Scottsdale Ins. Co. v. Ratliff, 69428
| Decision Date | 09 July 1996 |
| Docket Number | No. 69428,69428 |
| Citation | 927 S.W.2d 531 |
| Parties | SCOTTSDALE INSURANCE COMPANY, Plaintiff/Respondent, v. Roger RATLIFF, d/b/a Statewide Pest Control, Defendant/Appellant. |
| Court | Missouri Court of Appeals |
Thomas M. Pavelko, Stern, Pressman & Soule, St. Louis, for appellant.
Cheryl A. Callis, Amy A. Endrizal, Kortenhof & Ely, P.C., St. Louis, for respondent.
Scottsdale Insurance Company sought a declaration that it was not obliged to defend Roger Ratliff, doing business as Statewide Pest Control, in a suit filed by Terry and Rhonda Adams alleging that they sustained property damage because of a negligent termite inspection by Statewide. The trial court ruled in favor of the insurer concluding that the events charged in the Adams' petition did not constitute an "occurrence" within the meaning of the liability insurance policy issued to Ratliff. The case was submitted on a stipulation of facts, and this appeal presents only questions of law. We reverse and remand for further proceedings.
A liability insurer's duty to defend a suit against its insured is measured by the language of the policy and the allegations of the plaintiff's petition. Butters v. City of Independence, 513 S.W.2d 418, 424 (Mo.1974). The Adams' amended petition charged that in December of 1987 they hired Statewide to make an inspection of a home they contemplated buying to determine whether there was infestation by wood boring insects, and on the same date they received a negative report. On January 15, 1989, the Adams say they discovered termite damage while preparing to remodel their house. They assert that Statewide was negligent in its inspection and that this negligence resulted in damage as follows:
13. On January 15, 1988, the property ... had an appraised value in the sum of $38,000.00.
14. On August 13, 1990, the same property had the appraised value of $14,500.00.
15. The diminuation [sic] of the value of the said property in the sum of $23,500.00 on August 13, 1990 as to compared to the value of the said property on January 15, 1988 was caused by termite infestation and damage to the structure.
16. The damages specified in paragraph 15 were caused as the direct and proximate result of the negligence of the Defendant, STATEWIDE PEST CONTROL, INC. in failing to discover and report the infestation of termites during Defendant's inspection of Plaintiff's [sic] property on December 31, 1987.
It was also charged that Statewide acted recklessly. The prayer was for actual and punitive damages in the amount of $48,500.00.
The governing policy was effective April 20, 1987 and expired April 20, 1988. It provides general liability coverage in language which seems typical of most such policies considered in recent cases. The insurer places particular emphasis on the definition of "occurrence" in the following terms:
an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.
It also highlights the definition of "property damage" as follows:
(1) physical injury to or destruction of tangible property which occurs during the policy period including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.
These definitions are "boiler plate" contained in the printed portions of the policy. There is no policy language specially designed to apply to the insured's business except for the description, "Exterminators, including termite control--excluding the use of gas of any kind." Such attempts to fit myriad fact situations into a common mold present frequent problems of construction and much litigation.
The trial court relied strongly on Western Exterminating Co. v. Hartford Accident and Indemnity Co., 479 A.2d 872 (D.C.App.1984), involving a similar claim under indistinguishable policy language. Pending against plaintiff were complaints seeking damages for diminution of value and cost of restoration on the grounds that plaintiff had issued a termite inspection report stating that a house was free from termite damage when in fact it had termite damage. The District of Columbia court assumed that the allegedly negligent inspection was an "accident" within the meaning of the policy, but pointed out that the only damage sought was for diminution of value of the residence on account of the infestation. Id. at 875. It concluded that this kind of damage was not an "occurrence" within the meaning of the policy because it did not result in "direct injury" to tangible personal property. Id. at 875-76. The policy, the court said, covered physical damage but not strictly economic losses. Id. The court rather brushed aside claims in the plaintiffs' complaint of "cost of repair," as a "general open-ended prayer for damages" which did not cure the failure to allege resulting damage to tangible property. Id. at 877.
Western Exterminating has not been followed in other termite inspection and report cases. In Isle of Palms Pest Control Company v. Monticello Insurance Company, 459 S.E.2d 318 (S.C.App.1994), likewise involving a general liability policy with indistinguishable language, the court found the insured's negligence in issuing a termite letter reporting no visible evidence of termite infestation was an "occurrence" covered under the policy. The court held that the complaint "clearly alleges an accident (the negligent inspection) which caused property damage (termite damage)." Id. at 319. It found that the failure to discover an active infestation resulted in continued termite damage and that continuing damage from that active infestation constituted the accident. Id. at 320. The alleged damage consisted of "costs of repair and efforts to stop the damage." Id. at 319.
In Posing v. Merit Insurance Company, 258 Ill.App.3d 827, 196 Ill.Dec. 335, 629 N.E.2d 1179 (3 Dist.1994), the court likewise struggled with substantially identical definitions in a general liability policy. Several claims against a company engaged in the business of termite inspection and extermination were joined in a single suit. Id. One claim in particular seems very much like the Adams' claim. The homeowners charged that there was a negligent inspection which failed to discover termite damage causing the homeowners to purchase a house with a diminished value resulting in "great inconveniences and costs to repair." Id. 196...
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