United Fire Lloyds v. JD Kunz Concrete Contractor, Inc.
| Docket Number | 08-23-00047-CV |
| Decision Date | 31 October 2023 |
| Parties | UNITED FIRE LLOYDS, Appellant, v. JD KUNZ CONCRETE CONTRACTOR, INC., and EXPLOREUSA RV, LTD., Appellees. |
| Court | Texas Court of Appeals |
Appeal from the 207th Judicial District Court of Comal County, Texas (TC# C2021-0734B)
Before Rodriguez, C.J., Palafox, and Soto, JJ.
This is an appeal from the trial court's order granting Appellees' motion for summary judgment and denying Appellant's cross-motion. In its order, the trial court found that Appellant United Fire Lloyds (United Fire) has a duty to indemnify its insured, Appellee JD Kunz Concrete Contractor, Inc. (JD Kunz), pursuant to a commercial general liability policy it issued to JD Kunz covering damages that occurred during a construction project it performed on behalf of Appellee ExploreUSA RV, LTD. (ExploreUSA). For the reasons set forth below, we affirm.[1] Factual and Procedural Background
A. The construction contract
ExploreUSA is a recreational-vehicle sales company in Alvin, Texas. In May of 2015, it entered into a contract with JD Kunz in which JD Kunz agreed to "[p]rovide all materials and labor to install [a] Complete Concrete System" covering over 12 acres to be used as ExploreUSA's "supercenter."[2] (the Construction Contract). In exchange, ExploreUSA agreed to pay JD Kunz $2,700,775.00 to complete the system. As discussed in more detail below, the Construction Contract contained detailed specifications for the work to be performed and provided that JD Kunz was "solely responsible for, has control over, and is fully responsible for all construction means, methods, techniques procedures, coordination, safety, and sequences [and] shall coordinate all activities related to [its] work as defined herein."
B. The commercial general liability policy
As required by the Construction Contract, JD Kunz obtained a commercial general liability (CGL) policy from United Fire listing ExploreUSA as an additional insured, with a one-million-dollar limit per occurrence and a two-million-dollar aggregate limit.[3] The policy provided that United Fire had a duty to indemnify JD Kunz and to thereby pay any "sums that the insured becomes legally obligated to pay as damages because of . . . property damage to which this insurance applies." It further provided that United Fire had the "duty to defend" JD Kunz "against any suit seeking those damages," except those to which the insurance did not apply.
The policy contained a number of exclusions, three of which are germane to this appeal: (1) a "contractual liability" exclusion (applicable when an insured has assumed liability beyond its general duty to perform its work in a good and workmanlike manner); (2) a "your product" exclusion (applicable when the damages suffered related to a "product" that the insured manufactured, sold, handled, distributed, or disposed of) and (3) a "your work" exclusion (applicable when the damages suffered were caused by the insured's failure to perform its work in a good and workmanlike manner, i.e., for poor workmanship, but with an exception for work performed by subcontractors).
C. The underlying liability lawsuit
Following project completion, ExploreUSA sued JD Kunz for breach of contract, alleging the "Concrete System showed signs of failure, unusual cracking, deterioration, and damage." ExploreUSA posited that the physical damage and system deterioration was attributable to "incorrect or inadequate performance of work by Kunz and/or its subcontractors." In particular, ExploreUSA alleged the system's failure resulted from: (1) the thickness of the concrete, which was not in accordance with the specifications in the Construction Contract and/or the standard practice in the industry; and (2) the reinforcing steel (the rebar) not being in the midsection of the pavement and "was in most cases placed directly upon the stabilized subgrade surface." ExploreUSA further alleged that after being notified of the damage, JD Kunz agreed to perform repairs under the Construction Contract's warranty provisions but failed to adequately address the system's failure. JD Kunz thereafter notified United Fire of the lawsuit, and United Fire agreed to provide JD Kunz a defense but reserved the right to refuse to indemnify JD Kunz for any damages awarded if it concluded a policy exclusion applied.
