Yakima Cement Products Co. v. Great American Ins. Co.
| Citation | 93 Wn.2d 210,608 P.2d 254 |
| Decision Date | 20 March 1980 |
| Docket Number | No. 46198,46198 |
| Parties | YAKIMA CEMENT PRODUCTS COMPANY, a Washington Corporation, Respondent, v. GREAT AMERICAN INSURANCE COMPANY, a capital stock corporation, Petitioner. |
| Court | United States State Supreme Court of Washington |
Nashem, Prediletto, Schussler & Halpin, Don W. Schussler, Yakima, for petitioner.
Halverson, Applegate & McDonald, Walter G. Meyer, Jr., Yakima, for respondent.
Yakima Cement Products Company sued its insurer, Great American Insurance Company, to recover a portion of damages Yakima was required to pay F. S. Jones Construction Company for the negligent and defective manufacture of concrete wall panels. Both Yakima and Great American sought review of the trial court's decision. Great American has petitioned for review of the Court of Appeals' opinion. We reverse the Court of Appeals and affirm the result reached by the trial court.
Yakima contracted with Jones to manufacture and deliver 81 precast concrete panels to serve as the exterior walls of two buildings Jones was constructing for the Army Corps of Engineers. The panels were to be erected by a Jones' subcontractor. After 63 panels had been manufactured, delivered, and incorporated into the Army's operations building, it was discovered that 38 had been manufactured in a negligent and defective manner. They were not uniform in size, they varied in thickness, the exterior exposed aggregate did not conform to specifications and several window openings were inaccurate both in size and location. Until the panels had been erected, however, Yakima, Jones and the Army were not aware they had been misfabricated. The Army rejected them for failure to meet the requisite architectural specifications. Correction of the defects required Yakima to remove, refabricate and re-erect numerous panels while others were repaired in place. This remedial work was done at Yakima's own expense and is not a part of the claim for damages herein. All corrections were made well after the Yakima-Jones contract contemplated completion, thereby causing a material delay of the entire construction project.
These events gave rise to a dispute between Yakima and Jones. Jones refused to pay, claiming the damages incurred exceeded the original contract price. Yakima sued in federal court to recover on the contract and Jones' counterclaimed for its claimed damages. Yakima tendered defense of the Jones counterclaim to Great American which declined, asserting its comprehensive liability insurance policy did not cover the incident. Thereafter, Yakima and Jones resolved their dispute and memorialized the settlement in findings of fact, conclusions of law and judgments entered in federal court in favor of both Yakima and Jones. Based on Jones' counterclaim, Yakima's claim against Jones was reduced by $26,000 for the damages outlined in finding 9(a) below, and by $43,474.17 for those expenses incident to delay outlined in finding 9(b) below, for a total of $69,474.17. Thereafter, Yakima filed this action against Great American to recover the $69,474.17 judgment entered against it on the Jones' counterclaim.
In the instant case the trial court determined, in unchallenged finding of fact 9, that as a result of the delay and inability to use the panels to support the remaining structure in the building, numerous damages were sustained by Jones, including the following (a). Damages incurred by Jones to the roof materials, beams, steel joists and other structural steel which was to be used to form the roof and supporting structure for the building, which became exposed to natural elements and as a result thereof, was damaged, resulting in expense to cure said damages as a result of sandblasting and painting the structure and otherwise, in the amount of $26,000.00.
(b). Other costs and expenses incurred by Jones due to increased costs incurred by its subcontractors and by it directly due to the delays in the construction project, including increased rental charges, increased cost of labor, increased cost of materials, and increased cost of testing, all in the amount of $43,474.17.
(Italics ours.) Since error has not been assigned to the foregoing findings, we must accept them as verities. Portage Bay-Roanoke Park Comm. Coun. v. Shorelines Hearings Bd., 92 Wash.2d 1, 6-7, 593 P.2d 151 (1979); Lakeside Pump & Equip., Inc. v. Austin Constr. Co., 89 Wash.2d 839, 576 P.2d 392 (1978).
The comprehensive liability insurance policy issued to Yakima by Great American obligates the insurer:
To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of property damage caused by an occurrence.
