Taylor Morrison Servs., Inc. v. Hdi-Gerling Am. Ins. Co., S13Q0462.

• Decision Date: 12 July 2013
• Docket Number: No. S13Q0462.,S13Q0462.
• Citation: 293 Ga. 456,746 S.E.2d 587
• Parties: TAYLOR MORRISON SERVICES, INC. v. HDI–GERLING AMERICA INSURANCE COMPANY.
• Court: Georgia Supreme Court

293 Ga. 456

746 S.E.2d 587

TAYLOR MORRISON SERVICES, INC.

v.HDI–GERLING AMERICA INSURANCE COMPANY.

No. S13Q0462.

Supreme Court of Georgia.

July 12, 2013.

Kilpatrick, Townsend & Stockton, Julie A. Lierly, Caroline W. Spwangeberg, Ellen P. McCarley, for appellant.

Freeman, Mathis & Gary, Michael P. Bruyere, Fields, Howell, Athans & McLaughlin, Ann T. Kirk, for appellee.

King & Spalding, Zachary D. Tripp, Martin M. McNerney, Taylor T. Lankford, Anthony P. Tatum, McMickle, Kurey & Branch, Kevin P. Branch, Dana M. Mango, Ryan M. Suerth, Weissman, Nowack, Curry & Wilco, Linda B. Foster, McKenna, Long & Aldridge, John S. Berry, Wiley Rein, Laura Foggan, Matthew W. Beato, amici curiae.

BLACKWELL, Justice.

Generally speaking, a standard commercial general liability (CGL) policy ¹ insures against a liability to pay damages for “ ‘bodily injury’ or ‘property damage’ [that] is caused by an ‘occurrence,’ ” subject to certain limits and exclusions. In this coverage litigation, the United States Court of Appeals for the Eleventh Circuit has certified two questions to this Court, both of which concern the meaning of “occurrence,” as that term is used in a standard CGL policy, and with respect to coverage for the potential liabilities of an insured for alleged “property damage” arising from faulty workmanship in residential construction. More specifically, the Eleventh Circuit has asked us to answer these questions:

1. Whether, for an “occurrence” to exist under a standard CGL policy, Georgia law requires there to be damage to “other property,” that is, property other than the insured's completed work itself.

2. If the answer to Question One (1) is in the negative, whether, for an “occurrence” to exist under a standard CGL policy, Georgia law requires that the claims being defended not be for breach of contract, fraud, or breach of warranty from the failure to disclose material information.

HDI–Gerling America Ins. Co. v. Morrison Homes, Inc., 701 F.3d 662, 669(4) (11th Cir.2012). For the reasons that follow, we answer the first question in the negative, and we answer the second question in the affirmative as to fraud and in the negative as to breach of warranty.²

We begin with a brief summary of the background of this litigation. The record shows that HDI–Gerling America Insurance Company issued a standard CGL policy to Morrison Homes, Inc., a predecessor of Taylor Morrison Services, Inc. ³ By the express terms of the policy, HDI–Gerling promised to “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.” The policy clarifies that

[t]his 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”; and

(2) The “bodily injury” or “property damage” occurs during the policy period.

The policy expressly defines “property damage” as either “[p]hysical injury to tangible property” or “[l]oss of use of tangible property that is not physically injured.” And it expressly defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policy does not define “accident.” The policy also contains a number of exclusions, including several known as the “business risk”—or in the construction context, the “builder's risk”—exclusions. ⁴

Taylor Morrison is a homebuilder, and it was sued in California by sixteen homeowners, who sought to represent a class of more than 400 homeowners, all of whom owned homes built by Taylor Morrison in three California subdivisions. The homeowner-plaintiffs alleged that the concrete foundations of their homes were improperly constructed,insofar as Taylor Morrison failed to lay four inches of gravel beneath the foundations, it failed to use adequate moisture barriers in the construction of the foundations, and it built the foundations with concrete having too high a water-to-cement ratio.⁵ As a result, the homeowner-plaintiffs allege, the foundations are failing, and the defects in the foundations have caused “tangible physical damage” to the homes built atop the foundations, including “water intrusion, cracks in the floors and driveways, and warped and buckling flooring.” Based on these allegations, as well as allegations that Taylor Morrison misrepresented or concealed material information about the construction of the foundations and homes, the homeowner-plaintiffs asserted seven legal claims against Taylor Morrison, seeking monetary damages, among other remedies. The California court certified a class of homeowners as to five of these claims, including claims for breach of express and implied warranties.

