Ross v. C. Adams Constr. & Design

• Court: Court of Appeal of Louisiana
• Writing for the Court: Panel composed of Judges MARION F. EDWARDS, SUSAN M. CHEHARDY, and CLARENCE E. McMANUS.
• Citation: Ross v. C. Adams Constr. & Design, 70 So.3d 949 (La. App. 2011)
• Decision Date: 14 June 2011
• Docket Number: No. 10–CA–852.,10–CA–852.
• Parties: Terrence M. ROSS and Rhonda B. Rossv.C. ADAMS CONSTRUCTION & DESIGN, L.L.C., State Farm Mutual Insurance Company and Louisiana Citizens Property Insurance Company.

70 So.3d 949

Terrence M. ROSS and Rhonda B. Ross

v.C. ADAMS CONSTRUCTION & DESIGN, L.L.C., State Farm Mutual Insurance Company and Louisiana Citizens Property Insurance Company.

No. 10–CA–852.

Court of Appeal of Louisiana, Fifth Circuit.

June 14, 2011.

Kevin C. O'Bryon, O'Bryon & Schnabel, Attorney at Law, New Orleans, LA, for Plaintiff/Appellants.Darren A. Patin, Hailey, McNamara, Hall, Larmann & Papale, Attorney at Law, Metairie, LA, and Ralph S. Hubbard, III, Seth A. Schmeeckle, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, Attorneys at Law, New Orleans, LA, for Defendant/Appellee.Wayne J. Lee, Heather M. Lonian, Stone Pigman Walther Wittmann, Attorneys at Law, and Adrianne L. Baumgartner, Charles L. Chassaignac, IV, Porteous, Hainkel and Johnson, Attorneys at Law, New Orleans, LA, for National Association of Mutual Insurance Company.Panel composed of Judges MARION F. EDWARDS, SUSAN M. CHEHARDY, and CLARENCE E. McMANUS.CLARENCE E. McMANUS, Judge.

[5 Cir. 3] This is an appeal by plaintiffs from the trial court's granting of summary judgment in favor of defendant, Louisiana Citizens Property Insurance Company. For the reasons which follow, we affirm the trial court's judgment.

STATEMENT OF THE CASE

In 2006, C. Adams Construction & Design, LLC renovated a house at 316 Woodvine Ave. in Metairie, LA. In January 2007, plaintiffs, Terrence and Rhonda Ross (“the Rosses”), purchased the house from C. Adams Construction & Design and obtained homeowners insurance from Louisiana Citizens Property Insurance Company (“Louisiana Citizens”).

Approximately two years after they purchased the home, the Rosses began having chronic malfunctions in the heating, ventilation, and air conditioning system (“HVAC”). The Rosses then discovered the presence of foreign gypsum drywall, now referred to as “Chinese drywall”, in the house. In March 2009, the Rosses submitted an insurance claim to Louisiana Citizens for the damages caused by the Chinese drywall. Louisiana Citizens conducted an investigation and confirmed the presence of the Chinese drywall and damage to the metal surfaces caused by corrosion. Thereafter, on April 29, 2009, Louisiana Citizens denied the Rosses' insurance claim and determined the claim was not covered under their homeowners insurance policy.

[5 Cir. 4] On May 28, 2009, the Louisiana Department of Health and Hospitals conducted an investigation and inspection of the home and confirmed the presence of dangerous Chinese drywall in the home. On June 23, 2009, the Rosses sent a formal demand to C. Adams Construction giving them an opportunity to repair or correct the defects; however, they failed to do so. The Rosses ultimately made the necessary repairs at their own expense.

On July 30, 2009, the Rosses filed suit against the builder of the home, C. Adams Construction, the builder's insurer, State Farm Insurance Company, and their own homeowners insurer, Louisiana Citizens. The Rosses claimed the defective Chinese drywall released sulfuric gases that cause corrosion of various metal components, including the HVAC coils, refrigerator units, electrical wiring, plumbing, jewelry, appliances, electronics, and other household items. The Rosses also claimed the defective Chinese drywall had a noxious “rotten egg-like odor.” The Rosses alleged the defective Chinese drywall caused damage to their home, as well as their personal property.

On January 25, 2010, the Rosses filed a motion for partial summary judgment claiming the Louisiana Citizens homeowners insurance policy provided coverage for their claimed losses. On March 19, 2009, Louisiana Citizens filed a cross motion for summary judgment asserting that coverage for the claimed losses was barred by four different exclusions in the homeowners policy: 1) loss caused by faulty materials, 2) loss caused by latent defect, 3) loss caused by corrosion, and 4) loss caused by pollution. Louisiana Citizens also argued there is no coverage for the cost of removing and replacing the drywall itself because it did not sustain a “direct physical loss.” Further, Louisiana Citizens asserted the claim for damage to personal property is not covered because personal property is covered only for [5 Cir. 5] losses caused by sixteen specific perils listed in the policy and none apply in this situation.