The trial court held that the negligent and defective manufacture of the concrete panels was unexpected and unintended thereby constituting an "accident" and thus an "occurrence" within the terms of the policy. The trial court held further that the damage set forth in finding 9(a) (i. e., $26,000.00) was "property damage" and would be covered by the policy but for the fact that such damage arose from "loss of use" of the product thus falling within the terms of the policy's exclusionary clause (n) which provides:
(n) under Coverages B and D, to damages claimed for the withdrawal, inspection, repair, replacement, or loss of use of the named insured's products or work completed by or for the named insured or of any property of which such products or work form a part, if such products, work or property are withdrawn from the market or from use because of any known or suspected defect or deficiency therein.
(Italics ours.) Additionally, the trial court determined the expenses incident to delay set forth in finding 9(b) (i. e., $43,474.17) did not constitute "property damage", as defined in the policy, and thus were not covered.
Yakima appealed asserting it was entitled to coverage under the policy because the expenses incident to delay set forth in finding 9(b) were "property damage" within the terms of the insurance contract. Further, Yakima asserted that exclusion (n) was not applicable. Great American cross-appealed asserting there was no "accident" and thus no "occurrence" giving rise to liability under the policy. Great American also contended there was no "property damage" within the policy's definition and that exclusion (n) precluded recovery.
The Court of Appeals affirmed the trial court's rulings that there was an "occurrence" within the terms of the policy and opined that what the Court of Appeals characterized as "roof" damage amounted to "property damage". In reversing the trial court, however, it concluded that the expenses incident to delay were also "property damage" thus giving rise to liability under the policy. The Court of Appeals also concluded that exclusionary clause (n) did not preclude liability because no actual claim was made for the product's withdrawal or loss of use.
Initially we must determine whether Yakima's negligent and defective manufacture of the concrete panels, which necessitated the removal, repair and re-erection of a number of panels and the in-place repair of others, was an "occurrence" within the terms of the policy. An "occurrence" is defined by the policy as:
(A)n accident including injurious exposure to conditions, which results, during the policy period, in . . . property damage neither expected nor intended from the standpoint of the insured. . . .
(Italics ours.) A threshold question is the meaning of "accident" which is not defined in the policy. Great American argues that the present facts do not evidence an "accident" because the misfabrication of the concrete panels was the direct result of Yakima's volitional and intentional acts. Amicus curiae argues that the term accident refers only to an "active malfunctioning" of the insured's product and that no such malfunctioning occurred here. We reject both contentions.
Great American has improperly focused on the volitional and intentional nature of Yakima's manufacturing operation which produced the defective concrete panels. The insurer cites Evans v. Metropolitan Life Ins. Co., 26 Wash.2d 594, 174 P.2d 961 (1946) for the proposition that an accident does not exist when a deliberate act is performed, unless some additional unexpected, independent, and unforeseen happening occurs which produces or brings about the result of injury or death. Evans, however, is inapposite. In Evans we construed the term "accidental" within the context of an accidental death policy. We deal here with an accident within the context of a products liability policy. In the area of products liability, if insurance coverage does not extend to the deliberate manufacture of a product which inadvertently is mismanufactured, and thereafter results in property damage, the coverage would be rendered virtually meaningless. Bundy Tubing Co. v. Royal Indem. Co., 298 F.2d 151, 153 (6th Cir. 1962).
The appropriate definition of "accident", as a source and cause of damage to property, is "an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause". Hauenstein v. St. Paul-Mercury Indem. Co., 242 Minn. 354, 358-59, 65 N.W.2d 122, 124 (1954). See also Viking Automatic Sprinkler Co. v. Pacific Indem. Co., 19 Wash.2d 294, 297, 142 P.2d 394 (1943); 7 A.L.R.3d 1262 (1966). Applying this definition, it is clear Yakima's unintentional and unexpected mismanufacture of the concrete panels is an "accident" as contemplated by the Great American policy.
We note further that the word "accident" is but part of the definition of the broader term "occurrence". As noted in Aerial Agr. Serv. Inc. v. Till, 207 F.Supp. 50, 57-58 (N.D.Miss.1962):
To begin with, the word "occurrence", to the lay mind, as well as to the judicial mind, has a meaning much broader than the word "accident". As these words are generally understood, accident means something that must have come about or happened...
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