At first, HDI–Gerling undertook to defend Taylor Morrison against these claims, subject to a reservation of its rights. Then, in 2009, HDI–Gerling filed a lawsuit against Taylor Morrison in the United States District Court for the Northern District of Georgia, seeking a declaratory judgment that the claims for which a class was certified do not involve potential liabilities for which Taylor Morrison has coverage under its standard CGL policy. The district court awarded summary judgment to HDI–Gerling, finding no coverage for several reasons, including that the claims asserted against Taylor Morrison in California do not involve an “occurrence.” In that respect, the district court reasoned that there is no “occurrence” when the only “property damage” alleged is damage to work of the insured, in this case, the homes that Taylor Morrison constructed. The district court applied Georgia law in its decision to award summary judgment to HDI–Gerling, a choice of law that no one appears to dispute.⁶ Taylor Morrison appealed the award of summary judgment, and the Eleventh Circuit certified the questions to which we now turn.

1. About the first question, we addressed the meaning of “occurrence”—as used in a CGL policy, and in the context of a coverage dispute involving claims of faulty workmanship in residential construction—only two years ago, in American Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., 288 Ga. 749, 707 S.E.2d 369 (2011), and our analysis begins with that recent decision. In American Empire, a general contractor sued its plumbing subcontractor for costs that the general contractor incurred as a result of the subcontractor's faulty workmanship, which apparently caused water and weather damage to “surrounding properties” that also were being developed by the general contractor. 288 Ga. at 750, 752, 707 S.E.2d 369. After the subcontractor defaulted, and a default judgment against it was entered, the general contractor sought satisfaction of the judgment from the subcontractor's CGL insurer. Id. at 750, 707 S.E.2d 369. The insurer defended on the ground, among others, that the faulty workmanship was no “occurrence,” and the trial court awarded summary judgment to the insurer on that ground. The general contractor appealed, and the Court of Appeals reversed, holding that the faulty workmanship was accidental and, therefore, an “occurrence.” Hathaway Dev. Co. v. American Empire Surplus Lines Ins. Co., 301 Ga.App. 65, 69(2), 686 S.E.2d 855 (2009). We granted a writ of certiorari to consider whether “the Court of Appeals err[ed] in its construction of the term ‘occurrence.’ ” American Empire, 288 Ga. at 749–750, 707 S.E.2d 369.

Like the standard CGL policy in this case, the policy in American Empire defined an “occurrence” simply as “an accident, including continuous or repeated exposure to substantially the same, general harmful conditions,” and it did not define “accident.” 288 Ga. at 750, 707 S.E.2d 369. Accordingly, we “look[ed] to the commonly accepted meaning of the term,” and we found that “accident” most commonly means “an unexpected happening without intention or design.” Id. at 751, 707 S.E.2d 369 (citation and punctuation omitted). Upon this finding, we concluded that “an occurrence can arise where faulty workmanship causes unforeseen or unexpected damage to other property.” Id. at 752, 707 S.E.2d 369. Our decision in American Empire, therefore, definitively establishes that faulty workmanship sometimes can amount to an “occurrence,” at least when the property of someone other than the insured is damaged, a circumstance that was undisputed in American Empire. It does not answer the question, however, with which we are presented here, whether faulty workmanship also can amount to an “occurrence” when the only damage alleged is to work of the insured.

To answer that question, we begin as we began in American Empire, with the usual and common meaning of “accident.” As we have explained before, “[a]n insurance policy is simply a contract, the provisions of which should be construed as any other type of contract,” Hunnicutt v. Southern Farm Bureau Life Ins. Co., 256 Ga. 611, 612(4), 351 S.E.2d 638 (1987) (citation and punctuation omitted), and so, when the provisions of an insurance policy are clear and unambiguous, we attribute to those provisions their plain meaning. Grain Dealers Mut. Ins. Co. v. Pat's Rentals, Inc., 269 Ga. 691, 693, 505 S.E.2d 729 (1998). An insurer is entitled, of course, to define terms used in its insurance policies as it sees fit, and it may choose to define a term in an unusual and uncommon way. But unless the policy itself indicates that a term is used in an unusual sense, we attribute to that term its usual and common meaning.⁷American Empire, 288 Ga. at 751, 707 S.E.2d 369. See also Banks v. Brotherhood Mut. Ins. Co., 301 Ga.App. 101, 103(1), 686 S.E.2d 872 (2009); Empire Fire & Marine Ins. Co. v. Daniels, 279 Ga.App. 602, 605(1), 631 S.E.2d 799 (2006). As we noted in American Empire, in its usual and common usage, “accident” refers to “an unexpected happening without intention or design,” Black's Law Dictionary at 15 (6th ed.1990), an “event or change...