Down Under Masonry, Inc. v. Peerless Insurance Co. (2007-235)
2008 VT 46
[Filed 11-Apr-2008]
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2008 VT 46 |
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v. |
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Trial Judge: A. Gregory Rainville |
In the above-entitled cause, the Clerk will enter:
¶ 1. Plaintiff Down Under Masonry, Inc. appeals from summary judgment and denial of its motion for reconsideration. The trial court ruled that defendant Peerless Insurance Company was not required to indemnify Down Under under a commercial general liability (CGL) insurance policy because the act of installing the wrong type of cedar shingles on a garage roof by Down Under’s subcontractor did not cause property damage and was not a covered occurrence under the terms of the policy. We affirm.
¶ 2.
In 2000, Susan and Jonathan Crane hired Down Under to construct a garage
with a studio apartment adjacent to their house in
¶ 3.
Prior to contracting with the Cranes, Down Under had purchased a CGL
insurance policy from Peerless. Peerless, pursuant to the terms of its
policy and upon return receipt of its reservation-of-rights letter, agreed to
provide Down Under with a defense to the Cranes’ lawsuit. On June 4,
2004, a jury found Down Under liable for breach of contract and violation of
the Consumer Protection Act and awarded monetary damages and attorney’s fees to
the Cranes. Following the verdict, Peerless withdrew its defense and refused
to indemnify Down Under against the award. According to Peerless, the
damages awarded by the jury were not covered under the terms of the CGL
policy. Down Under thereafter filed a declaratory judgment action in
Caledonia Superior Court seeking a determination that the damages and fees
arising out of the
¶ 4. Down Under now claims that the trial court committed reversible error in several respects. Down Under argues that the court erred by: (1) relying on a policy exclusion for contractually assumed liabilities in determining there was no coverage for a subcontractor’s error under the policy; (2) finding no property damage where a subcontractor’s use of the wrong shingles caused injury to the appearance and value of the property; and (3) denying the existence of a coverable occurrence under the policy where a subcontractor violated the express terms of the contract without Down Under’s knowledge.
¶ 5.
We apply the same standard as the trial court in reviewing a grant of
summary judgment. “Summary judgment is appropriate when, taking all of
the allegations of the nonmoving party as true, there are no genuine issues of
material fact and the movant is entitled to judgment
as a matter of law.” Murdoch v. Town of Shelburne, 2007 VT 93, ¶
5, ___ Vt. ___, 939 A.2d 458, 460; see V.R.C.P. 56(c)(3). In an instance
when both parties seek summary judgment, each party “must be given the benefit
of all reasonable doubts and inferences when the opposing party’s motion is
being evaluated.” DeBartolo v. Underwriters at
¶ 6.
Down Under’s first argument—that the trial
court incorrectly relied on a contractually assumed
liability exclusion in the policy in granting summary judgment for Peerless—is
unconvincing. We have long reserved the right to affirm a trial court’s
correct decision “ ‘despite the fact that the court
based its decision on a different or improper rationale.’ ” Bloomer
v. Gibson, 2006 VT 104, ¶ 26 n.4, 180 Vt. 397, 912 A.2d 424 (quoting Sorge v. State, 171 Vt. 171, 174 n.*, 762
A.2d 816, 818 n.* (2000)). In the present case, the exclusion cited by
the trial court requires an insured party to pay damages for which that party
has assumed liability in a contract or agreement. The trial court did not
rely solely on the existence of this exclusion in determining that Peerless was
not liable to indemnify Down Under, but instead focused on what it determined
to be a lack of a coverable occurrence under our precedent. Without
affirming either rationale, we hold that the trial court was correct to find no
genuine issue of material fact existed and that Peerless was entitled to
summary judgment as a matter of law. Because the record supports
alternate grounds for the trial court’s conclusion, we hold that the court’s
limited reliance on the policy exclusion was harmless error, if error at
all. See Alpine Haven Prop. Owners Ass’n v. Deptula, 2003 VT 51, ¶ 10, 175
¶ 7. Down Under’s second claim of error—that the trial court erroneously found that there was no property damage resulting from the subcontractor’s use of the wrong shingles—is not supported by the record. As an initial matter, Down Under purchased additional liability coverage for subcontracted work under the policy. Even with the additional coverage, however, the terms of the policy incorporate the CGL Coverage Form 23-3, which defines the scope of coverage and requires Peerless to “pay those sums that [Down Under] becomes legally obligated to pay as damages because of . . . ‘property damage.’ “[1] The form defines “property damage” as “[p]hysical injury to tangible property” or the “[l]oss of use of tangible property that is not physically injured.”
¶ 8.
Neither “physical injury” nor “loss of use” occurred in this case.
The undisputed facts show that Down Under’s
subcontractor installed shingles that were inferior in quality and different in
color from those specified in the original contract with the Cranes.
Nothing in the record, however, suggests that any physical defect existed in
the shingle material used or in the manner in which the shingles were
installed, or that the Cranes were unable to use their new garage as a result of
the inferior shingles. Our precedent directs that “[a]lthough
we construe ambiguous terms in favor of the insured and to favor complete
coverage, we must give effect to the clear terms of the insurance
contract.” Fireman’s Fund Ins. Co. v. CNA Ins. Co., 2004 VT 93, ¶
47, 177 Vt. 215, 862 A.2d 251. To find that the aesthetic impact on
property value caused by the installation of inferior shingles equates to
“property damage” would extend coverage beyond the contemplation of the parties
as it is expressed by the plain language of the CGL policy. See State
v. Glens Falls Ins. Co., 132 Vt. 97, 99, 315 A.2d 257, 258 (1974) (“Where
the interpretation urged is not only strained, but would encompass a risk not
contemplated by the kind of policy issued nor intended to be undertaken by the
company, the insurer is entitled to that fair construction which reflects the
understanding of the parties.”). We decline to find coverage for
aesthetic damage under a CGL policy that does not explicitly provide for it.
See Members of City Council of City of Los Angeles v. Taxpayers for
Vincent, 466
¶ 9. Finally, it is unnecessary to decide whether the actions by Down Under’s subcontractor amount to an occurrence under our precedent. Even if there were an occurrence, Down Under’s claim does not satisfy the “property damage” prerequisite for indemnification.
Affirmed.
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BY THE COURT: |
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Paul L. Reiber, Chief Justice |
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John A. Dooley, Associate Justice |
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Denise R. Johnson, Associate Justice |
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Marilyn S. Skoglund, Associate Justice |
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Brian L. Burgess, Associate Justice |
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[1] The policy also applies to “bodily injury,” but no “bodily injury” has been alleged in this case.
[2]
After trial on the breach-of-contract claim, the