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COURT OF APPEALS DECISION DATED AND RELEASED June 1, 1995 |
NOTICE |
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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, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 94-1184
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
GENERAL CASUALTY
INSURANCE COMPANY,
Plaintiff,
v.
FEULING CONCRETE
CONSTRUCTION, INC.,
Defendant-Appellant,
POTRATZ CONCRETE PUMPING, INC.,
and XYZ INSURANCE COMPANY,
Defendants,
AMERICAN FAMILY INSURANCE COMPANY,
Intervenor-Defendant-Respondent.
APPEAL from a judgment
of the circuit court for Columbia County:
DANIEL S. GEORGE, Judge. Affirmed.
Before Eich, C.J.,
Gartzke, P.J., and Vergeront, J.
EICH, C.J. Feuling Concrete Construction, Inc., was
sued for damages resulting from its alleged negligence in constructing a
building foundation. It appeals from a
summary judgment dismissing its insurer, American Family Insurance Company,
from the action.
The issue is whether one
of several exclusions in the American Family policy applies so as to defeat
coverage for Feuling's alleged negligence.
We conclude that a provision excluding coverage for damage to Feuling's
"product" applies and we therefore affirm the judgment.
The underlying facts are
not in dispute. Sugden Builders, Inc.,
the general contractor for the construction of a private residence in Lodi,
subcontracted with Feuling for construction of the basement and foundation
walls for the home. After the
foundation walls had been poured and the backfilling completed, the walls began
to bulge and crack and eventually collapsed.
Sugden settled with the homeowners, and its insurer, General Casualty
Insurance Company, having taken an assignment of the homeowners' and Sugden's
claims, sued Feuling. General Casualty
claimed that the cracking and collapse of the walls was caused by the low
strength of the concrete and that Feuling (and the company Feuling hired,
Potratz Concrete Pumping, Inc., who poured the walls) failed to exercise
ordinary care in "curing" the cement after it was poured.[1] As a result, the basement and foundation
had to be replaced at considerable expense, and General Casualty sought to
recover the replacement costs as well as other damages, including compensation
for the delay in completing the home for the purchaser.
American Family,
Feuling's insurer, intervened in the action to contest coverage and filed a
motion for summary judgment, claiming that various exclusions in its policy
excluded coverage. The trial court,
without explaining its decision other than to state that it was
"adopt[ing] the arguments [in] American Family's brief," granted the
motion and dismissed American Family from the case.
Where, as here, the
facts are undisputed and the issue involves the construction and application of
a contract, the question is solely one of law, which we review de novo, owing
no deference to the trial court's decision.
Just v. Land Reclamation, Ltd., 155 Wis.2d 737, 744, 456
N.W.2d 570, 572 (1990); Ball v. District No. 4, Area Bd., 117
Wis.2d 529, 537, 345 N.W.2d 389, 394 (1984).
Under the general
coverage provisions of its policy, American Family agreed to "pay those
sums that the insured [Feuling] becomes legally obligated to pay as damages
because of `bodily injury' or `property damage' to which this insurance
applies." Feuling argued in the
trial court that coverage attached under those provisions because the claimed
exclusions did not apply. Feuling also
argued that coverage attached under the personal-injury liability provisions of
the policy. The trial court ruled that
two exclusions in the property-damage portion of the policy applied and
dismissed the action. It did not
address Feuling's argument that coverage was available under the
personal-injury provisions.
The property-damage
exclusions on which the trial court based its decision provide as follows:
This insurance does not apply to:
....
j.
"Property damage" to:
....
(5)
That particular part of real property on which you or any contractors or
subcontractors working directly or indirectly on your behalf are performing
operations, if the "property damage" arises out of those operations;
or
(6) That particular part of any property that
must be restored, repaired or replaced because "your work" was
incorrectly performed on it.
