Homeowner’s insurance policy carrier denied coverage for losses that occurred in connection with construction of an addition to the homeowner’s house that was to serve as an observatory. The addition included construction of a telescope support system that included piers to support the system weight. A subcontractor allegedly poured concrete over the piers in a defective manner which damaged the piers, the telescope support system’s pole and the foundation of the house. The carrier asserted these were uncovered losses due to the policy exclusion for faulty construction. A trial court agreed with the carrier but this was reversed on appeal with the court holding that the exception to that exclusion which provides coverage for “resulting loss” from an otherwise uncovered event is applicable here.
The court used the Webster dictionary to define “resulting loss” since the policy did not itself provide a definition, and concluded, “We believe an ordinary purchaser of insurance would conclude that where one loss results from another loss caused by faulty construction, such resulting loss is covered.” Here, where the losses in question resulted from the excluded loss caused by the bad concrete … we find that the language of the policy must be construed so that the losses to the piers, pole, and foundation are covered resulting losses.” Cockerham v. American Family Mutual Insurance Company, 2018 WL 4569878 (Missouri 2018).
The court analyzed the policy language as follows:
The policy here provides in pertinent part:
PROPERTY COVERAGES – SECTION I
COVERAGE A – DWELLING
We cover:
- the described dwelling on the insured premises including additions, built-in components and fixtures;
….
PERILS INSURED AGAINST – SECTION I
COVERAGE A – DWELLING AND DWELLING EXTENSION
We cover risks of accidental direct physical loss to property described in Coverage A – Dwelling and Dwelling Extension, unless the loss is excluded in this policy….
….
EXCLUSIONS – SECTION I …
….
PART C
The following exclusions apply to Coverage A – Dwelling and Dwelling Extension. We do not insure for loss caused by any of the following.
….
- Planning, Construction or Maintenance, meaning faulty, inadequate or defective:
- construction, reconstruction, repair, remodeling or renovation;
- materials used in construction, reconstruction, repair, remodeling or renovation;
- design, workmanship or specifications;
- siting, surveying, zoning, planning, development, grading or compaction; or
- maintenance;
of part or all of the insured premises or any other property.
….
However, we do cover any resulting loss to property described in Coverage A – Dwelling and Dwelling Extension not excluded or excepted in this policy….
The court explained,
“Our finding of coverage for these losses is centered on two specific policy provisions: (1) the policy’s exclusion for faulty construction; and (2) the exception to that exclusion for “resulting loss” and on the requirement under the rules of construction that those two provisions be harmonized. While we find that the policy excludes coverage for losses caused by faulty construction, the “resulting loss” clause in Part C of the Exclusions section, considered in the context of the whole policy, reinserts coverage for Homeowners’ losses for the damage to the telescope support system’s piers and pole, and to the foundation of the home.”
About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report, Vol. 21, No. 2 (Feb 2019).
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