Hawkeye-Security Ins. Co. v. Vector Const. Co.

• Decision Date: 25 September 1990
• Docket Number: Docket No. 109074,HAWKEYE-SECURITY
• Citation: 185 Mich.App. 369,460 N.W.2d 329
• Parties: INSURANCE COMPANY, Plaintiff-Appellee, v. VECTOR CONSTRUCTION COMPANY, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 329

460 N.W.2d 329

185 Mich.App. 369

HAWKEYE-SECURITY INSURANCE COMPANY, Plaintiff-Appellee, v. VECTOR CONSTRUCTION COMPANY, Defendant-Appellant.

Docket No. 109074.

Court of Appeals of Michigan.

Submitted April 3, 1990.

Decided Sept. 11, 1990.

Released for Publication Sept. 25, 1990.

Howard & Howard Attorneys, P.C. by James E. Lozier and Mark H. Canady, Lansing, for plaintiff-appellee.

Abood, Abood & Rheaume, P.C. by William E. Rheaume, P.C., Lansing, for defendant-appellant.

Before WAHLS, P.J., and MARILYN J. KELLY and ALLEN, ^* JJ.

GLENN S. ALLEN, Judge.

In this declaratory judgment action, which raises a question of first impression in Michigan, we are asked to set aside the trial court's grant of summary disposition in favor of plaintiff, Hawkeye-Security Insurance Company, and to conclude that Hawkeye possesses a duty to defend or indemnify defendant, Vector Construction Company, under the terms of a contract of insurance entered into between the parties. We cannot do that which is asked of us.

I

The material facts are not in dispute. Barton-Malow Company, a general contractor in the construction field, entered into a subcontract with Vector, a concrete contractor, on April 5, 1984, pursuant to which Vector agreed to provide all labor, materials and equipment necessary to perform all of the concrete work involved in certain improvements to be made at the Delta Township waste water treatment plant. Vector then contracted with Boichot Concrete Company to provide Vector with concrete meeting certain project specifications. Boichot delivered the concrete to Vector during July, August, and September, 1985. Vector used this concrete to construct the roof of the grit building at the plant. The concrete was also used to construct other improvements to the plant. After the concrete had been poured, testing revealed that the concrete failed to comply with project specifications. Consequently, Delta Township, owner of the plant, demanded corrective measures be taken. Vector removed and repoured 13,000 yards of concrete.

Subsequently, Vector filed suit against Boichot, alleging breach of contract, breach of express and implied warranties, and negligence. Barton-Malow filed suit against Vector alleging breach of contract, and against Boichot, alleging negligence, breach of express and implied warranties, and breach of contract under a third-party beneficiary theory.

Vector, in addition to filing suit against Boichot, notified Hawkeye, its insurance carrier, of the incident and filed a claim with Hawkeye. Hawkeye denied coverage and filed a complaint for declaratory relief on February 13, 1987, in Clinton Circuit Court. On Vector's motion venue was changed to Ingham Circuit Court.

Hawkeye moved for summary disposition under MCR 2.116(C)(10) on April 6, 1988. By opinion and order dated April 22, 1988, the court granted Hawkeye's motion, finding in part:

Said policy, when read as a whole, is unequivocal in that it does not provide coverage for property damage to work product due to faulty workmanship. The defect in the concrete supplied to Respondent by its supplier does not constitute an "occurrence" as defined in the policy. Further, the exclusions under the broad form comprehensive general liability policy endorsement excludes [sic] coverage for the restoration, repair or replacement of property, not on the premises of the insured, which has been made or is necessary by reason of faulty workmanship by or on behalf of the insured.

Vector's motion for reconsideration was denied on May 16, 1988. Vector now appeals as of right.

II

A trial court may summarily dispose of a claim where, except as to the amount of damages, there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. MCR 2.116(C)(10). Before the court may summarily dispose of a claim under this court rule, the court must determine whether a record might be developed which might leave open an issue upon which reasonable minds could differ, giving the benefit of reasonable doubt to the nonmovant. Dumas v. Automobile Club Ins Ass'n, 168 Mich.App. 619, 626, 425 N.W.2d 480 (1988). All inferences are to be drawn in favor of the nonmovant. Dagen v. Hastings Mutual Ins. Co., 166 Mich.App. 225, 229, 420 N.W.2d 111 (1987), lv. den. 430 Mich. 887 (1988). Before judgment may be granted, the court must be satisfied that it is impossible for the claim asserted to be supported by evidence at trial. Peterfish v. Frantz, 168 Mich.App. 43, 48-49, 424 N.W.2d 25 (1988).

