Webster v. Acadia Ins. Co.

• Citation: 156 N.H. 317,934 A.2d 567
• Decision Date: 17 October 2007
• Docket Number: No. 2006–945.,2006–945.
• Court: Supreme Court of New Hampshire
• Parties: Steven WEBSTER and another v. ACADIA INSURANCE COMPANY.

156 N.H. 317

934 A.2d 567

Steven WEBSTER and another

v.ACADIA INSURANCE COMPANY.

No. 2006–945.

Supreme Court of New Hampshire.

Argued: Sept. 19, 2007.

Opinion Issued: Oct. 17, 2007.

D'Amante Couser Steiner Pellerin, P.A., of Concord (R. James Steiner, on the brief and orally), for the plaintiffs.

Getman, Stacey, Schulthess & Steere, P.A., of Bedford (Naomi L. Mooney and Jill A. DeMello, on the brief, and Ms. Mooney orally), for the defendant.

GALWAY, J.

The plaintiffs, Steven Webster and Dutton & Garfield, Inc., appeal the decision of the Trial Court (Fitzgerald, J.) granting summary judgment to the defendant, Acadia Insurance Company, in the plaintiffs' breach of contract action. We reverse and remand.

The following facts were found by the trial court or are not in dispute. In 1991, the Winnisquam Regional School District (WRSD) hired the plaintiffs to perform work on the roof of its middle school. Specifically, the plaintiffs were to remove the existing outermost roof membrane, replace any damaged insulation, and install a new standing, seamless metal roof membrane. This type of roof membrane is fastened to the building using metal clips, and is not bolted to the ceiling beams, called purlins.

In March 2001, the school discovered structural deficiencies with the roof after a parent observed buckling in the gymnasium's purlins. Consequently, WRSD closed the gymnasium for an unspecified period of time to assess the damage. Because of the damage to the roof, on October 19, 2001, WRSD filed suit against the plaintiffs claiming negligence, negligent misrepresentation, breach of express warranty, professional negligence, and respondeat superior.

From November 1, 2000, through November 1, 2001, the plaintiffs held a general liability insurance policy with the defendant. The plaintiffs timely notified the defendant of the WRSD suit, and requested a defense and coverage for any liability. By letter dated August 5, 2002, the defendant denied the plaintiffs' requests, finding WRSD's writ did not contain allegations of property damage as required by the policy, and that several exclusions to coverage would apply. The WRSD suit came to final judgment following a jury trial and appeal to this court. See Winnisquam Reg. Sch. Dist. v. Levine, 152 N.H. 537, 880 A.2d 369 (2005). The plaintiffs subsequently filed the instant action to recover their defense costs in the WRSD suit, asserting WRSD's writ contained allegations of property damage by virtue of physical injury to the purlins and loss of use of the school gymnasium. Both parties moved for summary judgment. The trial court granted the defendant's motion and denied the plaintiffs' motion, ruling that WRSD's writ did not allege property damage, and, in the alternative, that coverage would be barred by the policy's "impaired property" exclusion. This appeal followed.

On appeal, the plaintiffs assert: (1) the allegations in the writ regarding damage to the purlins constitute property damage under the policy; (2) the closure of the school gymnasium constitutes a loss of use, and, thus, is also an allegation of property damage under the policy; and (3) the "impaired property" exclusion does not apply. The defendant argues the trial court correctly granted summary judgment because: (1) there has been no "occurrence" under the terms of the policy; (2) WRSD's writ does not allege property damage to the purlins, or, in the alternative, the purlins were incorporated into the plaintiffs' work product, and thus are not covered under the policy; (3) the writ does not allege a loss of use under the terms of the policy; and (4) the "impaired property" exclusion would preclude coverage.

When reviewing a trial court's grant of summary judgment, we consider the affidavits and other evidence, and all inferences properly drawn from them, in the light most favorable to the non-moving party. St. Onge v. MacDonald, 154 N.H. 768, 770, 917 A.2d 233 (2007). If no genuine issue of material fact exists, and if the moving party is entitled to judgment as a matter of law, the grant of summary judgment is proper. Id. We review the trial court's application of the law to the facts de novo. Id.

