U.S. Fidelity & Guar. Co. v. Warwick Development Co., Inc.

• Decision Date: 10 February 1984
• Parties: UNITED STATES FIDELITY & GUARANTY COMPANY v. WARWICK DEVELOPMENT COMPANY, INC. WARWICK DEVELOPMENT COMPANY, INC. v. Jerry G. ADAMS and Nancy B. Adams. Jerry G. ADAMS and Nancy B. Adams v. WARWICK DEVELOPMENT COMPANY, INC. 81-686, 81-697 and 81-707.
• Court: Alabama Supreme Court

Page 1021

446 So.2d 1021

UNITED STATES FIDELITY & GUARANTY COMPANY v. WARWICK DEVELOPMENT COMPANY, INC.

WARWICK DEVELOPMENT COMPANY, INC. v. Jerry G. ADAMS and Nancy B. Adams.

Jerry G. ADAMS and Nancy B. Adams v. WARWICK DEVELOPMENT COMPANY, INC.

81-686, 81-697 and 81-707.

Supreme Court of Alabama.

Feb. 10, 1984.

Foster Etheredge and J. Mark Hart of Spain, Gillon, Riley, Tate & Etheredge, Birmingham, for appellants.

W.L. Longshore, Jr., of Longshore & Longshore, Birmingham, for appellee/cross-appellant Warwick Development Co., Inc.

Nancy B. Adams and Jerry G. Adams, pro se.

ON REHEARING EX MERO MOTU

PER CURIAM.

The original opinion in this case, dated October 7, 1983, is withdrawn, and the following opinion is substituted therefor:

These appeals are the result of the trial court's award of money damages to the plaintiffs, and the trial court's finding that United States Fidelity & Guaranty Company (USF & G) was bound under the policy of insurance to Warwick Development Company, Inc. (Warwick). We affirm in part, reverse in part, and render.

FACTS

The plaintiffs, Jerry G. Adams and Nancy B. Adams (Adamses), were purchasers of a home in Grayson Valley Estates, Highland Sector, in Jefferson County. The contract for purchase was signed on or about March 17, 1980, and the sale closed on June 24, 1980. The Adamses alleged defects throughout the structure of the residence and some nineteen are listed in the complaint. The Adamses filed suit against Warwick, the contractor/seller, and National Mortgage Company (National), the holder of the first mortgage, alleging unworkmanlike construction and misrepresentations of material facts by Warwick. Plaintiffs brought this action in the Equity Division of the Circuit Court of Jefferson County seeking rescission and cancellation of the sale and mortgage, and money damages. Defendant, Warwick, filed a third-party complaint against USF & G and Northern Assurance Company of America (Northern Assurance), claiming both were liable under comprehensive general liability policies (CGL) issued to Warwick. Both companies had refused to defend Warwick in this action and denied coverage under the policies. Warwick sought recovery from the insurance companies for any sums adjudged against Warwick in favor of the Adamses, plus reasonable attorney's fees.

On the day of the trial, National, the holder of the mortgage, was dismissed upon stipulation of the parties, and Northern Assurance's motion for summary judgment was granted, resulting in its dismissal. USF & G's motion for summary judgment was denied, based on Cotton States Mutual Ins. Co. v. Norrell Heating & Air Conditioning Co., Inc., 370 So.2d 270 (Ala.1979).

The trial proceeded and at the close of the evidence the Adamses, pursuant to a former ruling by the trial judge, elected the remedy of rescission rather than damages for breach of contract. The trial court expressly found that under the evidence presented the Adamses were not entitled to rescission of the contract. Notwithstanding the election of remedies by plaintiffs, the trial court found within the complaint a prayer for damages and a prayer for general relief. Citing the Alabama Rules of Civil Procedure, Rule 15(b) and (c), and Tilley's Alabama Equity Pleading and Practice, Section 168, the trial court awarded the Adamses $4,600.00 based on the following principle:

" 'If, under the averments, Complainant is entitled to relief of the character prayed, the Court under the general prayer will mold the relief to meet the equities as they appear.' (See Dees v. Dees, , 235 So.2d at page 237 [1970]; Wood v. Cantrell, , 140 So. 345 [1932]; Cox v. Cox, , 102 So.2d 23 [1958]; Crawford v. Crawford, 349 So.2d 65 [Ala.Civ.App.1977] )."

With regard to the third-party complaint of Warwick against USF & G, the trial court found that USF & G was bound under its policy of insurance to Warwick and awarded Warwick the amount of the judgment ($4,600.00), plus a reasonable attorney's fee of $6,500.00.

