COURT OF APPEALS DECISION DATED AND RELEASED OCTOBER 15, 1996 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 96-0454
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
WILLIAM F. WEAVER
and JANE G. WEAVER,
Plaintiffs-Co-Appellants,
v.
DOUG DREW, d/b/a DREW
CONSTRUCTION,
n/k/a D. DREW
CONSTRUCTION, INC.,
Defendant-Appellant,
AMERICAN FAMILY MUTUAL
INSURANCE COMPANY,
Defendant-Respondent,
CUSTOM COMPONENTS OF
EAGLE RIVER,
INC., and INDIANA
LUMBERMEN'S
MUTUAL INSURANCE
COMPANY,
Defendants.
APPEAL from a judgment
of the circuit court for Vilas County:
JAMES B. MOHR, Judge. Affirmed.
Before Cane, P.J.,
LaRocque and Myse, JJ.
PER CURIAM. Doug Drew, d/b/a/ Drew Construction, and
William and Jane Weaver (collectively "Drew") appeal a summary
judgment dismissing the Weavers' claims against American Family Mutual
Insurance Company on the basis of a policy exclusion. Drew argues that (1) the insurance contract covers the Weavers'
claims and that none of the exclusions apply and (2) the policy exclusion is
ambiguous and should be construed in favor of coverage. Because the exclusion is unambiguous and
excludes coverage, we affirm the judgment.
The material facts are
not in dispute for purposes of this appeal.
Drew, a general contractor, retained the services of Custom Components,
a carpenter subcontractor, to construct portions of a house Drew had contracted
to build for the Weavers. Custom was to
supply virtually all the materials and labor relating to the structural
support, including framing the walls and roof trusses, floor joists,
subflooring and joists for the deck.
American Family insured Drew with a commercial general liability policy,
containing products-completed
operations hazard coverage.
After the Weavers moved
into their home, they initiated this action alleging breach of contract and
common law negligence against Drew and Custom.
The complaint alleges that Drew left the job site although the home was
still not completed according to the terms of the contract and the home was not
constructed according to the terms of the contract, resulting in a diminution
in value. The Weavers have not alleged
loss of use of their house because of the alleged defects, and allege no damage
to other property.
Drew answered the
complaint denying its allegations and alleging that any deficiencies, problems
and resulting damages resulted from the acts of others. American Family answered and alleged that
there was no coverage under its policy and sought summary judgment. In opposition to American Family's motion
for summary judgment, Drew's affidavit asserted that any defective workmanship
was the work of subcontractors.[1] The trial court granted American Family's
motion for summary judgment, concluding that the general liability policy does
not cover faulty workmanship. Drew
appeals.
When reviewing summary judgment, we apply the
standard set forth in § 802.08(2), Stats.,
in the same manner as the circuit court.
Kreinz v. NDII Secs. Corp., 138 Wis.2d 204, 209, 406 N.W.2d 164, 166 (Ct. App. 1987). Summary judgment is appropriate when
material facts are undisputed and when inferences that may be reasonably drawn from
the facts are not doubtful and lead only to one conclusion. Green Spring Farms v. Kersten, 136
Wis.2d 304, 314-15, 401 N.W.2d 816, 820 (1987). The allegations of the complaint determine whether the action
comes within policy coverage. Smith
v. State Farm Fire & Cas. Co., 127 Wis.2d 298, 301, 380 N.W.2d 372,
373 (Ct. App. 1985). Where there is no
factual dispute, questions of insurance coverage are customarily decided on
motions for summary judgment. Id.
at 301, 380 N.W.2d at 374.
Contracts of insurance
are controlled by the same principles of law applicable to other contracts. Garriguenc v. Love, 67 Wis.2d
130, 134, 226 N.W.2d 414, 417 (1975).
