Smith v. State Farm Fire and Cas. Co.

425 S.E.2d 719 (1993)

Kenneth E. SMITH and H. Clarice Smith, Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, an Illinois Corporation, Defendant.

No. 9118SC1030.

Court of Appeals of North Carolina.

February 16, 1993.

Haywood, Denny, Miller, Johnson, Sessoms & Patrick, by Michael W. Patrick, Chapel Hill, for plaintiffs-appellants.

Frazier, Frazier & Mahler, by James D. McKinney, Greensboro, for defendant-appellee.

*720 EAGLES, Judge.

In their first assignment, appellants argue that the trial court erred by granting the defendant's motion for summary judgment. Specifically, appellants argue that the asbestos damage was a physical loss to property which was not excluded from coverage. We disagree and affirm.

"In interpreting the relevant provisions of the insurance policy at issue, we are guided by the general rule that in the construction of insurance contracts, any ambiguity in the meaning of a particular provision will be resolved in favor of the insured and against the insurance company." Maddox v. Colonial Life & Accident Ins. Co., 303 N.C. 648, 650, 280 S.E.2d 907, 908 (1981). However,

[n]o ambiguity ... exists unless, in the opinion of the court, the language of the policy is fairly and reasonably susceptible to either of the constructions for which the parties contend. If it is not, the court must enforce the contract as the parties have made it and may not, under the guise of interpreting an ambiguous provision, remake the contract and impose liability upon the company which it did not assume and for which the policy holder did not pay.

Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 694, 340 S.E.2d 374, 379, reh'g denied, 316 N.C. 386, 346 S.E.2d 134 (1986) (quoting Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 276 N.C. 348, 354, 172 S.E.2d 518, 522 (1970)). This is so even though "[e]xclusionary clauses are not favored and must be narrowly construed. The court ... must interpret the policy as written and may not disregard the plain meaning of the policy's language." Western World Ins. Co., Inc. v. Carrington, 90 N.C.App. 520, 523, 369 S.E.2d 128, 129-30 (1988) (citations omitted). "[T]he goal of construction is to arrive at the intent of the parties when the policy was issued." C.D. Spangler Constr. Co. v. Industrial Crankshaft & Eng'g Co., Inc., 326 N.C. 133, 142, 388 S.E.2d 557, 562-63 (1990) (quoting Woods v. Nationwide Mut. Ins. Co., 295 N.C. 500, 505, 246 S.E.2d 773, 777 (1978)).

Here, State Farm's policy contains the following language:

SECTION IEXCLUSIONS * * * * * * 2. We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered. * * * * * * c. Faulty, inadequate or defective: (1) planning, zoning, development, surveying, siting; (2) design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction; (3) materials used in repair, construction, renovation or remodeling; or (4) maintenance; of part or all of any property whether on or off the residence premises.

Appellants argue that this "workmanship" exclusion is inapplicable "because [they] are seeking to recover only for their ensuing losses and not for any loss directly due to the defective workmanship." In other words, the appellants argue that "[t]he exclusion itself makes a distinction between losses directly due to defective workmanship and those losses ensuing from such defective workmanship." To support their contention, appellants cite Western World Ins. Co. v. Carrington, 90 N.C.App. 520, 369 S.E.2d 128 (1988).

"Although it is possible to perceive ambiguity in the policy language, it strains at logic to do so." Waste Management, 315 N.C. at 695, 340 S.E.2d at 379. A common sense reading of that language reveals that the first paragraph of the disputed exclusion means that State Farm's policy does not provide coverage for property loss caused by any event listed under paragraph 2. However, the policy does provide coverage for any ensuing loss, one following entry into the contract, which is not excluded. We agree with State Farm's contention that "[t]he exclusion obviously contemplates that the person or company *721 performing the faulty or negligent work should be the ones (sic) responsible for any resulting damages (sic)." Moreover, we note that that is exactly what has happened here. The appellants sued CBD and recovered for the damage caused by the faulty renovation.

Appellants argue, however, that Western World explains the difference between "losses directly due to defective workmanship and those losses ensuing from such defective workmanship."

In Western World, the defendant Carrington performed waterproofing work as a subcontractor on a building and parking deck project in which the defendant Clancy & Theys was the general contractor. Carrington was insured under a commercial liability insurance policy issued by the plaintiff at the time the waterproofing was performed. After completion of the project water was discovered leaking through the top level of the parking deck. The water caused damage to several cars in the lower deck and some cracking of concrete slabs. Clancy & Theys sued Carrington. Carrington, in turn, called upon the plaintiff to defend the lawsuit. The plaintiff argued that it did not provide coverage for the damage and filed a declaratory judgment action seeking determination of the parties rights under the policy.

On appeal, this court was faced with interpretation of a work product exclusion contained in the policy issued by the plaintiff. The policy exclusion at issue provided that the insurance involved did not apply:

(o) to property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith.

Id. 90 N.C.App. at 522, 369 S.E.2d at 129. In determining that no coverage was provided our Court stated:

Here, the record shows that the damages sought against Carrington are those costs incurred in replacing his allegedly defective waterproofing system with an effective waterproofing system. Therefore, the claim is excluded from the policy's coverage.

Defendants contend that exclusion (o) does not apply and cite several cases ... in support of their argument.

* * * * * * In all of those cases, the damages claimed were for damage to property other than that of the insured, which was caused either by the defective work or product, or the need to repair or replace that work or product. In this case, from the record before us it is clear that Clancy & Theys is not seeking damages for diminution in the structure's value, or costs for repairing the cracking in the concrete, or costs for any damage to its own property caused by the allegedly defective waterproofing. Clancy & Theys only claim is for costs incurred in substituting or replacing the protective functions which Carrington's original waterproofing work should have provided. The damages sought are solely for bringing the quality of the insured's work up to the standard bargained for. Consequently, the policy provides no coverage for the claim.

Western World, 90 N.C.App. at 524-25, 369 S.E.2d at 130-31.

The case sub judice, unlike Western World, does not involve a commercial liability insurance policy. Rather, it involves interpretation of a homeowner's policy. Moreover, as we indicated above, a common sense reading of paragraph 2 of the State Farm policy does not limit exclusion of damage to work product, but rather excludes any loss to property caused by the faulty workmanship, renovation or remodeling. Accordingly, we hold that Western World does not control the instant case.

Having determined that the exclusion does not "itself make[] a distinction between losses directly due to defective workmanship and those losses ensuing from such defective workmanship[,]" and that Western World does not control this case, we must next determine whether the exclusion specifically covers the situation presented here. The appellants admit in their brief's statement of facts that they contracted *722 to install a new vinyl floor in their kitchen because they were "in the process of renovating their home in order to sell it the following summer." The asbestos damage occurred while the renovations were taking place and were directly caused by the improper removal of the original vinyl floor. Therefore, the damage falls into subparagraph c.(2) of the "workmanship exclusion" which excludes from coverage damages caused by faulty, inadequate, or defective "design, specifications, workmanship, repair, construction, renovation, remodeling, grading, [or] compaction[.]" (Emphasis ours.)

Because of our disposition of appellants' first assignment of error we do not reach their remaining arguments or assignments.

Affirmed.

ORR and JOHN, JJ., concur.