Feuling argues first
that exclusion j(5) does not apply because, by its terms, reasonably
interpreted, it applies only to damage to real property that occurs while the
insured or its subcontractors "are performing some operation on the
property," and because the foundation collapse did not occur until several
months after Feuling had left the job site, Feuling was not performing
any operations on the project at the time of the loss. Thus, says Feuling, the exclusion is
inapplicable or, at best, ambiguous, in which case rules of insurance contract
construction require the exclusion to be interpreted against American
Family. "When ambiguous language
appears in an insurance contract, we must construe the ambiguity in favor of
the insured and against the insurance company that drafted the ambiguous
language. This court has consistently
stated that this is especially true of exclusionary clauses." Just, 155 Wis.2d at 746, 456
N.W.2d at 573 (citations omitted).
We agree that the
language is ambiguous. In Cardinal
v. Leader Nat'l Ins. Co., 166 Wis.2d 375, 383, 480 N.W.2d 1, 4 (1992),
the supreme court stated, "`An ambiguity exists when the policy is reasonably
susceptible to more than one construction from the viewpoint of a reasonable
person of ordinary intelligence in the position of the insured.'" (Quoted sources omitted.)
In our opinion,
exclusion j(5) is reasonably susceptible of two constructions under the
rule. First, as Feuling argues, the
"are performing" language suggests contemporaneity: that the
exclusion applies only to property damage that occurs while the work is being
undertaken. However, the exclusion goes
on to state that "if the `property damage' arises out of those
operations ...." (Emphasis
added.) We believe reasonable people
could construe that phrase to not require that the property damage occur
while the work is going on. Construing
such language against American Family, as we must under the above rules, we
conclude that the exclusion does not defeat coverage.
Feuling next argues that
the trial court erred in ruling that paragraph j(6) of the property-damage
coverage exclusions applies to defeat coverage. As noted, paragraph j(6) excludes coverage for property damage to
"[t]hat particular part of any property that must be restored, repaired or
replaced because `your work' was incorrectly performed on it." The policy then states, "Paragraph (6)
of this exclusion does not apply to `property damage' included in the
`products-completed operations hazard.'"
The initial language of
the exclusion plainly applies, for the damage in this case involves Feuling's
allegedly negligent ("incorrectly performed") work on the house
foundation. Feuling contends, however,
that the latter paragraph--the "exclusion-to-the-exclusion"--applies
to negate the exclusion itself. The
phrase "products-completed operations hazard" is defined elsewhere in
the policy as including "all `bodily injury' and `property damage'
occurring away from premises you own or rent and arising out of `your product'
or `your work' ...." Feuling reads
the exclusion-to-the-exclusion as applying to work performed by a
subcontractor--which, as indicated above, the concrete pouring was--thus
negating the exclusion itself.
American Family does not
respond to the argument, and we have often stated, "`Respondents on appeal
cannot complain if propositions of appellants are taken as confessed which they
do not undertake to refute.'" State
ex rel. Sahagian v. Young, 141 Wis.2d 495, 500, 415 N.W.2d 568, 570
(Ct. App. 1987) (quoted sources omitted).
We thus conclude that exclusion j(6) is also inapplicable.
Feuling also argues that
the trial court incorrectly ruled that another policy exclusion--exclusion
k--applies to its work on the project.
Exclusion k excludes coverage for property damage to "`your
product' arising out of it or any part of it." It is a clause common to commercial general liability policies,
and it has been before the courts, in various forms, in several cases.
In Sola Basic
Indus., Inc. v. United States Fidelity & Guar. Co., 90 Wis.2d 641,
653, 280 N.W.2d 211, 217 (1979), for example, the supreme court considered a
similar exclusion.[2] The court stated that one of the "principles
... derived from the[] cases" involving the product-damage exclusion is
that the exclusion "eliminate[s] coverage for injury to or destruction of
the product furnished or work completed by the insured ...." If, however, "the defect in the product
furnished or the work completed ... causes damage to other tangible property,
there is coverage for such damage ...."
Id.[3] It is a distinction between "an
accident of faulty workmanship" and "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). The latter is the type of risk
insured against; the former is a "business risk" to which the
exclusion applies to defeat coverage.