A hearing on the motions for summary judgment was held on April 5, 2010. The trial court issued a judgment April 14, 2010 denying the Rosses' motion for partial summary judgment and granting Louisiana Citizens' cross motion for summary judgment. The trial court also issued an order on May 20, 2010, clarifying the ruling was a final judgment, dismissing the Rosses' claims against Louisiana Citizens. The Rosses now appeal this judgment. For the reasons which follow, we affirm the trial court's judgment.

DISCUSSION

This is an appeal from the granting of a motion for summary judgment. A motion for summary judgment should be granted when there exists no genuine issue of material fact, and the mover is entitled to judgment as a matter of law. LSA–C.C.P. Art. 966; Brewster v. Hunter, 09–932, p. 3 (La.App. 5 Cir. 3/9/10), 38 So.3d 912, 914, writ denied, 2010–0773 (La.6/4/10), 38 So.3d 305. Appellate courts review summary judgments de novo using the same criteria applied by the district court in order to determine whether the grant of summary judgment was appropriate. Id. Whether an insurance policy provides or precludes coverage, as a matter of law, can be resolved within the framework of a motion for summary judgment. Id.

The material facts of this case are undisputed. The Rosses home contained Chinese drywall which emitted sulfuric gases that caused corrosion of the electrical wiring, plumbing components, and other household items. Our review of the granting of the summary judgment on appeal requires an interpretation of the homeowners insurance policy and a determination of the applicability and enforceability of the policy provisions pursuant to Louisiana law.

[5 Cir. 6] Louisiana Citizens, in its motion for summary judgment, argued the Rosses' claims are not covered under their homeowners insurance policy due for several reasons. First, Louisiana Citizens claimed the Rosses had sustained no direct physical loss. Louisiana Citizens further argued four exclusions to coverage applied. First, the policy provides an exclusion for losses caused by faulty, inadequate or defective materials. Next, Louisiana Citizens alleged the damages sustained by the Rosses were caused by the defective Chinese drywall, which is a latent defect. Louisiana Citizens also argues the Rosses' claims are excluded because they are losses caused by corrosion. Louisiana Citizens further alleged the claims are excluded from coverage because the damages were caused by pollution. The trial court granted Louisiana Citizen's cross motion for summary judgment without reasons.

Direct Physical Loss

The Rosses argue on appeal that their home did sustain a direct physical loss. The homeowners insurance policy provides that Louisiana Citizens insures against risk of direct physical loss to the property. Louisiana Citizens argued in its motion for summary judgment that the house did not suffer a direct physical loss because the drywall was physically intact and functional. However, the inherent qualities of the Chinese drywall did create a physical loss to the home and required that the drywall be removed and replaced. Thus, we find there was a direct physical loss sustained by the Rosses. Therefore, we will address the applicability of the exclusions to coverage asserted by Louisiana Citizens.

Faulty, Inadequate, or Defective Materials

In its motion for summary judgment, Louisiana Citizens contended the Rosses' homeowners insurance policy contains an exclusion for faulty, inadequate, [5 Cir. 7] or defective materials and the Chinese drywall, that is the source of the damages suffered by the Rosses, constitutes faulty, inadequate, or defective materials.

The Rosses' homeowners insurance policy states:

B. We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not precluded by any other provision in this policy is covered.

...

3. Faulty, inadequate or defective: ...

c. Materials used in repair, construction, renovation or remodeling;... of part or all of any property whether on or off the “residence premises.”

In their original petition, the Rosses claimed that the foreign drywall used in their home was defective and emitted sulfuric and methane gas that caused corrosion of the HVAC coils, plumbing, electrical wiring, and other household items. Louisiana Citizens argued the damages suffered by the Rosses were due to faulty or defective materials and were, thus, excluded from coverage.

On appeal, the Rosses argue this exclusion to their homeowners insurance policy does not apply because the drywall at issue is not faulty, inadequate or defective. They contend the drywall functions as drywall and serves its intended purpose. The Rosses further argue the drywall was installed prior to their purchase of the home and they did not perform any repair, construction, or renovation of the home related to the drywall. Thus, they argue the exclusion in the homeowners insurance policy for faulty, inadequate or defective materials does not apply.

Louisiana Citizens argues the damages sustained by the Rosses was directly caused by drywall that released sulfuric gas that caused corrosion of plumbing, electrical wiring and other metal components and has specifically been referred to by the Rosses as “defective”....