At the close of trial, the jury was asked three questions. First, it was asked if JD Kunz had failed to comply with the Construction Contract, to which the jury answered "Yes." Second, the jury was asked if JD Kunz's "failure, if any . . . to comply with a warranty [was] a producing cause of damages to ExploreUSA . . .," to which the jury answered "No." And third, it was asked "[w]hat sum of money if any . . . would fairly and reasonably compensate ExploreUSA . . . for its damages, if any, that resulted from such failure to comply," to which the jury answered, "$1,700,000." In determining the amount of damages, the trial court instructed the jury that it was only to consider "[t]he reasonable and necessary cost to repair and replace the concrete."
The trial court thereafter entered a final judgment against JD Kunz in the amount of $2,291,747.73, to include attorney's fees, costs, and prejudgment interest (the underlying liability judgment).
D. The insurance coverage lawsuit
Following the judgment, United Fire filed a petition seeking a declaratory judgment that it had no duty to indemnify JD Kunz due to three CGL policy exclusions: (1) the contractual-liability exclusion; (2) the your-product exclusion; and (3) the your-work exclusion. Both ExploreUSA and JD Kunz (collectively, the Kunz Defendants) filed general denials to the lawsuit and counterclaims against United Fire for, among other things, breach of contract and violation of the Texas Insurance Code for United Fire's refusal to indemnify JD Kunz. The Kunz Defendants thereafter filed traditional motions for summary judgment, asserting they were entitled to summary judgment on United Fire's request for declaratory relief and on their counterclaims. United Fire opposed the motions and filed its own motion for summary judgment, which the Kunz Defendants opposed.
As discussed in more detail below, in support of their motions for summary judgment, the parties all attached copies of the Construction Contract; the CGL policy; and the jury charge, jury verdict, and final judgment from the underlying lawsuit. In addition, United Fire provided copies of its correspondence with JD Kunz in which it agreed to assume the duty to defend JD Kunz in the underlying lawsuit, with its reservation of the right to contest the duty to indemnify, as well as its final letter to JD Kunz advising that it believed coverage was precluded by the exclusions in the policy. The Kunz Defendants attached excerpts from the trial and deposition testimony of several witnesses who testified in the underlying litigation as to the cause of the concrete failure and damage, and which entities, i.e., which of JD Kunz's subcontractors, performed the work that led to the same.
At issue in all three summary judgment motions was the interpretation and application of the three CGL policy exclusions identified by United Fire in its request for declaratory relief, and whether any of the exclusions applied to preclude coverage for the underlying liability judgment.
E. The trial court's ruling
The trial court denied United Fire's motion for summary judgment and granted the Kunz Defendants' motion in part, ruling in the Kunz Defendants' favor on their claims for declaratory relief, declaring that United Fire had a duty to indemnify JD Kunz for the damages awarded in the underlying liability lawsuit.
The Kunz Defendants then filed motions for summary judgment seeking an award of attorney's fees, which United Fire initially opposed, arguing JD Kunz was not entitled to any such award and the amount requested was not reasonable or necessary. Shortly thereafter, however, the parties submitted a Rule 11 Agreement to the trial court indicating they reached an agreement on attorney's fees and wished to obtain a final judgment on the issue of whether United Fire owed a duty to indemnify JD Kunz for the underlying liability judgment. The Rule 11 Agreement stipulated to the amount of reasonable and necessary attorney's fees the Kunz Defendants had incurred "to date," as well as the contingent amounts they would be entitled to if they prevailed on appeal.
Pursuant to the Rule 11 Agreement, the parties filed an agreed motion for severance and abatement of the Kunz Defendant's remaining claims. The parties also filed a joint motion for entry of a final judgment, stating they had "stipulated to prejudgment and post judgment interest," as well as the "reasonable and necessary attorney's fees for Defendants." However, the motion expressly stated that United Fire "still contests the issue of whether the [trial court] properly granted summary judgment on the duty to indemnify [and] reserves its right to address and contest this issue on appeal."
The trial court entered its final judgment in which it found, as a matter of law, that United Fire owed a "duty to indemnify J.D. Kunz for the underlying judgment." It further recognized the parties' Rule 11 Agreement and accordingly listed the attorney's fees the Kunz Defendants had already incurred as well as the contingent attorney's fees to be awarded if the Kunz Defendants prevailed on appeal, together with post-judgment interest on the calculated fees.[4] The trial court then severed all of the parties' remaining claims into a separate cause number, thereby making its judgment a final, appealable order from which United Fire appealed.
To continue reading
Request your trial