Mutual of Enumclaw Ins. Co. v. PATRICK ARCHER CONST., INC.

• Decision Date: 16 August 2004
• Docket Number: No. 52943-9-I.,52943-9-I.
• Citation: 123 Wash. App. 728,97 P.3d 751
• Court: Washington Court of Appeals
• Parties: MUTUAL OF ENUMCLAW INSURANCE COMPANY, Respondent, v. PATRICK ARCHER CONSTRUCTION, INC.; Patrick Archer and Jane Doe Archer, husband and wife, and their marital community, Appellants.

97 P.3d 751

123 Wash. App. 728

MUTUAL OF ENUMCLAW INSURANCE COMPANY, Respondent, v. PATRICK ARCHER CONSTRUCTION, INC.; Patrick Archer and Jane Doe Archer, husband and wife, and their marital community, Appellants.

No. 52943-9-I.

Court of Appeals of Washington, Division 1.

August 16, 2004.

Publication Ordered September 10, 2004.

John Mele, Attorney at Law, Robert Curran, Ryan Swanson & Cleveland PLLC, Seattle, WA, for Appellants.

Brent Beecher, Hackett Beecher & Hart, Seattle, WA, for Respondent.

COX, C.J.

Patrick Archer Construction ("Archer") and Patrick Archer and Jane Doe Archer appeal the trial court order granting Mutual of Enumclaw's ("MOE") motion for summary judgment and denying their CR 56(f) motion to continue. Because the trial court did not abuse its discretion in denying the motion to continue and MOE has established that the policy exclusion for "products" under the commercial general liability insurance policy controls, we affirm.

Archer is a licensed general contractor. MOE issued to it a CGL policy with a Broad Form Extended Liability Endorsement for contractual liability for the period relevant to this action.

In 1995, Patrick Archer, Charles Teel, and Bruce Robertson formed TRA Associates ("TRA"), to develop the Sjonadal Condominiums. TRA contracted with Archer to serve as the general contractor/construction supervisor for this condominium project. TRA sold the units to purchasers.

Following completion of construction of the project, construction defects were apparent. Problems with the siding resulted in damage to the building itself and personal property within the building. The Sjonadal Condominium Association sued TRA. TRA brought a third party claim against Archer. Archer tendered the claim to MOE under its CGL policy, and MOE defended Archer under a reservation of rights. MOE commenced this declaratory judgment action to determine whether coverage existed under its policy with Archer.

MOE moved for summary judgment. Archer opposed the motion with declarations and other evidence, and moved to continue pursuant to CR 56(f) to permit additional discovery on alleged missing endorsements to the policy. The trial court denied Archer's motion to continue and granted MOE's motion for summary judgment. The trial court also denied Archer's motion for reconsideration.

Archer appeals.

PRODUCTS EXCLUSION

Archer contends that the products exclusion clause of the insurance policy does not control. Archer is mistaken.

In our de novo review of an order granting summary judgment, we consider all evidence and reasonable inferences in the light most favorable to the nonmoving party.¹ Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.²

To prevail, Archer must first establish that the loss falls within the scope of the policy's insured losses.³ To avoid responsibility for the loss, MOE must then show that the loss is excluded by specific language in the policy.⁴ "A general liability policy `does not insure the contractor against his own failure to perform his contract.'"⁵ We construe narrowly exclusions in an insurance policy.⁶

MOE does not contest that the loss falls within the insuring terms of the policy. Clearly, property damage is involved for the occurrence at issue here.⁷

Rather, the applicability and scope of the products exclusion is at issue. That exclusion states: "[t]his insurance does not apply:... (n) to property damage to the named insured's products arising out of such products or any part of such products." "Named insured's products" is defined as "goods or products manufactured, sold, handled or distributed by the named insured or by others trading under his named [sic]...."⁸ "Products" itself is not defined in the policy, but our court has previously defined this as "goods which are processed or assembled in the ordinary channels of commerce" for purposes of an insurance policy.⁹

CGL insurance policies "exclude the insured's faulty workmanship from coverage. The rationale for such exclusions is that faulty workmanship is not an insurable `fortuitous event,' but a business risk to be borne by the insured."¹⁰

"Washington case law interprets such product exclusions to encompass entire buildings as defective products. This view is consistent with Washington courts' reluctance to interpret such general liability policies as a form of performance bond, product liability insurance, or malpractice insurance."¹¹ A building constructed by a builder is its product, for purposes of a products exclusion.¹² "... [A] products exclusion applies to damages to an insured's product regardless of whether the insured's business also involves the provision of services."¹³

A threshold question in this motion is the role that Archer assumed in the project. It opposed the motion for summary judgment, in part, based on the contention that it "did not build or manufacture the Sjonadal Condominiums."¹⁴ Moreover, it contended that it only provided "construction management services."¹⁵ This argument is unpersuasive.

