Rando v. Top Notch Properties, LLC, 2003-CA-1800.

• Decision Date: 02 June 2004
• Docket Number: No. 2003-CA-1800.,2003-CA-1800.
• Citation: 879 So.2d 821
• Court: Court of Appeal of Louisiana — District of US
• Parties: Peter RANDO III and Anne Bodet Rando v. TOP NOTCH PROPERTIES, L.L.C. and Zurich Insurance Company/Assurance Company of America.

879 So.2d 821

Peter RANDO III and Anne Bodet Rando v. TOP NOTCH PROPERTIES, L.L.C. and Zurich Insurance Company/Assurance Company of America.

No. 2003-CA-1800.

Court of Appeal of Louisiana, Fourth Circuit.

June 2, 2004.

J. Douglas Sunseri, Dawn Danna Marullo, Nicaud, Sunseri & Fradella, L.L.C., Metairie, LA, for Third-Party Plaintiff/Appellee.

Robert T. Myers, Young, Richaud & Myers, Metairie, LA, for Third-Party Defendant/Appellee.

(Court composed of Chief Judge JOAN BERNARD ARMSTRONG, Judge MICHAEL E. KIRBY, Judge TERI F. LOVE, Judge DAVID S. GORBATY and Judge LEON A. CANNIZZARO).

Chief Judge JOAN BERNARD ARMSTRONG.

REVERSED AND RENDERED IN PART AND REMANDED

Third party plaintiff-appellant, Dmitri Pile Driving, Inc. (Dmitri), appeals a summary judgment in favor of third party defendant-appellee, Century Surety Company (Century or Century Surety), dismissing Dmitri's claims for indemnity, defense, and damages for bad faith failure to defend and provide coverage. We reverse and render in part and remand.

On March 12, 2002, plaintiffs in the main demand, Peter Rando, III and Ann Bodet Rando, instituted a Petition to Rescind Contract of Sale for Redhibition and for Damages for Breach of Contract pertaining to the construction of their home at 4425 Olive Drive in Meraux, Louisiana. Named as original defendants were Top Notch Properties, L.L.C. and Zurich Insurance Company/Insurance Company of America. Plaintiffs purchased the property from Top Notch on September 9, 1998.

Top Notch filed an answer and third party demand, naming Dmitri¹, Technon Systems, Inc., Engineering Services, Inc., Assurance Company of America and Continental Insurance Company as third party defendants. Dmitri filed an answer to Top Notch's third party demand combined with a third party demand of its own against its insurer Century Surety.

Century denied coverage and refused to provide a defense to Dmitri, whereupon Dmitri filed a supplemental third party demand alleging that Century was in bad faith in refusing to defend Dmitri, which Century answered.

Next Dmitri filed a motion for summary judgment seeking indemnity and/or defense from Century. Century filed a counter motion for summary judgment denying coverage and any obligation to defend.

A hearing was held on August 8, 2003, pursuant to which the trial court granted Century Surety's motion for summary judgment and dismissed Century from the litigation. The trial judge designated the judgment as final and this appeal by Dmitri followed.

At the outset we wish to emphasize that a careful reading of the policy language is critical to the resolution of this case. We share the concern expressed by professors McKenzie and Johnson in 15 Civil Law Treatise (2d Ed.1996), § 186, at p. 380 that:

In some cases, courts have misapplied policies by seizing upon conclusions in earlier cases without realizing that the policy language had been revised.

An insurance company may limit coverage in any manner, as long as the limitations do not conflict with statutory provisions or public policy. Reynolds v. Select Properties, Ltd., 93-1480 (La.4/11/94), 634 So.2d 1180. But it is hornbook law that insurance policies are to be read broadly in favor of coverage and any ambiguity is to be construed against the insurer. Garcia v. St. Bernard Parish School Board, 576 So.2d 975 (La.1991). Exclusionary provisions in insurance contracts are strictly construed against the insurer. Ledbetter v. Concord General Corp., 95-0809 (La.1/6/96), 665 So.2d 1166, judgment amended, (La.4/18/96), 671 So.2d 915. The rule of strict construction does not authorize a perversion of language, or the exercise of inventive powers for the purpose of creating an ambiguity where none exists. Id. The fact that an insurance policy is a complex instrument requiring analysis does not render it ambiguous. Oxner v. Montgomery, 34,727, p. 6 (La.App. 2 Cir. 8/1/01), 794 So.2d 86, 90-91. The rule of strict construction does not authorize a perversion of language, or the exercise of inventive powers for the purpose of creating an ambiguity where none exists, nor does it authorize the court to make a new contract for the parties or disregard the evidence as expressed, or to refine away terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties. Reynolds v. Select Properties, Ltd., 93-1480 (La.4/11/94), 634 So.2d 1180, 1183; Ott v. LPK Systems, Inc., XXXX-XXXX (La.App. 4 Cir. 11/28/01), 812 So.2d 38, 41. Only if the language can reasonably be read to have more than one reasonable meaning can the language be said to be ambiguous. The insurer, in this case Century, bears the burden of proving that a loss comes within a policy exclusion. Louisiana Maintenance Services, Inc. v. Certain Underwriters at Lloyd's of London, 616 So.2d 1250 (La.1993).