It is well-settled in New Hampshire that an insurer's obligation to defend its insured is determined by whether the cause of action against the insured alleges sufficient facts in the pleadings to bring it within the express terms of the policy. Broom v. Continental Cas. Co., 152 N.H. 749, 753, 887 A.2d 1128 (2005). In considering whether a duty to defend exists based upon the sufficiency of the pleadings, we consider the reasonable expectations of the insured as to its rights under the policy. Id.

We have said, "An insurer's obligation is not merely to defend in cases of perfect declarations, but also in cases where by any reasonable intendment of the pleadings liability of the insured can be inferred, and neither ambiguity nor inconsistency in the underlying plaintiff's complaint can justify escape of the insurer from its obligation to defend." Id. at 754, 887 A.2d 1128 (quotations, brackets and ellipses omitted). In case of doubt as to whether the complaint against the insured alleges a liability of the insurer under the policy, the doubt must be resolved in the insured's favor. Id.

In the underlying writ, WRSD specifically alleged that the purlins in the gymnasium had buckled and "some separation between the purlin webs and support clips at the building frame" was present. The writ indicated that the purlins were missing bolts and were not properly aligned. In addition, the writ alleged that "many roof purlins showed bowing, the early stages of rolling or lateral buckling...."

The plaintiffs argue these allegations sufficiently raise a claim of physical injury to the gymnasium's purlins to fall within the scope of "property damage" under the terms of the policy. By contrast, the defendant asserts that they merely support a claim of faulty workmanship, and do not allege property damage independent of the deficient roof work. Our analysis necessarily begins with an examination of the policy language. See Broom, 152 N.H. at 753, 887 A.2d 1128. The interpretation of insurance policy language is a question of law, which we review de novo. Hartley v. Elec. Ins. Co., 154 N.H. 687, 688, 919 A.2d 808 (2007). We construe the language as would a reasonable person in the position of the insured based upon a more than casual reading of the policy as a whole. Id. Policy terms are construed objectively; where the terms are clear and unambiguous, we accord the language its natural and ordinary meaning. Id.

The plaintiffs' policy provides, "[Acadia] will 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. [Acadia] will have the right and duty to defend the insured against any ‘suit’ seeking those damages." The policy defines "property damage" as:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

"[P]roperty suffers physical, tangible injury when the property is altered in appearance, shape, color or in some other material dimension." 9A S. Plitt, D. Maldonado & J. Rogers, Couch on Insurance 3d § 129:6, at 129–16 to 129–17 (Thomson/West 2005).

We have previously held that a writ alleged property damage for purposes of an indemnity insurance policy when it "alleged actual damage" to property other than the work product of the insured. High Country Assocs. v. N.H. Ins. Co., 139 N.H. 39, 43, 648 A.2d 474 (1994). In High Country, the underlying action involved claims for negligence and breach of an implied warranty of workmanlike quality, specifically alleging that the insured's faulty design, selection of materials, and construction of the damaged condominium units resulted in "substantial moisture seepage into the buildings, causing mildew and rotting of the walls, and loss of structural integrity." Id. at 41, 648 A.2d 474. Reviewing the underlying writ, we held that these allegations were claims for the "water-damaged walls, not the diminution in value or cost of repairing work of inferior quality." Id. at 43, 648 A.2d 474. We specifically distinguished between negligent construction that resulted in property damage and merely seeking damages for the negligent construction. Id. By alleging actual damage in the form of mildew, rot, and loss of structural integrity, the underlying writ was "not simply a claim for the contractor's defective work," but also a claim for the damage to other property suffered as a result. Id.

Similarly, WRSD's writ raises claims beyond the defective roof replacement, as it contains allegations of actual damage to the purlins. WRSD explicitly alleges alteration of the purlins' appearance and shape, including buckling, bowing, lateral movement, and separation of the purlins from the building frame. The writ also summarizes several engineering reports that detail this damage to the purlins. WRSD asserts that these alterations were a direct result of the plaintiffs' negligent roof design and replacement. Like the mildew and rot in High...