Evanston Insurance Company v. D&L Masonry, Inc. ( 2011 )

NO. 07-10-00359-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL A
APRIL 18, 2011
EVANSTON INSURANCE COMPANY, APPELLANT
v.
D&L MASONRY OF LUBBOCK, INC., APPELLEE
FROM THE COUNTY COURT AT LAW NO. 3 OF LUBBOCK COUNTY;
NO. 2009-564,144; HONORABLE JUDY A. PARKER, JUDGE
Before CAMPBELL and HANCOCK and PIRTLE, JJ.
MEMORANDUM OPINION
Evanston Insurance Company (Evanston) appeals the trial court’s granting of a
summary judgment in favor of D&L Masonry, Inc. (D&L) and denial of the summary
judgment filed by Evanston. We will affirm.
Factual and Procedural Background
Evanston issued D&L a commercial general liability insurance policy, number
CL420401831.1 This policy had an applicable coverage period from January 1, 2007,
through January 1, 2008. Beginning January 1, 2008, and continuing through January
1, 2009, D&L was covered by policy number CL420402187, also issued by Evanston.
During the applicable time period, D&L was engaged in the masonry business and had
been engaged as a subcontractor for Lee Lewis Construction, Inc. (Lewis) to install
masonry on renovations and improvements to Dillman Elementary School and Watson
Junior High in Muleshoe, Texas. Because of scheduling difficulties and weather
concerns, D&L did not do the masonry work until after the window frames and windows
had been installed.2 Because the windows and frames were already in place, D&L had
to attempt to seal the area between the frames and brick with mortar. In an effort to
prevent masonry mortar from damaging the window and frames, D&L used masking
tape around the window frames and soap and water to soap the windows. After D&L
had completed the masonry work, the schools were examined and mortar stains were
found on many of the window frames. Additionally, some of the frames were scratched
when D&L attempted to remove some of the excess mortar that had fallen on the
frames during the masonry work. After the window frames were examined, it became
apparent that the school would not accept the completion of the project with the window
1
Evanston mentions only one policy in its brief, CL420402187, however, neither
party contests that there was a commercial general liability policy issued by Evanston in
favor of D&L in full force at all times relevant to this dispute.
2
The record reflects that, typically, the brick and mortar work is done before the
windows and frames are installed.
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frames in a tarnished and scratched condition. Further, the school would not agree to
paint the window frames because future maintenance costs would be incurred
repainting the frames periodically. Eventually, Lewis took control and had another
subcontractor replace all of the damaged frames. D&L was charged and paid the
$58,113 cost of replacement. D&L submitted a claim for the cost of replacement to
Evanston. Evanston denied payment claiming that the policy exclusions applied
because the window frame damage was damage to property upon which D&L
performed its work.
D&L filed suit pursuant to several different theories of recovery. After some
discovery, both D&L and Evanston filed motions for summary judgment.3 The trial court
granted D&L’s motion for summary judgment on its breach of contract claim and denied
Evanston’s motion for summary judgment. Subsequently, D&L gave notice of non-suit
without prejudice as to all other causes of action pleaded in its live pleadings. The trial
court signed an order granting the non-suit without prejudice and Evanston gave timely
notice of appeal.
Evanston presents one issue before this Court. It is Evanston’s contention that
the trial court erred in granting summary judgment in favor of D&L and denying
Evanston’s summary judgment. For the reasons hereafter stated, we disagree and
affirm the judgment of the trial court.
3
D&L’s motion for summary judgment was filed as a part of its response to
Evanston’s motion for summary judgment. The parties stipulated before the trial court
that the response would be considered a cross-motion for summary judgment.
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Standard of Review
We review the granting or denial of a motion for summary judgment de novo.
See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). When both
parties file a motion for summary judgment, as in this case, and one is granted and one
is denied then we, as the reviewing court, must determine all questions presented and
render the judgment that should have been rendered by the trial court. See HCBeck,
Ltd. v. Rice, 284 S.W.3d 349, 352 (Tex. 2009).
Analysis
In reviewing the trial court’s granting of D&L’s summary judgment and denying
Evanston’s summary judgment, we are being asked to construe the policy of insurance
under which D&L made its claim. There is no dispute about whether the policy was in
full force at the time of the loss upon which D&L made its claim. The question
presented to this Court is whether the exclusions relied upon by Evanston to deny
D&L’s claim apply. If the exclusions are not applicable, then the trial court was correct
in granting D&L’s summary judgment on its breach of contract theory. If the exclusions
do apply, then the judgment the trial court should have rendered is to grant Evanston’s
summary judgment. Id.
