Opinion
CIV. 98-4210.
Filed January 5, 2000.
E. Steeves Smith, Tinan, Smith Bucher, Mitchell, SD, Attorney for Plaintiff.
John E. Simko, Woods, Fuller, Shultz Smith, P.C., Sioux Falls, SD, Attorney for Defendant.
MEMORANDUM OPINION GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
[¶ 1] Mueller Lumber Company, Inc. sued its commercial general liability insurer in a declaratory judgment action after the insurer refused to defend a negligent construction lawsuit. Defendant and plaintiff filed cross motions for summary judgment (Docket 6 and 13 respectively). Defendant's motion is granted.
[¶ 2] In 1985, Mueller Lumber acted as general contractor for the construction of the Community Building in the City of Parker. Richard C. Purdy was hired as the architect. Several years after construction was completed, the building began sinking in one corner and the walls developed cracks.
[¶ 3] On July 17, 1995, the City of Parker filed suit in state court against Mueller Lumber and Purdy. The complaint alleged the defendants "negligently designed, prepared the site, and constructed the Parker Community Building in such a manner that the foundation upon information and belief is sinking, the wall[s] of the building are cracking, there is separation of the walls from the foundation and from the roof, the sidewalk has sunk and since its sinking [has] been repaired by the Defendants, there is cosmetic damage to the walls, and a door no longer shuts tightly." The lawsuit was commenced after the northeast corner of the building, including the floor and foundation wall, began to settle.
[¶ 4] The City of Parker hired Great Plains Engineering to inspect the settling of the northeast corner of the Parker Community Building. Great Plains concluded that the settling occurred due to fill consistency of mostly low quality wood chips and substandard compaction values. Great Plains opined that the existent fill was unsuitable and inadequate to support the foundation of the building, and that this was the cause of the settling. City Attorney David Buechler concluded that the culpability for the settling issue lay with the architect Purdy in his failure to obtain or request soil tests.
[¶ 5] At the time of the lawsuit, Mueller Lumber was covered by an insurance policy issued by Continental Western Insurance Company. After notification and tender of defense by Mueller Lumber, Continental refused the tender, asserting it had no duty to defend or indemnity Mueller Lumber under the facts alleged within the complaint.
[¶ 6] After defending itself in the original action, Mueller Lumber brought a declaratory judgment action against Continental for the cost of its own defense in the original action with the City of Parker.
SUMMARY JUDGMENT STANDARD
[¶ 7] Under Rule 56(c) of the Federal Rules of Civil Procedure, a movant is entitled to summary judgment if the movant can "show that there is no genuine issue as to any material fact and that [the movant] is entitled to judgment as a matter of law." In determining whether summary judgment should issue, the facts and inferences from those facts are viewed in the light most favorable to the nonmoving party, and the burden is placed on the moving party to establish both the absence of a genuine issue of material fact and that such party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 1356-57, 89 L.Ed.2d 538 (1986). Once the moving party has met this burden, the nonmoving party may not rest on the allegations in the pleadings, but by affidavit or other evidence must set forth specific facts showing that a genuine issue of material fact exists.
[¶ 8] In determining whether a genuine issue of material fact exists, the Court views the evidence presented based upon which party has the burden of proof under the underlying substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986). The Supreme Court has instructed that "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to `secure the just, speedy, and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). The nonmoving party "must do more than show that there is some metaphysical doubt as to the material facts," and "[w]here the record as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita, 106 S.Ct. at 1356.
DISCUSSION
[¶ 9] In this diversity action, South Dakota law governs the interpretation of Continental's insurance policy. St. Paul Fire Marine v. Medical X-Ray Center, 146 F.3d 593 (8th Cir. 1998). Under South Dakota law, the duty to defend and the duty to pay on a claim are severable and independent duties. Stoebner v. South Dakota Farm Bureau Mut. Ins. Co., 1999 SD 106, 598 N.W.2d 557, 559 (1999). The duty to defend is much broader than the duty to pay a judgment rendered against the insured. Stoebner, 1999 SD 106, 598 N.W.2d at 559. To claim that no duty to defend exists, the burden is on Continental to demonstrate that the claim clearly falls outside Mueller Lumber's policy coverage. Stoebner, 1999 SD 106, 598 N.W.2d at 559; Hawkeye-Security Ins. Co. v. Clifford, 366 N.W.2d 489 (SD 1985). "If, after considering the complaint, and when appropriate, other record evidence, doubt exists whether the claim against the insured arguably falls within policy coverage, such doubts must be resolved in favor of the insured." Stoebner, 1999 SD 106, 598 N.W.2d at 559 (quoting Hawkeye-Security Ins. Co. v. Clifford, 366 N.W.2d at 492.)
