LANDSCAPING v. HAWKEYE-Sec. INS. CO
| Decision Date | 01 November 2010 |
| Docket Number | No. 09-3874.,09-3874. |
| Citation | 625 F.3d 1019 |
| Parties | BRAKE LANDSCAPING & LAWNCARE, INC., Plaintiff-Appellant, v. HAWKEYE-SECURITY INS. CO., The Midwestern Indemnity Co., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
OPINION TEXT STARTS HERE
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David C. Knieriem, argued, Clayton, MO, for appellant.
Mark G. Arnold, argued, St. Louis, MO, Bruce A. Moothart, on the brief, Kansas City, MO, for appellees.
Before RILEY, Chief Judge, MELLOY and COLLOTON, Circuit Judges.
Brake Landscaping & Lawncare, Inc. (“Brake”) appeals from an adverse entry of summary judgment 1 in its action against Hawkeye-Security Insurance Company (“Hawkeye”) and The Midwestern Indemnity Company (“Midwestern”) arising out of the insurance companies' denial of coverage under two insurance policies. Brake sought coverage for costs incurred in re-sodding and re-seeding sections of its customers' lawns after an employee mistakenly sprayed them with non-selective herbicide, which killed the grass. The district court granted summary judgment in favor of Hawkeye and Midwestern. We affirm.
Brake, a Missouri corporation, is a full-service landscaping company with primarily commercial customers. Brake purchased a commercial general liability insurance policy (“primary policy”) from Midwestern, an Ohio corporation, and a commercial umbrella liability insurance policy (“umbrella policy”) from Hawkeye, a Wisconsin corporation. Both policies were issued for a one-year period beginning November 1, 2007.
Between April 21 and 28, 2008, Jeffrey McGee, an employee of Brake, applied herbicide to thirteen properties owned by Brake customers. All but one of these customers had a lawn-care maintenance agreement with Brake pursuant to which Brake was obligated to apply a combination of fertilizer and herbicide to the lawns on the clients' properties. McGee was supposed to apply Lesco Momentum, a selective herbicide that kills only weeds, not grass. Instead, he mistakenly applied Lesco Prosecutor, a non-selective herbicide that kills all vegetation. Once Prosecutor has been applied, it immediately begins to kill the plant, although actual plant death usually does not occur until seven to ten days later. There are no antidotes and the effects are irreversible. On April 28, Brake discovered the mistake and identified which properties had been affected by driving by customers' properties to see if their lawns were displaying signs of dead vegetation. Brake incurred costs of approximately $1.2 million to re-sod or re-seed the dead spots.
Both insurance policies generally provided coverage for “property damage” caused by an “occurrence.” Both contained an identical provision, which, in relevant part, excluded coverage for “property damage” to:
5. That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations; or
6. That particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.
(hereinafter, “business risk exclusions”). 2
In the primary policy, an exception to the subparagraph (6) exclusion restored coverage for “property damage” included in the “products-completed operations hazard.” The umbrella policy also included the same “products-completed operations hazard” exception, but it applied to the subparagraph (5) exclusion, and not the subparagraph (6) exclusion. The definition of the exclusion was the same under both policies:
Products-completed operations hazard:
(a) Includes all ... ‘property damage’ occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work’ except: ...
(2) Work that has not yet been completed or abandoned. However, ‘your work’ will be deemed completed at the earliest of the following times:
(a) When all of the work called for in your contract has been completed.
(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.
(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.
Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.
Both policies defined “your work” as: “(1) Work or operations performed by you or on your behalf; and (2) Materials, parts or equipment furnished in connection with such work or operations.”
After Midwestern and Hawkeye denied coverage for the damage to Brake's clients' lawns, Brake brought this action seeking a declaratory judgment that the damage was covered under both policies. The district court denied Brake's motion for partial summary judgment and granted summary judgment in favor of Hawkeye and Midwestern, finding that there was no “occurrence” as required for coverage under the policies. Alternatively, the district court held that even if the spraying were an “occurrence,” the business risk exclusions would exclude coverage. Brake filed a timely appeal. On appeal it argues that the district court erred in concluding that the spraying did not constitute an “occurrence” and in finding that the business risk exclusions applied.
[1] In this diversity action, state law prescribes the rules for construing the insurance policies. See St. Paul Fire & Marine Ins. Co. v. Mo. United Sch. Ins. Council, 98 F.3d 343, 345 (8th Cir.1996). The parties do not dispute the district court's conclusion that Missouri law governs this diversity action. Under Missouri law, the interpretation of an insurance policy is a question of law. Universal Underwriters Ins. Co. v. Lou Fusz Auto. Network, Inc., 401 F.3d 876, 879 (8th Cir.2005). Accordingly, our review of both the district court's grant of summary judgment and its interpretation of the terms of the insurance policies is de novo. Tonicstar Ltd. v. Lovegreen Turbine Servs., Inc., 535 F.3d 790, 793 (8th Cir.2008).
[2] We agree with the district court that the business risk exclusions apply. 3 Subparagraph (5) excludes coverage for property damage to that particular part of real property on which Brake was performing operations, if the property damage arose out of those operations. When Brake's employee sprayed Lesco Prosecutor on Brake's clients' lawns, Brake was performing operations on those lawns. It was the employee's action in spraying a non-selective herbicide on the lawns that caused parts of the vegetation to die, which is precisely the damage for which Brake is now claiming coverage. The property damage at issue, therefore, fits squarely within the exclusion described in subparagraph (5). Similarly, subparagraph (6) excludes coverage for property damage to that particular part of property that must be restored, repaired, or replaced because Brake's work was incorrectly performed on it. Since the damage to the lawns was caused by Brake's incorrect performance of its work in spraying herbicide on the lawns, subparagraph (6) also applies.
Brake contends, however, that neither subparagraph (5) nor subparagraph (6) apply because it was not performing operations or work on the grass. Rather, the “particular part” of its clients' properties on which it was performing operations was only the weeds, and not the grass, because its intention was to spray a selective herbicide on the lawns, which would have affected only the weeds. Brake relies on Columbia Mutual Insurance Co. v. Schauf, in which the Supreme Court of Missouri considered an insurance policy containing an exclusion with identical language to subparagraph (5) and held that “only the damage the insured causes to the particular part of the property that is actually the object of the insured's work when the damage occurs is excluded from coverage; any other damage would not be subject to the exclusion.” 967 S.W.2d 74, 80-81 (Mo.1998).
In Schauf, a painter entered into a contract to paint, stain, or lacquer all interior and exterior surfaces of a residential house. Thirty minutes after finishing the job of lacquering some kitchen cabinets, the painter was cleaning his tools in the dining room when he accidentally started a fire that damaged the cabinets and other parts of the house. The court found that the damage to the kitchen cabinets fell within the exclusion but that the damage to the rest of the house did...
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