Johnson v. Aid Ins. Co. of Des Moines, Ia., 49276.

• Decision Date: 11 January 1980
• Docket Number: No. 49276.,49276.
• Parties: Ivar E. JOHNSON, Appellant, v. AID INSURANCE COMPANY OF DES MOINES, IOWA, d.b.a. AID Insurance Services, Respondent.
• Court: Minnesota Supreme Court

287 N.W.2d 663 (1980)

Ivar E. JOHNSON, Appellant, v. AID INSURANCE COMPANY OF DES MOINES, IOWA, d.b.a. AID Insurance Services, Respondent.

No. 49276.

Supreme Court of Minnesota.

January 11, 1980.

Robert H. Meier, St. Paul, for appellant.

Lommen, Cole & Stageberg and Thomas E. Peterson, Minneapolis, for respondent.

Heard before ROGOSHESKE, TODD, and WAHL, JJ., and considered and decided by the court en banc.

WAHL, Justice.

Plaintiff Ivar E. Johnson, a building contractor, sought a declaratory judgment that his comprehensive liability insurance carrier, defendant AID Insurance Company (AID), was under a duty to defend him in a suit brought against him for breach of a construction contract.¹ AID denied that the alleged contract specification violations constituted an "occurrence" which fell within the coverage provided by the policy. The Carver County District Court found no coverage and granted AID's motion for summary judgment. We affirm.

On August 9, 1973, plaintiff Johnson, a general construction contractor, entered into a written contract with Julius C. Smith and Mary A. Smith to build the Smiths a home. The Smith house was to be constructed in accordance with "detailed architectural plans and specifications." On June 2, 1977, the Smiths served on Johnson a summons and complaint alleging that Johnson had not met his obligations under the construction contract and cataloging "numerous and flagrant deficiencies" in the construction of their home, for which they sought reimbursement. The complaint charged that the house was marred by "major structural defects," "major departures from the design requirements," and "poor quality" of workmanship and that, despite numerous complaints from the Smiths, Johnson "failed and neglected" to "complete the said construction or to correct the defects" in the work he had already completed.

Under Johnson's general liability policy with AID, AID agreed to pay, and to defend Johnson in suits against him seeking, damages because of "property damage * * to which this insurance applies, caused by an occurrence * * *." The policy defines "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in * * * property damage neither expected nor intended from the standpoint of the insured."

We must decide whether AID correctly refused Johnson's tendered defense on the ground that the events in the underlying action did not constitute an "occurrence" resulting in property damage. Because we find this issue to be determinative, we do not consider AID's arguments that coverage is specifically denied by the policy exclusions.

The coverage provided by AID, for an "occurrence" resulting in "property damage neither expected nor intended from the standpoint of the insured," is standard liability policy language. Identical language was construed by this court in Bituminous Casualty Corp. v. Bartlett, 307 Minn. 72, 240 N.W.2d 310 (1976). In Bituminous, the defendant insured had contracted to do brick and masonry work on a new office building. The building owner refused to pay for the work and alleged in a counterclaim that "Bartlett negligently, carelessly and in an unworkman-like manner performed the masonry and cement work" and that the building had depreciated as a result. 307 Minn. at 74, 240 N.W.2d at 311. The owner prayed damages for this depreciation, and Bartlett tendered the defense of the claim to his general liability insurer, plaintiff Bituminous, who refused to defend, arguing that there was no "occurrence" as required by the policy. At the hearing on the declaratory judgment action brought by Bituminous, the building owner testified that 20 percent of the bricks Bartlett placed in the exterior walls of the building were "chipped," that the walls were "out of plumb," and that these conditions violated the standards of workmanship contracted by the parties.

Defining an "occurrence" to require (1) an accident, (2) resulting in property damage, (3) neither expected nor intended by the insured contractor, 307 Minn. at 77, 240 N.W.2d at 312, we held that the results of obvious violations of contract standards of workmanship are not "unexpected" and that Bartlett was not covered for such results. "A construction contractor's liability policy is designed to protect him from fortuitous losses occurring in connection with his work." Because the defects were obvious and had been called to the insured's attention, Bartlett was "consciously controlling his risk of loss," had not suffered an unexpected "occurrence," and was not entitled to a defense. 307 Minn. at 78, 79-80, 240 N.W.2d at 313, 314.

In Ohio Casualty Ins. Co. v. Terrace Enterprises, Inc., 260 N.W.2d 450 (Minn.1977), we distinguished Bituminous, and held that the settling of an apartment building resulting from faulty construction that...