[¶ 10] The interpretation and construction of insurance policies are questions of law. Grovenburg v. Homestead Ins. Co., 183 F.3d 883, 885 (8th Cir. 1999). Therefore, the issue of whether the duty to defend or indemnify exists under a policy is often appropriate for summary judgment. Grovenburg, 183 F.3d at 885; Newyear v. Church Ins. Co., 155 F.3d 1041, 1043 (8th Cir. 1998).
[¶ 11] Both parties claim the language of the policy exclusion is unambiguous, yet each reaches a different conclusion as to its meaning. Therefore, the Court must first determine whether the exclusion is ambiguous.
[¶ 12] The commercial general liability policy issued by Continental provides coverage for damages incurred by Mueller Lumber because of "bodily injury" or "property damage." No bodily injury is alleged to have occurred here, so the property damage portions of the policy will be reviewed. The policy excludes coverage for certain property damage:
2. Exclusions
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;
. . .
l. "Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard."
m. "Property damage" . . . arising out of:
(1) a defect, deficiency, inadequacy or dangerous condition in "your product" or "your work;"
[¶ 13] When the application of the rules of interpretation creates a genuine uncertainty as to which of two or more meanings is correct, then a contract is ambiguous. Alverson v. Northwestern Nat'l Cas. Co., 1997 SD 9, 559 N.W.2d 234. "An insurance contract's language must be construed according to its plain and ordinary meaning and a court cannot make a forced construction or a new contract for the parties." St. Paul Fire Marine Ins. Co. v. Schilling, 520 N.W.2d 884 (SD 1994) (citations omitted).
[¶ 14] Mueller Lumber acted as the general contractor in the construction of the Parker Community Building. It was sued by the City of Parker for negligently designing and constructing the building in breach of the general standards of care imposed upon contractors.
[¶ 15] Section (m) of the policy excludes damage to any property because "your work" was deficient or inadequate. The term "your work" is defined in the policy as "work or operations performed by you or on your behalf" and "materials, parts or equipment furnished in connection with such work. . . ."
[¶ 16] The construction of the Parker Community Building is work that was performed by Mueller Lumber as the general contractor. If Mueller Lumber is found negligent for its construction of the Community Building, it would be because its employees negligently performed the construction work and these damages would be excluded under the policy.
[¶ 17] Mueller Lumber contends that it was Purdy's responsibility to design the facility, to determine whether soil tests were necessary and to approve the site before Mueller Lumber began construction. Mueller Lumber further contends that the defects in the building were exclusively the responsibility of Purdy. Thus, Mueller Lumber contends that it was not Mueller Lumber's "work" that was deficient and therefore, the exclusion of "your work" under the insurance contract is not applicable.
[¶ 18] Mueller Lumber can only be found liable for its negligence. If the case went to trial, the jury would be instructed to determine the liability of each defendant separately as if it were separate lawsuits. City of Bridgewater v. Morris, Inc., 1999 SD 64, 594 N.W.2d 712. The jury would also be instructed that to find Mueller Lumber negligent, it must find that Mueller Lumber breached a duty of care it owed to the City of Parker. Parmely v. Hildebrand, 1999 SD 157; Waggoner v. Midwestern Dev., Inc., 83 S.D. 57, 154 N.W.2d 803 (1967). Thus, Mueller Lumber could only be held liable for its own deficient work and not the negligence of Purdy. Because Mueller Lumber's potential liability is limited to its negligent acts, the policy exclusion for "your work" would preclude insurance coverage.
[¶ 19] There is nothing ambiguous about the policy exclusion in this case, and therefore, there is no coverage. Because the claim falls outside of Mueller Lumber's policy coverage, there is no duty to defend.
[¶ 20] Based on the aforementioned discussion, it is hereby
[¶ 21] ORDERED that plaintiff's motion for summary judgment (Docket 13) is denied.
[¶ 22] IT IS FURTHER ORDERED that defendant's motion for summary judgment (Docket 6) is granted.