When interpreting an insurance contract, we use the same rules of interpretation
and construction that we apply to any contract. See Forbau v. Aetna Life Ins., Co., 876
S.W.2d 132, 133 (Tex. 1994). Our primary concern is to give effect to the intent of the
parties. Id. In this particular case, we are construing the exclusions contained within
the policy, therefore, we must adopt the construction urged by the insured if that
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construction is not unreasonable, even if the construction urged by the insurer appears
to be more reasonable. See Utica Nat’l Ins. Co. v. Am. Indem. Co., 141 S.W.3d 198,
202 (Tex. 2004).
The policy in question provides for coverage for “damages because of ‘bodily
injury’ or ‘property damage’ to which this insurance applies.” However, paragraph 2 of
the Commercial General Liability Coverage Form provides for certain exclusions from
coverage. Evanston contends that paragraph 2. J. (5) and (6) exclude the property
damage to the window frames in question from coverage. These exclusions deny
coverage for damages caused 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;
(6) That particular part of any property that must be restored, repaired, or
replaced because “your work” was incorrectly performed on it.
There is an exception to the exclusion of paragraph J(6) which provides, “Paragraph (6)
of this exclusion does not apply to ‘property damage’ included in the ‘products-
completed operations hazard.’”4
In section V of the policy, definitions are provided for some of the terms that are
used in the exclusion paragraphs. Paragraph 21 of section V defines “Your Work” as
follows:
a. Work or operations performed by you or on your behalf, and
4
Because of our disposition of this matter, we do not reach the exception to the
exclusion J(6).
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b. Materials, parts or equipment furnished in connection with such work
or operations.
However, no one is contesting the definitions; rather, it appears the conflict arises in the
application of the definitions to the facts. The main point of contention between the
parties is whether the actions taken by D&L in preparing to apply the mortar, and
applying the mortar, to the space between the last brick and the window frame
constitutes working on the window frames. Evanston’s position is that the activity of
applying the tape to the window frames and soap to the windows was work on the
window frames for purposes of the exclusions. Further, Evanston contends that
allowing the mortar to come into contact with the window frame also constituted work on
the frames. Finally, Evanston contends that any effort D&L took to eliminate any of the
mortar from the window frame was also work on the window frames. Under Evanston’s
theories, all of this work on the window frames places D&L’s claim squarely within the
ambit of both exclusion J(5) and J(6). D&L contends that the policy in question is
designed to protect the insured when its work damages someone else’s property.
Under D&L’s theory, their work did not include work on the frames. Rather, their work
was with the brick and mortar which had to be placed next to the frames in order to seal
the frames. Accordingly, concludes D&L, the exclusions do not apply.
The purpose of a commercial general liability policy is to protect the insured from
liability for damages when its own defective work or product damages someone else’s
property. See Mid-Contintent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 211-12 (5th Cir.
2009). If such were not the case, then the insured would have, in effect, contracted for
indemnification for property damage caused by its own defective workmanship. See
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Houston Bldg. Serv., Inc. v. Am. Gen. Fire & Cas. Co., 799 S.W.2d 308, 310
(Tex.App.—Houston [1st Dist.] 1990, writ denied).
To properly analyze the question before the Court, we look to the language of
each of the exclusions. Turning first to the exclusion contained in J(5), which excludes
coverage for property damage to, “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.”
Exclusion J(6) excludes coverage for damage to, “That particular part of any property
that must be restored, repaired, or replaced because ‘your work’ was incorrectly
performed on it.” What work was D&L contracted to perform in connection with the
renovations of the two schools in question? The answer, and both parties agree, is
masonry work. D&L was not contracted to perform work on the window frames. D&L’s
contact with the window frames came about only as a prophylactic measure to attempt
to prevent damage.
In Gore Design Completions, LTD. v. Hartford Fire Ins. Co., the 5th Circuit
addressed this very issue while trying to ascertain whether exclusion J(6) applied to the
claim of Gore. 538 F.3d 365, 371 (5th Cir. 2008). Gore involved work by Gore on a
portion of the electrical system of a business jet. The allegations were that, as a result
of Gore’s subcontractor’s negligent work to a component system, the entire electrical
system had to be replaced which resulted in damage to the entire aircraft. When Gore
tried to get Hartford to undertake its defense, Hartford denied coverage contending that
an exclusion worded the same as J(6) would exclude coverage to the entire aircraft. In
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finding that Hartford did in fact have coverage, the court held that Hartford’s position
reads out the words “that particular part” in arriving at its interpretation of the exclusion.