Words used in a contract are to be given their plain or ordinary meaning
but technical words are to be interpreted as usually understood by persons in
the profession or business to which they relate, unless the context of the
contract clearly indicates a different meaning. Mutual Fed. S & L Ass'n v. Wisconsin Wire Works,
58 Wis.2d 99, 105, 205 N.W.2d 762, 766 (1973).
The policy terms are to be construed according to what a reasonable
person in the position of the insured would have understood the words to
mean. Garriguenc, 67
Wis.2d at 134-35, 226 N.W.2d at 417.
Whether an ambiguity exists is a question of law. See Moran v. Shern, 60
Wis.2d 39, 46-47, 208 N.W.2d 348, 351-52 (1973). A contract is ambiguous when it is fairly read to have two
different meanings. Jones v.
Jenkins, 88 Wis.2d 712, 722, 277 N.W.2d 815, 819 (1979).
We are asked to construe
policy exclusions to determine whether they deny coverage.[2] Assuming that certain allegations may fall
within the definition of property damage, caused by an "occurrence,"
we examine the exclusions to determine whether this insurance applies. American Family relies on the following
exclusion:
2. Exclusions.
This
insurance does not apply to:
....
j. "Property damage" to:
....
(6)
That particular part of any property that must be restored, repaired or
replaced because "your work" was incorrectly performed on it.
....
Paragraph
(6) ... does not apply to "property damage" included in the
"products-completed operations hazard."
....
11.
a. "Products-completed operations hazard" includes all "bodily
injury" and "property damage" occurring away from premises you
own or rent and arising out of "your product" or "your
work" except:
(1) Products
that are still in your physical possession; or
(2) Work
that has not yet been completed or abandoned.
b. "Your work" will be deemed completed
at the earliest of the following times:
(1) When
all of the work called for in your contract has been completed.
(2) When
all of the work to be done at the site has been completed if your contract
calls for work at more than one site.
(3) When
that part of the work done at the job site has been put to its intended use by
any person or organization other than another contractor or subcontractor
working on the same project.
Work
that may need service, maintenance, correction, repair or replacement, but
which is otherwise complete, will be treated as completed.
The plain language of
j.(6) excludes coverage because the complaint seeks damages for work that must
be restored, repaired or replaced due to faulty workmanship. Drew acknowledges that at least some of the
allegations of the complaint claim damages arising out of faulty workmanship. However, he claims that the damages were
caused by subcontractors and included driving machinery too close to an
unsupported foundation wall. A building
contractor's work is considered the entire house that he contracted to build. Indiana Ins. Co. v. DeZutti,
408 N.E.2d 1275, 1280 (Ind. 1980); see Knutson Constr. Co. v. St.
Paul Fire & Marine Ins. Co., 396 N.W.2d 229, 237 (Minn. 1986). Damage by subcontractors, as well as damage
to an unsupported foundation wall by machinery driven too close to it, fall
within the scope of faulty workmanship.
See L.F. Driscoll Co. v. American Prot. Ins. Co.,
930 F. Supp. 184, 188 (E.D. Pa. 1996) (The negligence of subcontractors created
a product of faulty workmanship.).
Drew also argues that
exclusion j.(6) does not apply because the alleged property damage is included
in the products-completed operations hazard coverage. He contends that all work at the site is completed because all
work called for in the contract is complete, the Weavers moved into the house
on schedule, the house has been put to its intended use, and the only
allegations to the contrary are for needed repairs, corrections or
maintenance. Drew contends that the
damages, such as sagging floors, cracked floors, warping floors, bowed beams
and wall cracks all occurred after completion.[3] We disagree with Drew's characterization of
the issue.
Generally, the allegations
of the pleadings control the issue of coverage. Smith, 127 Wis.2d at 301, 380 N.W.2d at 373. Here, the pleadings, together with the
affidavits submitted on summary judgment, allege that the damages were a result
of faulty workmanship. By inference,
the faulty workmanship for which compensation is sought occurred
contemporaneously with the work's performance.
