Opinion
No. COA10-619
Filed 15 March 2011 This case not for publication
Appeal by Plaintiff from order entered 7 January 2010 by Judge Russell J. Lanier, Jr. in New Hanover County Superior Court. Heard in the Court of Appeals 16 November 2010.
Burton Sue, L.L.P., by Gary K. Sue and Andrea Dancy Harrell, for Plaintiff-Appellant. Hedrick, Gardner, Kincheloe Garofalo, L.L.P., by Scott Lewis and Ellen J. Persechini, for Defendant-Appellee.
New Hanover County No. 09 CVS 1545.
Alliance Mutual Insurance Company (Plaintiff) appeals from the trial court's order denying its motion for summary judgment and granting summary judgment in favor of Guilford Insurance Company (Defendant). For the reasons stated below, we affirm.
As alleged in the pleadings, Phillip R. Walls d/b/a Premier Plumbing 1 and Premier Plumbing 1, Inc. (collectively Premier) performed plumbing work at a home being constructed, beginning the installation job in early September 2004. At that time, Premier was insured by Defendant under a policy effective from 21 February 2004 until 21 February 2005. Plaintiff then assumed coverage of Premier beginning 21 February 2005. As part of Premier's plumbing work on the home, PEX water supply lines were installed.
The house was purchased by Donald Freitag on 7 April 2005, and he moved into his home that same month. On 27 December 2006, Freitag returned from a trip and discovered his home was flooded with water. Upon closer inspection, Freitag noticed that the PEX water supply line to the laundry room sink had separated. Freitag's deposition testimony indicated that, prior to December 2006, he had used the sink in the laundry room about once per week until he discovered the flood. During prior use, Freitag never noticed leakage or other plumbing problems in the laundry room.
Freitag filed a claim with his homeowner's insurance company, Allstate Insurance Company (Allstate), for losses arising from the damage to his real and personal property. Allstate determined that the flooding of the house was caused by "defective installation of the PEX water supply line." Allstate paid Freitag's claim pursuant to his policy and then filed a subrogation action against Premier for recovery of the payments made to its insured. "Based on the bare allegations of the Allstate Complaint," Plaintiff provided a legal defense to Premier in the subrogation action. Counsel for Premier formally requested, and Plaintiff also demanded, that Defendant undertake its duty to either defend or indemnify Premier, based on the policy that expired on 21 February 2005. Defendant refused to defend or indemnify Premier on the basis that it did not insure Premier at the time that Freitag discovered the leak and resultant damage, such that the subject loss "occurred" outside the policy period during which Defendant insured Premier.
On 2 April 2009, Plaintiff filed a "Complaint for Declaratory Judgment," seeking a determination by the trial court as to whether Defendant is obligated to provide Premier with a defense and indemnification related to the Allstate action or, in the alternative, to share with Plaintiff the expenses associated therewith. Defendant answered, denying all material allegations in the complaint. Thereafter, the parties filed cross-motions for summary judgment, which were heard on 4 January 2010. By order entered 7 January 2010, the trial court denied Plaintiff's motion for summary judgment and granted Defendant's motion for summary judgment. From this order, Plaintiff now appeals.
Plaintiff argues that the trial court erred in denying Plaintiff's motion for summary judgment and granting Defendant's motion for summary judgment. We disagree.
According to Rule 56 of the North Caroline Rules of Civil Procedure, a motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56 (2009). "A party moving for summary judgment under Rule 56 has the burden of clearly establishing the lack of any triable issue of fact by the record properly before the court." Caldwell v. Deese, 288 N.C. 375, 378, 218 S.E.2d 379, 381 (1975) (internal quotation marks and citations omitted). When a summary judgment motion is considered, "[t]he movant is held by most courts to a strict standard, and all inferences of fact from the proofs proffered at the hearing must be drawn against the movant and in favor of the party opposing the motion." Id. (internal quotation marks and citations omitted). We apply de novo review to an appeal from summary judgment. In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008).
Defendant, in its motion for summary judgment, contended that it is not responsible to defend or indemnify Premier in the subrogation action related to Freitag's claim because "the injury-in-fact occurred outside [Defendant's] policy period." Defendant explains that those duties are triggered only if the damage occurs during the policy period and argues that the subject property damage occurred, not within that time, but when the piping separated and water flooded Freitag's residence in December 2006 after its policy with Premier had expired. Plaintiff counters that the damage actually occurred when the PEX piping was incorrectly installed, in or about September 2004. We disagree that the date the PEX piping was installed determines which insurer is
responsible to defend and indemnify Premier and rely instead on the date the property damage or event occurred.
Defendant's policy provides, in pertinent part, as follows:
COMMERCIAL GENERAL LIABILITY COVERAGE FORM
. . . .
SECTION I — COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of . . . "property damage" to which this insurance applies
b. This insurance applies to . . . "property damage" only if:
(1) The . . . "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; and
(2) The . . . "property damage" occurs during the policy period.
. . . .
(2) SECTION V — DEFINITIONS
. . . .
13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
. . . .
17. "Property damage" means:
a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.
In Gaston County Dyeing Machine Co. v. Northfield Ins. Co., 351 N.C. 293, 524 S.E.2d 558 (2000), our Supreme Court examined an insurance policy which had substantially the same relevant policy language as defendant's policy. See Gaston County, 351 N.C. at 300-01, 524 S.E.2d at 563-64. Thus, according both to the policy and Gaston County, an "occurrence" means an "accident." See id. at 302, 524 S.E.2d at 564. "An accident is generally considered to be an unplanned and unforseen happening or event, usually with unfortunate consequences." Id. Like in Gaston County, where there was a "sudden, unexpected leakage," here there was an unexpected water leak. Id.
