Maryland Casualty Co. v. Mid-Continent Casualty Co., 032018 FED10, 17-4032
|Docket Nº:||17-4032, 17-4037|
|Opinion Judge:||Mary Beck Briscoe, Circuit Judge.|
|Party Name:||MARYLAND CASUALTY COMPANY, Plaintiff - Appellee/Cross-Appellant, v. MID-CONTINENT CASUALTY COMPANY, Defendant-Appellant/Cross-Appellee.|
|Judge Panel:||Before BRISCOE, HARTZ, and PHILLIPS, Circuit Judges. HARTZ, Circuit Judge, dissenting:|
|Case Date:||March 20, 2018|
|Court:||United States Courts of Appeals, Court of Appeals for the Tenth Circuit|
D.C. No. 2:14-CV-00522-DB (D. Utah)
Before BRISCOE, HARTZ, and PHILLIPS, Circuit Judges.
ORDER AND JUDGMENT [*]
Mary Beck Briscoe, Circuit Judge.
Both party insurance companies issued a commercial general liability policy to Red Point Homes, Incorporated ("Red Point"). When Red Point was sued for defective design and construction of a condominium project in state court, only Maryland Casualty Company defended Red Point. Mid-Continent refused to defend Red Point, arguing it had no duty to defend because of policy exclusions.
After the state court action was concluded, Maryland filed a complaint against Mid-Continent in the United States District Court for the District of Utah seeking a declaratory judgment, equitable contribution, and also alleging breach of contract. The district court concluded Mid-Continent had a duty to defend Red Point as a matter of law. The district court also awarded Maryland prejudgment interest and costs based on the United States Prime Interest Rate, not the interest rate set by Utah Code Ann. § 15-1-1(2). Both parties appeal. We exercise jurisdiction under 28 U.S.C. § 1291 and AFFIRM.
1. Maryland's Policy
Maryland's sole policy with Red Point, Policy No. SCP 37187979, was effective from November 17, 2001 to November 2002, and had a $500, 000 per occurrence limit and a $1, 000, 000 aggregate limit of liability. App., at 660-61. Maryland's policy includes a "transfer of rights of recovery against others" provision, which states, "[i]f the insured has rights to recover all or part of any payments we have made under this Coverage Part, those rights are transferred to us." Id. at 467.
2. Mid-Continent's Policies
Mid-Continent issued to Red Point the following policies: (i) Policy No. 04-GL-000096996, effective November 17, 2002 to November 17, 2003; and (ii) Policy No. 04-GL-000527867, effective November 17, 2003 to November 17, 2004. Id. at 660. Each of the Mid-Continent policies had a $1, 000, 000 per occurrence limit and $2, 000, 000 aggregate limit of liability. Id.
Under "Coverage A" for "Bodily Injury and Property Damage Liability, " Mid-Continent's policies provide as follows:
1. Insuring Agreement a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. . . .
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";
(2) The "bodily injury" or "property damage" occurs during the policy period . . . .
Id. at 80.
Mid-Continent's policies define "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id. at 93. The Mid-Continent policies define "property damage" as: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.
Id. at 94.
Mid-Continent's policies contain two relevant exclusions to policy coverage. First, Mid-Continent's policies are modified by endorsement CG 22 94 10 01, which contains a "your work" exclusion, stating: This insurance does not apply to:
I. Damage To Your Work
"Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard[.]"
Id. at 101.
The policies define "your work" as: a. Means:
(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.
(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work", and
(2) The providing of or failure to provide warnings or instructions.
Id. at 95.
Mid-Continent's policies also contain an "impaired property" exclusion, which states: This insurance does not apply to . . . .
m. Damage To Impaired Property Or Property Not Physically Injured
"Property damage" to "impaired property" or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in "your product" or "your work"; or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.
This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product" or "your work" after it has been put to its intended use.
Id. at 81, 84.
The Mid-Continent policies define "impaired property" as: tangible property, other than "your product" or "your work", that cannot be used or is less useful because:
a. It incorporates "your product" or "your work" that is known or thought to be defective, deficient, inadequate, or dangerous; or
b. You have failed to fulfill the terms of a contract or agreement,
if such property can be restored to use by: a. The repair, replacement, adjustment or removal of "your product" or "your work"; or
b. Your fulfilling the terms of the contract or agreement.
Id. at 92.
3. Underlying Action
On May 2, 2008, Intrigue Homeowner's Association (the "Association") filed a sixteen-count complaint against Red Point, Intrigue L.C., Brent Mitchell, and John Does 1-30 for alleged defective design and construction of a condominium project-the Intrigue Project-in Salt Lake City. Id. at 119-202. Exactly two years later, the Association amended its complaint to include ten causes of action against the same defendants.
Relevant allegations in the complaints include: The Owners and the Association have observed the interior and exterior surfaces and roofs of the Units and the common areas are experiencing and continue to experience one or more accidental events that include exposure to and actual repeated and/or continuous and substantial water intrusion through the stucco, sidewalls, exterior walls, doors, windows, window boxes, and roofs. Additionally, the Owners and Association have observed that the common areas and limited common areas are experiencing and continue to experience one or more accidental events that include concrete degradation, expansive soils, and asphalt degradation. In this and subsequent paragraphs of the Complaint, such event or events are referred to separately and collectively as "water intrusion" and "soil subsidence."
Id. at 124. Water intrusion and soil subsidence has caused and continues to cause one or more accidental events of extensive property damage to the Units and common areas to the extent that some or all of the Units and common areas are and/or will become unsafe, unliveable [sic], unsanitary, and/or unusable. The property damage includes, but is not limited to, dryrot, mold, exterior water staining, elevated moisture levels throughout the stucco walls, cracks and degradation of the stucco system, cracking and sinking sidewalks and driveways, stairs and curbs that are crumbling, and asphalt roads that are falling apart. The property damage is effected and exacerbated by ongoing water intrusion into cracking stucco and concrete of the Units and/or common areas. In this and subsequent paragraphs of this Complaint, such damage, is referred to collectively and separately as "water damage, " and "subsidence damage."
Id. at 125. The continued water intrusion, water damage, construction defects, soil subsidence, subsidence damage, and consequential damage to the Units at the Intrigue, was and is being caused by Developer, Red Point, and Mitchell and continues to substantially and unreasonably interfere with Plaintiff's and/or the individual Owners' use and enjoyment of common areas and Units and constitute a private nuisance.
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