Kesling v. Am. Family Mut. Ins. Co.
| Decision Date | 22 March 2012 |
| Docket Number | Civil Action No. 10–cv–01441–RBJ–CBS. |
| Citation | 861 F.Supp.2d 1274 |
| Parties | Jack KESLING and Michelle Kesling, Plaintiffs, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Defendant. |
| Court | U.S. District Court — District of Colorado |
OPINION TEXT STARTS HERE
Giovanni M. Ruscitti, Justin Colby Berg, Berg Hill Greenleaf & Ruscitti, LLP, Boulder, CO, for Plaintiffs.
Clifton J. Latiolais, Jr., Colin C. Campbell, Robyn Berger Averbach, Campbell Latiolais & Averbach, P.C., Denver, CO, for Defendant.
ORDER on PENDING MOTIONS
This order resolves all motions pending on this date.
On July 17, 2007 Jack and Michelle Kesling purchased a home located in Douglas County, Colorado from Stephen and Janet Dulaney. On September 19, 2007 the Keslings purchased a “Gold Star Special Deluxe Form” homeowner's insurance policy from American Family. They have renewed the policy annually since that time.
In June 2008 the Keslings began to discover problems with the main deck of their home. After an initial exchange of emails, Mr. Kesling sent a detailed summary of the problems to the Dulaneys on August 20, 2008 in which he described “massive cracking, lifting and leaking issues on the west deck” and “water running through the exterior foundations walls into the home.” [CM/ECF docket # 37–1] at 3. The Keslings hired an engineering firm, BornEngineering, which issued a report on the deck and related problems on October 31, 2008. [# 36–3]. BornEngineering issued a second report, generally focused on other problems with the house, on June 18, 2009. [# 36–4].
On July 16, 2009 the Keslings filed a complaint in the Douglas County District Court against defendants the Dulaneys and their company JLM Products & Design, Inc., which had acted as the general contractor for the construction on the home and certain warranty repair work; and the architect who designed the home; and various subcontractors involved in the construction or warranty repair work. [# 1–2]. The Keslings alleged that they had discovered six “conditions, defects and/or damage” in the home: (1) Damage to the surface of the main deck; (2) damage to nearly all structural members of the main deck; (3) damage to interior and exterior walls adjacent to the main deck; (4) damage to the roof system and adjacent members; (5) moisture intrusion and elevated levels of mold in the downstairs bedroom; and (6) moisture intrusion, elevated levels of mold, and rust, corrosion, and cracking of structural members and walls in the crawlspace.
The Keslings alleged that the damage in categories (1) and (2) were “caused either directly or indirectly by one or more” of five causes:
(i) a defectively designed and/or constructed deck system ... that results in the failure to provide positive drainage of precipitation off the surface of the deck and away from the Residence and instead diverts water toward the Residence and/or fails to prevent precipitation from penetrating the surface of the deck, the deck and vertical wall junctions, and the structural deck support columns;
(ii) an improper application of weatherproofing materials and an epoxy/pebble stone coating ... that is not appropriate for the subject deck system and results in the failure to provide positive drainage of precipitation off the surface of the deck and away from the Residence and instead diverts water toward the Residence and/or fails to prevent precipitation from penetrating the surface of the deck, the deck and vertical wall junctions, and the structural deck support columns;
(iii) precipitation ‘ponding’ on the surface of the main deck that penetrates the surface of the deck, the deck and vertical wall junctions, and the structural deck support columns;
(iv) the lack of proper flashing, lapping of weatherproofing materials, sealants, and control joints at various transition points; and/or
(v) continuous and/or repeated exposure to substantially the same general harmful conditions.
[# 1–2] at 4–5.
They alleged that the damage in category (3) and the moisture intrusion in category (5) were “caused directly or indirectly by one or more of” the same five causes attributed to categories (1) and (2) and/or “the lack of a vapor barrier in the crawlspace.” Id. at 5–6.
The damage in category (4) was alleged to have been “caused either directly or indirectly by one or more” of three causes:
(i) a defectively designed and/or constructed roof system that results in the failure to provide positive drainage of precipitation off the surface of the roof and away from the Residence, fails to prevent precipitation from penetrating the roof and roof and vertical wall junctions, and/or fails to adequately support the code applied loads;
(ii) the lack of proper flashing, lapping of weatherproofing materials, sealants, and control joints at various transition points; and/or
(iii) continuous and/or repeated exposure to substantially the same general harmful conditions.