Generally the insurer's obligation to defend suits against its insured is broader than its liability for damage claims. American Home Assurance Company v. Czarniecki, 255 La. 251, 230 So.2d 253 (1969). The insurer's duty to defend suits is determined by the allegations of the petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage. Id. The allegations of the petition should be liberally construed in determining whether they set forth grounds which bring the claims within the scope of the insurer's duty to defend the suit against its insured. Id. The duty to defend is not dependent upon the outcome of the suit. Id.

I. THE ALLEGATIONS OF STRUCTURAL DEFECTS IN THE RANDOS' PETITION CONSTITUTE AN "OCCURRENCE" UNDER THE POLICY

It is undisputed that Century provided occurrence coverage to Dmitri from December 11, 1998 through December 11, 2001. At the crux of this appeal is the statement by the trial judge in his written reasons for judgment that:

The original Plaintiffs in the Petition alleged that the first damage occurred on October 2, 1998. Therefore, the alleged property damage is deemed to have occurred on October 2, 1998.[²] Accordingly, the alleged damage did not occur within the policy period of December 11, 1998 through December 11, 2001. [Emphasis added.]

This is an allusion to the allegations to be found in paragraph V of the original plaintiff's original petition:

Twenty-three (23) days after the sale on October 2, 1998, the house began having serious problems with the air conditioning/heating unit leaking and failing to work properly. On February 24, 1999, sink holes began to visually appear on the property and it was discovered that the plumbing was leaking. Additionally, the concrete, stucco and bricks were crackling and damaged and the doors of the house became warped and failed to close properly.

A normal reading of this paragraph would lead the reader to conclude that the only defects noted on October 2, 1998, were air conditioning defects. Air conditioning defects manifesting themselves so soon after construction are not typically associated with faulty pile driving. Implicit in Dmitri's argument is that its pile driving operations had nothing to do with the problems manifesting themselves in the air conditioning system only a few weeks after the Rando's purchased the property. Indeed, that is what one would normally assume in the absence of proof to the contrary, and the burden of producing such proof is on Century as the mover for summary judgment denying coverage. On the other hand, the problems the Randos alleged they first noticed on or after February 24, 1999, are problems one would more readily associate with defective pile driving. Century offers no proof that the alleged problems with the air conditioning system were the result of Dmitri's work. Dmitri has offered no proof that the air conditioning system problems were unrelated to its work. Moreover, proof of the causation of the air conditioning system defects is really wrapped up with the original plaintiffs' proof of their claim at the trial on the merits. Therefore, we find that there is a genuine issue of material fact as to whether the air conditioning system problems are causally connected to Dmitri's work. Accordingly, at this stage of the proceedings we must also find that there is a genuine issue of material fact as to whether the earliest alleged manifestation of defects and damage caused by the work done by Dmitri was February 24, 1999, which is within the policy period covered by Century.

Having determined that the allegations of the original petition raise claims for damages arguably within the policy period, we must next consider whether those damages are covered by the policy issued by Century.

The trial judge in his reasons for judgment states that:

In Coverage Section (A)(1)(b)(1) and (A)(1)(b)(2), the Policy states that the insurance applies to property damage only if the property damage is caused by an occurrence that takes place in the coverage territory which occurs during the policy period. The Policy defines exactly when a[sic] occurrence us deemed to take place in Coverage Section (A)(1)(c). The section specifically states that the property damage is deemed to take place at the time of the first such damage or injury³ even though the nature and extent of such damage or injury may change; and even though the damage may be continuous or repeated exposure to substantially the same general harm. The original Plaintiffs in the Petition alleged that the first damage to their property appeared on October 2, 1998. Therefore, the alleged property damage is deemed to have occurred on October 2, 1998. [Emphasis added.]

But, as we have already noted, the air-conditioning damage alleged to have become manifest on October 2, 1998, is not damage we can necessarily attribute to Dmitri in the absence of more specific allegations and/or proof, and the doctrine of res ipsa loquitur unquestionably does not apply. Therefore, as we agree with the trial judge that damage under the policy is deemed to take place at...