Joe Harden Builders, Inc. v. Aetna Cas. and Sur. Co.

• Citation: 486 S.E.2d 89,326 S.C. 231
• Decision Date: 16 April 1997
• Docket Number: No. 24628,24628
• Court: United States State Supreme Court of South Carolina
• Parties: JOE HARDEN BUILDERS, INC., Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Defendant. . Heard

Page 89

486 S.E.2d 89

326 S.C. 231

JOE HARDEN BUILDERS, INC., Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY, Defendant.

No. 24628.

Supreme Court of South Carolina.

Heard April 16, 1997.

Decided June 2, 1997.

C. Craig Young and Hugh L. Willcox, Jr., both of Willcox, McLeod, Buyck & Williams, Florence, for plaintiff.

Robert T. Strickland and Andrew E. Haselden, both of Barnes, Alford, Stork & Johnson, L.L.P., Columbia, for defendant.

MOORE, Justice:

This case is before us on certification from the United States District Court to interpret the language of a standard occurrence insurance policy.

FACTS

Plaintiff (Contractor) brought this declaratory judgment action to determine coverage under an insurance policy issued by defendant (Insurer) to Precision Concrete. Contractor was the general contractor for the Carolina Winds condominium project and subcontracted to Precision construction of the building's twelve-story concrete frame consisting of columns and floor slabs. Precision misaligned the concrete columns and floor slabs. To compensate for the misalignment, the masonry contractor modified construction of the exterior veneer brick wall. As a result, this brick wall, which was not intended for structural support, eventually began cracking.

The condominium owner sought damages from Contractor. After settling with the owner, Contractor won an arbitration award against Precision Concrete for $302,800 and sought payment from Insurer under Precision's insurance policy. The policy in question provides coverage for an "occurrence" and includes the following definitions:

occurrence: 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.

property damage: (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 such loss of use is caused by an occurrence during the policy period.

(Emphasis added). We agreed to answer the following question certified by Judge Traxler.

QUESTION

Where defective construction causes progressive property damage that is otherwise covered by insurance, is the property damage deemed to occur:

1. When the concrete frame is constructed out of plumb 2. When the masonry contractor knowingly builds the defective brick wall;

3. When the failure of the brick wall is manifest;

4. When the owner actually discovers the failure of the brick wall; or

5. At some other time?

DISCUSSION

Many courts have grappled with the issue of coverage under an occurrence policy when there is progressive damage that is not apparent at the time of the underlying injury-causing event. See generally Annot. 14 A.L.R. 5th 695 (1993). In determining when coverage is triggered, we have considered the four main theories set forth below.

1) Coverage triggered at time of injury-causing event

Under this theory, coverage is triggered at the time of the underlying injury-causing event, even though no damage has yet occurred, and the policy in effect at the time of this underlying event covers all the ensuing damage.

We find this theory of coverage conflicts with the plain language of the policy. The policy provides coverage for an occurrence that causes property damage "which occurs during the policy period." This provision clearly focuses on the time the damage occurs and not on the time of the underlying event that eventually caused the damage. An overwhelming majority of jurisdictions have rejected the argument that coverage is triggered at the time of the injury-causing event because such an interpretation conflicts with this provision of a standard occurrence policy. See, e.g., Prieto v. Reserve Ins. Co., 340 So.2d 1282 (Fla.App.1977); Jenoff, Inc. v. New Hampshire Ins. Co., 558 N.W.2d 260 (Minn.1997); Greenlee v. Sherman, 142 A.D.2d 472, 536 N.Y.S.2d 877 (1989); Friendship Homes, Inc. v. American States Ins. Cos., 450 N.W.2d 778 (N.D.1990); CPC Int'l, Inc. v. Northbrook Excess & Surplus Ins. Co., 668 A.2d 647 (R.I.1995); Dorchester Dev. Corp. v. Safeco Ins. Co., 737 S.W.2d 380 (Tex. App.1987). Accordingly, we reject the time of the injury-causing event as the trigger for coverage when no damage has yet occurred. ¹

2) Coverage triggered when injury manifested

Under this theory, damage is deemed to occur at the time it is manifested or discovered, thus triggering coverage for all the ensuing damage under the policy in effect at the time of manifestation, even if some damage actually occurred earlier but was undetected.

Insurer argues our decision in Spinx Oil Co. v. Federated Mut. Ins. Co., 310 S.C. 477, 427 S.E.2d 649 (1993), is dispositive. In Spinx, an environmental pollution case, we held coverage was triggered when the damage was "first manifested." The policy in question provided coverage for a pollution incident that commenced on or after the effective date. Because of the difficulty of determining when the pollution incident actually commenced, we interpreted "commenced" to mean when damage was first discovered. In so holding, we relied on a case holding damage occurred when it was "first discovered," Mraz v. Canadian Universal Ins. Co., 804 F.2d 1325 (4th Cir.1986), and concluded "commence" and "occur" should be interpreted synonymously.

We decline to follow Spinx in this case. In Spinx, we were concerned solely with construing the "commence" language of that particular policy and not analyzing a standard occurrence policy which covers damage caused by a "continuous or repeated exposure." Applying the manifestation trigger used in Spinx to this case would conflict with the plain language of the policy. Several courts have rejected the manifestation trigger because nothing in the standard occurrence policy requires that the property damage actually be manifested or discovered during the policy period. See, e.g., Sentinel Ins. Co. v. First Ins. Co. of Hawai'i, Ltd., 76 3) Coverage triggered continuously from time of injury-causing event while damage progresses

Hawai'i 277, 875 P.2d 894 (1994); Harford County v. Harford Mut. Ins. Co., 327 Md. 418, 610 A.2d 286 (1992); Trustees of Tufts University v. Commercial Union Ins. Co., 415 Mass. 844, 616 N.E.2d 68 (1993). Accordingly, we reject a manifestation trigger as the appropriate trigger of coverage.

Under this theory, coverage may be triggered at any point from the time of the underlying injury-causing event until the damage is complete, allowing coverage under any policy in effect during this entire time. Some courts have adopted this theory to give effect to the language in the standard occurrence policy which provides coverage for a "continuous or repeated exposure to conditions." See, e.g., Montrose Chemical Corp. v. Admiral Ins. Co., 42...