III

Vector secured from Hawkeye the insurance policy in question. This policy contains two sections, one defining the parameters of property coverage and a second defining the parameters of comprehensive general liability coverage. The latter includes coverage for all sums which Vector becomes legally obligated to pay as damages arising from bodily injury or property damage "caused by an occurrence." The insurance contract defines "occurrence" as follows:

"[O]ccurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured[.]

The contract does not define the term "accident."

In Frankenmuth Mutual Ins Co v. Kompus, 135 Mich.App. 667, 678, 354 N.W.2d 303 (1984), lv. den. 421 Mich. 863 (1985), a panel of this Court, being called upon to define the term "accident" as contained in an insurance contract definition of "occurrence" which is substantially similar to the definition quoted in the preceding paragraph, adopted the following definition:

" 'An "accident", within the meaning of policies of accident insurance, may be anything that begins to be, that happens, or that is a result which is not anticipated and is unforeseen and unexpected by the person injured or affected thereby--that is, takes place without the insured's foresight or expectation and without design or intentional causation on his part. In other words, an accident is an undesigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.' " Guerdon Industries, Inc v Fidelity & Casualty Co of New York, 371 Mich 12, 18-19; 123 NW2d 143 (1963), quoting 10 Couch on Insurance (2d ed), § 41:6, p 27.

Vector argues that its defective workmanship, e.g., use of inferior concrete supplied to it by Boichot, gave rise to causes of action against Boichot sounding in negligence and breach of warranty and that misdeeds that give rise to such causes of action have been held by courts in other jurisdictions to constitute "accidents" for purposes of establishing "occurrences" within the meaning of similarly-worded insurance contracts. Whether Vector's alleged defective workmanship constitutes an accident/occurrence within the meaning of the insurance contract is a question of first impression in Michigan.

Vector relies on Bundy Tubing Co. v. Royal Indemnity Co., 298 F.2d 151 (C.A.6, 1962), in support of its argument. In that case, Bundy manufactured thin-walled steel tubing which building contractors and plumbers installed in concrete floors for use in radiant heating systems. Id. Some of the tubing manufactured by Bundy contained defects that caused the tubing to fail and leak. Several parties then sued Bundy to recover damages to property sustained by reason of the defective tubing. The suits alleged negligence in the manufacture of the tubing or breach of warranty or both. Royal, Bundy's insurer, defended three of eight suits filed against Bundy. They refused to defend the remaining five suits. Thereafter, Bundy sued Royal seeking to recover the amounts paid out in satisfaction of a judgment rendered against it, in settlement of claims, and in costs and expenses incurred in defending the five suits Royal refused to defend. Id. at 151-152.

At issue in Bundy's suit against Royal was the extent of liability coverage offered in two policies of liability insurance that Royal had issued to Bundy. Both policies contained identical provisions which provided that Royal would pay all sums which Bundy became legally obligated to pay as damages arising from "injury to or destruction of property, including the loss of use thereof, caused by accident." Id. at 152. (Emphasis added.) Additionally, both policies contained a clause excluding coverage for "injury to or destruction of ... any goods or products manufactured, sold, handled or distributed [by Bundy] ... out of which the accident arises." Id.

The district court held that no duty to defend or indemnify arose under the provisions of the insurance contracts as each of the suits filed against Bundy involved claims of breach of warranties or of negligence and, therefore, the damages were not caused by accident. Id.

The United States Court of Appeals for the Sixth Circuit disagreed with the district court's finding that no property was damaged as a result of an accident:

In our opinion, property was damaged by the installation of defective tubing in a radiant heating system which caused the system to fail and become useless. A homeowner would never have such equipment installed if he knew that it would last only a very short time. A home with a heating system which did not function would certainly not be suitable for living quarters in the wintertime. The market for its sale would be seriously affected.

The failure of the tubing in the heating system in a relatively short time was unforeseen, unexpected and unintended. Damage to the property was therefore caused by accident. [Id. at 153.]

The court also disagreed with the district court's conclusions as to the effect the nature of the claims asserted against Bundy had on the scope of coverage.

The fact that the claims here involved breach of warranty or negligence did not remove them from the category of accident. Bundy would not be legally...