REVIEW FROM COURT OF APPEALS CASE NO. 2013-CA-001428 KENTON
CIRCUIT COURT NO. 09-CI-01276
COUNSEL FOR APPELLANT: Paul R. Boggs, III Jonathan Douglas
Gray Wallace Boggs, PLLC
COUNSEL FOR APPELLEE: Katherine Kennedy Laura Salzman, Judd
Uhl Lewis, Brisbois, Bisgaard & Smith, LLP
MINTON, CHIEF JUSTICE
Cincinnati Ins. Co. v. Motorist Mut. Ins.
Co., this Court held that damage because of a
contractor's faulty workmanship does not constitute an
occurrence covered under the contractor's commercial
general liability (CGL) j insurance policy. The
Court of Appeals applied the principles of
Cincinnati in the present case to hold that a
contractor's faulty workmanship on the basement and
foundation of an existing structure, resulting in extensive
damage to the entire building, was not an accident triggering
coverage as an occurrence under the contractor's CGL
policy. On discretionary review, we agree that the Court of
Appeals correctly applied the law and affirm.
FACTUAL AND PROCEDURAL HISTORY.
Elias/Properties, LLC ("MEP") purchased an old home
in a historic urban neighborhood to renovate and resell for a
profit. After completing renovations on the first, second,
and third floors, MEP hired Tony Gosney to renovate and
expand the basement.
agreed that he would dig the existing basement deeper, pour
new footers to stabilize the building, and pour a new
concrete floor. While performing his work on the townhouse,
Gosney failed to support the existing foundation adequately
before digging around it. Within days, the old foundation
began to crack and eventually the entire structure began to
sag. Interior doors began sticking and brick walls began
cracking. At this point, Gosney stopped work and notified his
CGL insurer, Acuity. Acuity recommended that MEP hire a
structural engineer to evaluate the condition of the
structural engineer reported that the entire structure was at
risk of imminent collapse. To repair the damage caused by
Gosney's work would require substantial work. After
learning this, MEP made a demand for payment upon both Gosney
and Acuity, but they rejected the demand. So MEP sued Gosney
and Acuity in circuit court. Against Gosney, MEP claimed
negligence, breach of contract, and breach of warranties.
Against Acuity, MEP asserted bad faith by failing to provide
coverage under its CGL policy. Meanwhile, Gosney sought
bankruptcy protection and disappeared. Later, efforts by
private investigators to locate Gosney failed, and he neither
testified at trial nor participated in any way.
Acuity each filed motions for summary judgment citing the
same language in Acuity's CGL policy. The policy provided
that Acuity would pay for property damage if it resulted from
an "occurrence." The policy defined
occurrence as "an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions." The policy did not define
the term accident.
argued that the damage to the property from Gosney's work
should be considered an accident triggering coverage under
the CGL policy issued by Acuity. Acuity argued that the
structural damage was caused by Gosney's faulty
workmanship, a circumstance that failed to qualify as an
occurrence under the CGL policy, and therefore, the
loss was not covered by Gosney's policy.
trial court granted partial summary judgment to both parties.
The court ruled that MEP could not recover from Acuity for
the damage to the basement because that damage directly
resulted from the faulty work Gosney performed, hence not
satisfying the requirement of an occurrence under the CGL
policy. But the trial court also ruled that MEP could recover
from Acuity under the policy for the damage to the structure
above the basement level. Damage to the structure above the
basement, the trial court reasoned, was an unexpected and
unintended consequence of Gosney's faulty work on the
basement, making this portion of the total loss an occurrence
covered by the policy.
case was then tried to a jury on the issue of damages. The
jury found the cost to repair the entire structure to be
$700, 000. It found the cost to repair the basement alone to
be $227, 000. Applying it's ruling on liability from its
summary judgment, the trial court $227, 000 from the total
cost of repair to arrive at a final judgment that required
Acuity to pay MEP $473, 000.
appealed the judgment, and a unanimous panel of the Court of
Appeals reversed the trial court judgment. Applying the rule
established in Cincinnati, the appellate panel
emphasized Gosney's intent and control over the work to
reverse the trial court's summary judgment and hold that
none of the structural damage qualified as an accident
triggering coverage as an occurrence under Acuity's CGL
policy. We agree.
Standard of Review.
of a contract is ordinarily a question of law for a
court's m determination. So with questions of
contractual interpretation, an appellate court reviews the
lower court's findings de novo, with no deference to the
ruling of the lower court.
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