"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 insured, as a source of goods or services, may be liable as a matter
of contract law to make good on products or work which is defective or
otherwise unsuitable because it is lacking in some capacity. This may even
extend to an obligation to completely replace or rebuild the deficient product
or work. This liability, however, is not what the coverages in question are
designed to protect against. The
[underlying] 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 (quoting Weedo v. Stone-E-Brick, Inc.,
405 A.2d 788, 791 (N.J. 1979)).
In this case General
Casualty claims that Feuling was negligent in pouring and curing the basement
walls of the home. Thus, Feuling is
being proceeded against because its own "product," the poured
concrete, failed. The failure
complained of is that of "the product furnished or work completed by
[Feuling]." Sola Basic,
90 Wis.2d at 653, 280 N.W.2d at 217. We
conclude that the trial court correctly ruled that exclusion k of the American
Family policy applies.
Feuling disagrees,
pointing to the language of the exclusion covering damage to "your
product" and to the definition of that phrase elsewhere in the policy as
"any goods or products, other than real property ...." (Emphasis added.) Then, citing generally to a legal encyclopedia,[4]
Feuling contends that because the foundation walls and footings are
"permanent, fixed and immovable and attached to the land," they
"clearly constitute real property" and, as a result, the exclusion
does not apply.
American Family agrees
that the foundation walls are now part of the building, but maintains
that at the time they were provided by Feuling, they were not. We agree.
Feuling was not selling real property.
The "goods" provided by Feuling constituted only the wet
concrete used in the foundation, together with accompanying construction
services. Feuling claims, however, that
if we are to so decide, we must also conclude that the general contractor would
be covered by the exclusion for any and all negligence in construction of the
home because it "also contracted to supply personal property in the form
of building materials, as opposed to real property in the form of a
house." The answer to that
argument is that this is not such a case.
If Feuling had been the general contractor, providing an entire home as
a completed project, a different result may indeed be proper. That question is not before us in this case,
however.
We thus conclude that
exclusion k in the property-damage section of the policy applies to exclude
coverage for the acts complained of in General Casualty's complaint.
Finally, Feuling argues
that coverage exists under the personal-injury provisions of the policy. As indicated, the trial court did not reach
this question.
The policy defines
"personal injury" as
[a]n injury, other than "bodily
injury", arising out of one or more of the following offenses:
....
c. The
wrongful eviction from, wrongful entry into, or invasion of the right of
private occupancy of a room, dwelling or premises that a person occupies by or
on behalf of its owner ....
In so arguing, Feuling
refers us to City of Edgerton v. General Casualty Co., 172 Wis.2d
518, 548-50, 493 N.W.2d 768, 780-81 (Ct. App. 1992), rev'd in part on other
grounds, 184 Wis.2d 750, 517 N.W.2d 463 (1994), cert. denied, 115 S.
Ct. 1360 (1995), as interpreting "nearly identical policy language"
to cover groundwater contamination as an "invasion" of the property
owner's right of occupancy. Because
General Casualty's complaint in this case includes a claim for damages for the
delay in completion of the home, Feuling argues that the claim constitutes one
for wrongful "eviction" from the home or, at the least, an invasion of
"the right of private occupancy" of the premises. Thus, Feuling argues that the claim is
covered under the personal-injury provisions.
City of Edgerton, of
course, provides no authority for the proposition that the type of construction
defect alleged in this case would constitute a similar "invasion,"
and Feuling has offered no other authority in support of the proposition it
advances. We reject the argument.
By the Court.—Judgment
affirmed.
Not recommended for
publication in the official reports.
[1] Specifically, the complaint alleged that the low strength of the concrete was caused by pouring the cement in below-freezing weather without maintaining it at an adequate temperature to allow for proper hydration.
[2] The policy in Sola Basic excluded coverage for property damage to "`the ... Insured's products arising out of such products or any part of such products ....'" Sola Basic Indus., Inc. v. United States Fidelity & Guar. Co., 90 Wis.2d 641, 646, 280 N.W.2d 211, 213 (1979).