That consequential damages in the form of warping or cracking appeared
later and may continue to appear does not change our analysis under these
circumstances. Because reasonable
inferences drawn from the pleadings and affidavits compel the conclusion that
the breaches of contract and common law duty, as well as the resulting damage
of faulty workmanship, occurred well before Drew's abandonment or alleged
completion of the project, the products completed operations hazard exception
to the exclusion j.(6) does not apply.
Our result is consistent
with other interpretations of other comprehensive general liability
policies. "The policy in question
here does not cover an accident of faulty workmanship but rather faulty
workmanship which causes an accident."
Bulen v. West Bend Mut. Ins. Co., 125 Wis.2d 259, 265, 371
N.W.2d 392, 395 (Ct. App. 1985). Bulen
explained:
The
risk intended to be insured is the possibility that the goods, products or work
of the insured, once relinquished or completed, will cause bodily injury or
damage to property other than to the product or completed work itself, and for
which the insured may be found liable. ...
The coverage is for tort liability for physical damages to others and
not for contractual liability of the insured for economic loss because the
product or completed work is not that for which the damaged person bargained.
Id. at
264-65, 371 N.W.2d at 394 (citing Weedo v. Stone-E-Brick, Inc.,
405 A.2d 788, 791 (N.J. 1979)). Because
we conclude that exclusion j.(6) bars coverage, it is unnecessary to address
whether other exclusions also bar coverage.
Next, Drew argues that
because the policy language before us is ambiguous, it must be construed in
favor of coverage. He argues that an
ambiguity results when exclusion j.(6) is read in conjunction with exclusion l.,
that provides:
This
insurance does not apply to:
l."Property
damage to 'your work' arising out of it or any part of it and included in the
"products-completed operations hazard."
This
exclusion does not apply if the damaged work or the work out of which the
damage arises was performed on your behalf by a subcontractor.
Drew argues that this
language creates a reasonable expectation of coverage here, where much of the
work complained of was performed by his subcontractor. He argues that at the very least, it appears
to give back what exclusion j.(6) took away and therefore an ambiguity
results. We disagree. First, our earlier discussion controls where
we concluded that the damages sought were not included in the products
completed operations hazard coverage.
Consequently, l. is inapplicable.
Second, a similar
argument, that two exclusions when read together create an ambiguity, has been
rejected in Bulen, 125 Wis.2d at 263-64, 371 N.W.2d at
394. Exclusions subtract from coverage,
not broaden it. Id. Interpretations that render insurance
contract language superfluous are to be avoided when a construction can be
given that lends meaning to the phrase.
Id. "[E]ach
exclusion is meant to be read with the insuring agreement, independently of
every other exclusion." Weedo,
405 A.2d at 795. "If any one
exclusion applies there is no coverage, regardless of inferences that might be
argued on the basis of exceptions or qualifications contained in other
exclusions." Id. Because each exclusion must be read
independently of one another, no ambiguity is created.
We conclude exclusion
j.(6) unambiguously bars coverage for faulty workmanship. Because the Weavers' complaint seeks damages
for faulty workmansip, we affirm the trial court's summary judgment dismissing
the claims against American Family.
By the Court.—Judgment
affirmed.
This opinion will not be
published. Rule 809.23(1)(b)5, Stats.
[1] Drew does not argue that the damage was caused by defective "products" incorporated into the structure, but rather defective "workmanship." Therefore, we do not address the issue whether damage was caused by the incorporation of defective components into the larger structure. See St. John's Home v. Continental Cas. Co., 147 Wis.2d 764, 787-88, 434 N.W.2d 112, 122 (Ct. App. 1988).
[2] Because whether an exclusion denies coverage is the dispositive issue, we do not address coverage. See Gross v. Hoffman, 227 Wis. 296, 299-300, 277 N.W. 663, 665 (1938).
[3] On the other hand, American Family points to the Weavers' complaint that "the home was still not complete according to the terms and conditions of the contract" when Drew left the site. American Family argues that because the complaint seeks damages for uncompleted work, the products completed operations hazard exception does not apply. Because of our conclusion it is unnecessary to address American Family's contention.