USF & G appeals from the denial of its motion for summary judgment and from the judgment entered for Warwick on the third-party complaint. Additionally, Warwick cross-appeals from the money judgment in favor of the Adamses and the Adamses cross-appeal from the judgment. Three issues were presented for review which will be addressed separately.

I.

The first issue is whether USF & G's policy provided coverage for alleged faulty workmanship and noncomplying materials in the construction of plaintiff's residence when the alleged damage was confined to the residence itself. USF & G contends that the policy affords no coverage because (1) no insurable loss occurred within the policy period and (2) damages to the work of the insured attributable to faulty workmanship are expressly excluded from coverage. After a review of the record and the policy involved, we conclude that the trial court incorrectly held that USF & G was bound under its policy of insurance to Warwick. In our view, there was no "occurrence" within the definition of "occurrence" found in the pertinent policy provisions. The policy clearly states that the company will pay damages for: "A. bodily injury or B. property damage to which this insurance applies caused by an occurrence." The USF & G policy defines "occurrence" as "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." For a contrary holding under circumstances amounting to "an occurrence," see Moss v. Champion Ins. Co., 442 So.2d 26 (Ala.1983).

We cannot agree with the argument set forth by the Adamses that "a reliance upon the misrepresentations" made by Warwick constitutes an occurrence within the language of the policy. Further, we agree with USF & G that if a misrepresentation were an "occurrence" within the definition of the policy then "any misrepresentations in this case would not be an 'occurrence' which caused 'property damage' as required to support liability under the policy." "Property damage" is defined in the policy 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."

There was no evidence in this case that a misrepresentation by Warwick caused physical injury to or destruction of tangible property. For property damage to come under the coverage of USF & G, there must have been an "occurrence" within the definition of the policy. A majority of courts have held that in order to have liability under the terms of such a policy the "occurrence" must arise during the policy period, for it is the insurance that is in force at the time of the property damage that is applicable rather than insurance that was in force when the work was performed. See, e.g., Deodato v. Hartford Ins. Co., 143 N.J.Super. 396, 363 A.2d 361 (1976); Singsaas v. Diederich, 307 Minn. 153, 238 N.W.2d 878 (1976); Oceanonics, Inc. v. Petroleum Distributing Co., 280 So.2d 874 (La.Ct.App.1973), aff'd, 292 So.2d 190 (La.1974). USF & G also asserts, and we agree, that "as a general rule the time of an 'occurrence' of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed but the time the complaining party was actually damaged." Muller Fuel Oil Co. v. Insurance Company of North America, 95 N.J.Super. 564, 232 A.2d 168 (1967), quoted in Deodato v. Hartford Ins. Co., 363 A.2d at 365. See also Annot., 57 A.L.R.2d 1385. By adopting this view, we necessarily overrule Wixom Brothers Co. v. Truck Insurance Exchange, 435 So.2d 1231 (Ala.1983).

The trial court denied USF & G's motion for summary judgment on the basis of Cotton States, supra. Warwick argued and reiterates on appeal that under Cotton States certain exclusions found within the policy provisions were ambiguous when read in light of each other, and that the ambiguity should be resolved in favor of the insured. Because we find that the damages claimed were not within the USF & G policy coverage, we need not reach the question of ambiguity as to the policy exclusions.

II.

The next issue presented is whether the plaintiff's "election" of the relief of rescission at the close of the evidence barred the trial court's award of money damages. While it is true, as urged by Warwick, that a plaintiff may not both rescind a contract and receive money damages, this argument overlooks the fact that the Adamses were not requesting both forms of recovery, but rather were pleading and pursuing their claims for relief in the alternative, as expressly allowed by the Alabama Rules of Civil Procedure. ARCP 8(a).

Rule 8 is identical in relevant aspects to the corresponding Federal Rule of Civil Procedure. The federal courts have consistently upheld the right of a plaintiff to try his case on alternate theories of relief and the "plaintiff cannot be required to elect upon which theory to proceed." Breeding v. Massey, 378 F.2d 171, 178 (8th Cir.1967); Campbell v. Barnett, 351 F.2d 342, 344 (10th Cir.1965); Pulliam v. Gulf Lumber Co., 312 F.2d 505, 507 (5th Cir.1963); Herlihy Mid-Continent Co. v. Bay City, 293 F.2d 383, 385 (6th Cir.1961).

Breeding v. Massey, supra, involved an appeal by the Defendant/Appellant, asserting that the claims of negligent entrustment and respondeat superior were alternative grounds for liability, and that recovery for the former could only be made when respondeat superior liability did not exist. The court found such a position unsupported by authority or logic, stating, "A party may ... state as many separate claims or defenses as he has regardless of consistency and whether based on legal equitable or maritime grounds." 378 F.2d at 178.

Where the...