not be intended nor, with reasonable certainty, be expected by the Insured to produce injury. All injury or damage arising out of such exposure to substantially the same general conditions shall be considered as arising out of one occurrence.

Both terms were defined by the court in Truck Ins. Exch. v. Rohde, 49 Wash.2d 465, 469, 303 P.2d 659 (1956):

An accident is '. . . an undesigned and unforeseen occurrence of an afflictive or unfortunate character; . . .'

An occurrence is 'Any incident or event, esp. one that happens without being designed or expected; . . .'

. . . However, in our opinion and for the purposes of this case, the terms, 'accident' and 'occurrence,' are synonymous.

See also Viking Automatic Sprinkler Co. v. Pacific Indem. Co., 19 Wash.2d 294, 142 P.2d 394 (1943); Annot., 7 A.L.R.3d 1262 (1966). We find substantial evidence to support the trial court's finding that the dry rot came within the definition of 'accident' and 'occurrence' as used on the contracts of insurance. The record reflects testimony of Gruol that he had no knowledge of the defective backfilling or concrete work until its discovery in 1968; that the defective condition was not observable after a concrete cap was put over the dirt and after completion of the building; and that the damage caused by dry rot was not foreseeable.

There is a significant difference in the facts here and the facts in Town of Tieton v. General Ins. Co. of America, 61 Wash.2d 716, 380 P.2d 127 (1963) upon which the appellants rely. In Town of Tieton, the municipality constructed a sewage installation with knowledge that a private well on adjacent property might be contaminated. The damage which resulted when the possibility of contamination became a reality was not unusual, unexpected or unforeseen and, therefore, not an 'accident.' Had the trial court found that Gruol knew about the defective backfilling and its possible result, the parallel could properly be drawn. See McGroarty v. Great American Ins. Co., 43 A.D.2d 368, 351 N.Y.S.2d 428 (1974); City of Kimball v. St. Paul Fire & Marine Ins. Co., 190 Neb. 152, 206 N.W.2d 632 (1973). We recognize that dry rot is the expected result when moisture is introduced to dirt which is too close to wood but the fact that the condition (defective backfilling) was not detected during construction supports the finding that the dry rot which resulted from the unknown condition was unexpected. It cannot be disputed that it was undesigned.

The question then becomes which insurer covered the damage--the insurer at the time of the defective backfilling, at the time of the discovery of the dry rot, or all insurers providing coverage during the total time period of the undiscovered condition which progressively worsened. The answer is determined by a consideration of whether the term 'accident' or 'occurrence' as used in the policy must of necessity be a single isolated event or whether it can...