Id. Because the damages sought went beyond the scope of “that particular part” that
Gore was responsible for, the court found that Hartford owed a duty of defense. Id.
Later, the 5th Circuit construed an insurance exclusion based upon the definition
of “your work.” See Wilshire Ins. Co. v. RJT Constr., LLC,, 581 F.3d 222, 226 (5th Cir.
2009). In that case, the exclusion offered by the insurance company was as follows:
This insurance does not apply to:
“Property damage” to “your work” arising out of it or any part of it and
included in the “products-completed operations hazard.”
In construing this exclusion, the court held that the exclusion only precluded coverage
for liability for repairing or replacing the insured’s own defective work; it does not
exclude coverage for damage to other property resulting from the defective work. Id. In
so holding, the court cited the Texarkana Court of Appeals’s case of Travelers Ins. Co.
v. Volentine, 578 S.W.2d 501, 503 (Tex.Civ.App.—Texarkana 1979, no writ). Travelers
dealt with a garage liability policy where the insured had performed a valve job on a
customer’s car. Id. at 502. The allegation was that, because of the defective valve job,
the entire engine was destroyed. Id. at 502-03. Travelers invoked a “worked performed
by you” exclusion to deny coverage. Id. at 503. Finding that the decisive question was
whether Volentine’s work product was the engine or merely the valve repair, the court
held that the valve repair was the work product. Id. at 504.
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Finally, in determining the issue of whether the insurance company owed the
insured a defense, the United States District Court for the Western District of Texas
addressed the “That Particular Part” exclusion under exclusions J(5) and J(6). See
Basic Energy Servs,, Inc. v. Liberty Mut. Ins. Co., 655 F. Supp. 2d 666, 676 (W.D. Tex.
2009). In Basic, the insured was hired to replace an oil pump on a well and, while doing
so, a leak was detected. Id. at 668. The owner then contracted for Basic to conduct
pressure testing on the tubing before returning it to the well. Id. While conducting the
pressure testing and returning the tubing to the well, the entire tubing string dropped
into the well thereby allegedly causing damage to the well bore and casing. Id. The
insurance company was asked to pay the cost of defense of a subsequently filed state
court case. Id. at 669. The company refused contending that it did not have coverage
for a number of reasons, one of which was because of policy exclusions identical to J(5)
and J(6) in the present case. Id. at 676. In analyzing the “That Particular Part”
exclusions of J(5) and J(6), the court came to the conclusion that the “work done on the
tubing and well bore is not equivalent to working on the entire well.” Id. at 677. Thus,
the damage to the entire well was due to negligence while working on a distinguishable
component part and the exclusions J(5) and J(6) did not apply. Id. at 677-78.
Evanston urges this court to accept the reasoning of Houston Bldg. as
controlling. See 799 S.W.2d at 311. However, we decline to do so as the facts in that
case are distinguishable from the facts presented to us. It is true that the case involved
an application of the same exclusions as are operative in this case, however, the job
being performed by the insured was work done directly on the subject of the contract,
providing janitorial services to the building in question. Id. at 309. The damages at
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issue occurred when an employee of the insured, while providing the aforementioned
janitorial services, applied linseed oil to wooden doors while cleaning the premises. Id.
The doors and the frames suffered discoloration damages, and a claim for repayment of
damages was made to the insured. Id. The insured paid the damages and then
submitted a claim to the insurance company who, asserting the exclusions, refused to
pay. Id. Clearly, the work performed in Houston Bldg. was subject to the exclusions of
J(5) and J(6). But, just as clearly, the facts of the present case are unquestionably
different and lead to a different result. Therefore, we do not find Houston Bldg. to be
controlling.
After reviewing the above cases and their discussions of “Your Work” and “That
Particular Part” language of the various policies at issue, we are of the opinion that
D&L’s construction of the exclusions at work is not unreasonable. See Barnett v. Aetna
Life Ins. Co., 723 S.W.2d 663, 666 (Tex. 1987). Therefore, the trial court did not err in
granting D&L’s motion for summary judgment. Accordingly, Evanston’s single issue is
overruled.
Conclusion
Having overruled Evanston’s only issue, the judgment of the trial court is
affirmed.
Mackey K. Hancock
Justice
Pirtle, J., dissenting without written opinion.
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