The moisture intrusion, mold, etc. in category (6) was alleged to have been “caused either directly or indirectly by one or more” of five causes:
(i) a defectively designed and/or constructed weatherproofing and drainage system in the crawlspace that results in the failure to provide positive drainage of precipitation off the surface of the deck and away from the Residence and instead diverts water toward the Residence and/or fails to prevent precipitation from penetrating into the crawlspace;
(ii) an improper application of weatherproofing materials and a drainage system that is not appropriate for the subject crawl space and results in the failure to provide positive drainage of precipitation and water away from the Residence and instead diverts water toward the Residence and/or the failure to prevent precipitation and water from penetrating into and building up in the crawlspace;
(iii) the lack of appropriate anchoring between load bearing walls, steel beams, steel columns, and concrete piers;
(iv) the lack of a vapor barrier in the crawlspace; and/or
(v) continuous and/or repeated exposure to substantially the same general harmful conditions.
The Court has not been informed about the status of the state court construction defect litigation.
As will be discussed in more detail below, Mr. Kesling first notified an American Family agent of water damage to the deck and siding by telephone on August 6, 2008. The Keslings next contacted American Family by letter, through counsel, on August 28, 2009. [# 1–2] at 1. The letter attached a copy of the state court complaint, bids they had obtained for repair work, and an appraisal report. The Keslings requested coverage for the “conditions, defects and damages” at their home under their homeowner's policy which covers accidental direct physical loss to propertydescribed in the policy unless the loss is excluded. [# 1–1] at 12.
On September 21, 2009 American Family denied coverage. [# 1–4]. The denial letter recited that American Family had inspected the residence and had reviewed the information provided. Apparently the Keslings had provided at least one of the engineer's reports, because the denial letter indicates that American Family's investigation confirmed what was listed in “the BornEngineering report.” It attributed the damage to “water intrusion due to wear and tear, deterioration, and faulty workmanship, materials, repairs and construction” and concluded that this type of damage was excluded. The letter cited the following terms of the policy:
First, the “Losses Not Covered” subsection of the “Perils Insured Against–Section I” includes the following paragraph:
6. Other Causes of Loss:
a. wear and tear, marring, scratching, deterioration;
b. inherent vice, latent or inherent defect, mechanical breakdown;
c. smog, rust, corrosion, condensation, mold, wet or dry rot;
d. smoke from agricultural smudging or industrial operations;
e. settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, wells, floors, roofs or ceilings;
f. birds, vermin, rodents, insects or domestic animals.
I note, although the letter did not, that this exclusion contains an exception to the exclusion, providing “[h]owever, we do cover any resulting loss to property described in Coverage A—Dwelling and Dwelling Extension from items 2 through 8 above, not excluded or excepted in this policy.” [# 1–1] at 12.
Second, the policy contains the following exclusions in the “Exclusions–Section I” part of the policy:
The following exclusions apply to Coverage A—Dwelling and Dwelling Extension. We do not insure for loss caused by any of the following:
...
2. Planning, Construction or maintenance, meaning faulty, inadequate or defective:
a. construction, reconstruction, repair, remodeling or renovation;
b. materials used in construction, reconstruction, repair, remodeling or renovation;
c. design, workmanship or specifications;
d. siting, surveying, zoning, planning, development, grading or compaction; or
e. maintenance
of part of all of the insured premises or any property.
3. Weather conditions which contribute in any way with a cause or event excluded in Part A above to produce the loss.
Again I note that these exclusions are subject to an exception for “any resulting loss to property described in Coverage A—Dwelling and Dwelling Extension not excluded or excepted by this policy.” [# 1–1] at 14.
On September 30, 2009 plaintiffs responded to the denial letter, disagreeing that any of the “32 enumerated causes” found in the “Losses Not Covered” exclusion applied to their claim but, alternatively, arguing that the exception to the exclusion restored the coverage. Similarly, they relied on the exception to the exclusions for defective construction and weather conditions. [# 1–5] at 2–3.
On October 20, 2009 American Family again denied the claim. In addition to the exclusions cited above, this letter cites a clause limiting “loss of use” damages to...
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...Inc. v. U.S. Fire Insurance, 345 Fed. Appx. 305 (9th Cir. 2009). Tenth Circuit: Kesling v. American Family Mutual Insurance Co., 861 F. Supp.2d 1274 (D. Colo. 2012) (ensuing loss covered). State Courts: California: Freedman v. State Farm Insurance Co., 173 Cal. App.4th 957, 93 Cal. Rptr.3d ......
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