On appeal, Plaintiff contends that the improper installation of the PEX water supply line caused the water leak which caused the property damage, and that under Gaston County, the "occurrence" was the improper installation of the PEX water supply line. Plaintiff argues that in Gaston County,
the Court adopted the view that it would look to the cause of property damage in determining the date of the "occurrence" required to trigger property damage coverage. Nelson v. Hartford Underwriters Ins. Co., 177 N.C. App. 595, 630 S.E.2d 221 (2006). The Court ultimately held in Gaston County Dyeing that "where the date of the injury-in-fact can be known with certainty, the insurance policy or policies on the risk on that date are triggered." Id., 351 N.C. at 303, 524 S.E.2d at 564 (2000). In a later case, Hutchinson v. Nationwide Mut. Fire Ins. Co., the Court of Appeals went so far as to hold that "even in situations where damage continues over time, if the court can determine when the defect occurred from which all subsequent damages flow, the court must use the date of the defect and trigger the coverage applicable on that date." Id., 163 N.C. App. 601, 605, 594 S.E.2d 61, 64 (2004).
However, Plaintiff's argument overlooks both the policy language and the relevant facts of Gaston County and Hutchinson and misstates the holding of Hutchinson.
First, Defendant's policy provides coverage for "property damage," "caused by an `occurrence' that takes place in the `coverage territory'" and the "` property damage' [must] occur[] during the policy period." (Emphasis added). Therefore, even if we assume arguendo that the date of improper installation of the PEX water supply line is the date of the "occurrence," the "property damage" — the water leak and flooding of the house — did not occur "during the policy period," as it is undisputed that there was no leakage until December of 2006. Both Gaston County and Hutchinson deal with factual situations of a continuing leakage which resulted in property damage over an extended period of time, although the leakage was not discovered until substantial property damage had already occurred. See Gaston County, 351 N.C. at 302, 524 S.E.2d at 564; Hutchinson, 163 N.C. App. at 605, 594 S.E.2d at 64. The factual situation of Gaston County is different from the case before us because both the "occurrence" and a portion of the "property damage" happened during the policy period in question. In Gaston County, the "property damage" was the contamination of diagnostic imaging dye, which was caused by the "occurrence" of a leak in the dye production equipment that started on 21 June 1992 but was not discovered until 31 August 1992, after the leak had "contaminated over sixty tons of the contrast media dye." Gaston County, 351 N.C. at 295, 524 S.E.2d at 560. Thus, the property damage in Gaston County, the contamination of the dye, began as soon as the leak started on 21 June 1992 and continued until its discovery at the end of August 1992. Id. at 302, 524 S.E.2d at 564. Here, the improper installation of the PEX water supply line occurred between September of 2004, when Premier began performing plumbing work on the home, and early 2005, when its work was completed, but there was no leakage or "property damage" until December of 2006. This is not a case of property damage which "continues over time."
The "coverage territory" is a geographical area and is not at issue in this case; it is undisputed that all of the relevant events occurred in the "coverage territory."
Plaintiff incorrectly states the holding in Hutchinson. The language quoted by Plaintiff as the holding is actually the Court's summary of Gaston County's holding. See id. at 605, 594 S.E.2d at 64. In Hutchinson, the plaintiffs' home was built in 1999, with construction complete by the end of October 1999. Id. at 602, 594 S.E.2d at 62. The home's retaining wall suffered property damage from water, which was caused by either the general contractor's "failure to install a drainage system in the retaining wall and/or to use proper soil under the retaining wall, or . . . the continual entry of water into the soil from the compacted surface area." Id. at 604, 594 S.E.2d at 63. There was a lapse in the general contractor's insurance coverage during construction of the home, but defendant Nationwide Mutual Fire Insurance Company's policy which was at issue in Hutchinson took effect on 15 November 1999, after construction of the home was complete. Id. at 602, 594 S.E.2d at 62. "[T]he defect in the [retaining] wall was discovered 18 November 1999, three days after defendant's second policy came into effect. . . ." Id. at 605, 594 S.E.2d at 64. The Hutchinson Court noted that the "[p]laintiffs' strongest argument [was] that [the general contractor] failed to construct any alternate means to protect the site and therefore allowed the continual entry of water into the soil under the retaining wall, creating significant damage to the retaining wall." Id. Based on the "continual entry theory," the plaintiffs claimed that defendant Nationwide should be "responsible to plaintiff for the damages created." Id. However, the plaintiffs' argument also made it "clear that [the general contractor's] actions and inactions at the time the retaining wall was constructed caused the subsequent problems with water entry. . . ." Id. Because the damages were caused by "the continual entry of water," which began at the time of construction of the home prior to the policy coverage period, the Court held that the trial court properly granted summary judgment in favor of defendant Nationwide, as nothing suggested "that the damage was caused during the three days of coverage prior to discovery." Id. at 605-06, 594 S.E.2d at 64.
Plaintiff here claims that Hutchinson would require that Defendant provide coverage because Premier's improper plumbing work in 2004 "caused" the leak in 2006. In the case before us, accepting the Plaintiff's forecast of evidence as true, as we must for purposes of summary judgment, see Smart v. State, 198 N.C. App. 161, 165, 678 S.E.2d 720, 723 (2009), the PEX water supply line was improperly installed in 2004, and this improper installation ultimately caused the leak which caused the property damage. However, this is not a case of a continual leak which began in 2004 and was not discovered until December 2006; the leak began in 2006. The "property damage" thus did not occur, or begin to occur, until December 2006. Therefore, no portion of the property damage caused by the leak "occur[ed] during the policy period" as required by Defendant's policy which had ended on 21 February 2005. The trial court properly granted summary judgment in favor of Defendant and we therefore affirm the trial court's order.
Affirmed.
Judges BRYANT and STROUD concur.
Report per Rule 30(e).