Pat Archer testified at deposition that Archer was the general contractor on the Sjonadal project. "Q. Now, was Patrick Archer Construction the general contractor on the Sjonadal project? A. I'd say so." Although his declaration in opposition to the motion for summary judgment appears to back away from this clear response to a clear question, such an approach does not create a genuine issue of material fact on the role of Archer during the project.¹⁶

In any event, Pat Archer also testified at his deposition that, "Pat Archer Construction would fill in where the subcontractors weren't able to. So Pat Archer Construction was basically like an air traffic controller, trying to make sure that all the planes would arrive on time and get their job done." Specifically, Archer performed soffit and wall flashing work and "a lot of cleanup" at Sjonadal. This testimony shows that Archer was not just providing services for the project. It was actively involved in constructing it.

Other evidence supports the conclusion that Archer built the project. Bruce Robertson testified that Archer was the general contractor on the project, was responsible for assembling the subcontractors, and oversaw the work done by subcontractors on Sjonadal. Robertson further testified, "[a]ll construction aspects were gone [sic] through Pat of Archer Construction." Charles Teel testified that TRA hired Archer by oral agreement to "build the condo." When asked whether it was "up to Pat Archer to either perform or delegate construction tasks" on Sjonadal, Teel replied, "Yes. Pat Archer, Pat Archer Construction, that entity ... just he [sic] as Pat Archer Construction."

Lastly, in response to interrogatories in the underlying lawsuit, TRA responded:

TRA employed Patrick Archer Construction as general contractor for this project. Patrick Archer Construction performed construction related activities for the benefit of the project from approximately 9/6/95 to 4/97. On information and belief, Patrick Archer Construction employed agents and/or contractors to perform construction related activities for the benefit of the project. On information and belief, Patrick Archer Construction organized sub-trades, acquired bids, accepted bids, set schedules for work to be performed, and supervised construction.[¹⁷]

In Schwindt, this court addressed in part whether a building is a general contractors product when subcontractors performed some of the construction work.¹⁸ Noting that to hold otherwise would not reflect the realities of the commercial construction process, we held that the work of subcontractors is necessarily included in exclusions pertaining to faulty work or defective products of the contractor.¹⁹

That reasoning is applicable here. TRA contracted with Archer to build Sjonadal. Archer chose to rely substantially on subcontractors to perform the work. Archer was responsible for supervising and for ensuring that the work was completed. There can be no question that the quality of the work performed, both by Archer as well as by its subcontractors, was the responsibility of Archer and no one else.

Even if Archer did provide some services, Westman dictates that the products exclusion applies "regardless of whether the insured's business also involves the provision of services."²⁰ There is no other conclusion but that Sjonadal is Archer's product.

Accordingly, there is no genuine issue of material fact regarding the role Archer assumed in this case. It was the general contractor, acting as such. And case authority supports our conclusion that the alleged defective product — the building — falls within the policy exclusion for products of the insured.

Nevertheless, Archer cites the payment arrangement between itself and TRA to support its argument that genuine issues of material fact exist. Archer points to its flat monthly "supervision fee" of $2,500 and the fact that payments to it represented only a fraction of the total costs of the project. Neither of these facts is material.

To the extent Archer is trying to use the payment arrangement to argue that it was not the general contractor, the deposition testimony and interrogatory responses defeat this contention. And the fact that the money did not flow first to Archer and then to the subcontractors does not create a genuine issue of material fact concerning whether Sjonadal is Archer's product. Archer does not cite any authority to support this proposition.

Furthermore, Archer's contention that it was TRA that "manufactured, sold, handled or distributed" Sjonadal is not persuasive in light of the facts of this case and case authority defining a building as a builder's product. Archer both "manufactured" and "handled" Sjonadal. The fact that TRA sold the units does not change the conclusion that Sjonadal is Archer's product.

Archer argues for the first time in...