Opinion
Civ. No. 5:97CV-290-R
March 2000.
MEMORANDUM OPINION ORDER
This matter is before the court on Petitioner's motion for summary judgment (doc. #12). For the following reasons, the motion is GRANTED.
I.
In March 1997, heavy rainfall led to the flooding of many homes in the Derby Park Subdivision, in the City of Oak Grove, Christian County, Kentucky. Homeowners suffered property damage as a result. Each had acquired their Derby Park Subdivision property from Mark Henderson and Donald Henderson, doing business as Henderson Enterprises, Inc. Different homeowners filed 13 lawsuits against the Hendersons individually and their business. The homeowners alleged contractual liability, fraud, gross negligence, and reckless disregard in the sale of their homes. Respondents had been insured under a policy issued by State Auto, providing general commercial liability coverage. Respondents made a claim upon State Auto to defend the lawsuits and to assume all responsibility under the terms of the insurance policy for any damage judgment. State Auto filed this declaratory judgment action. State Auto argues that no coverage is available to the Respondents because the acts or omissions that are the subject of the lawsuits are not covered by the Respondent's policy.
The policy contains the following clause:
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
Insuring Agreement
We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies . . .
This insurance applies to "bodily injury" and "property damage" only if: (1) The "bodily injury" or "property damage" is cause by an "occurrence" that takes place in the "coverage territory."
The policy also contains the following exclusions, which Plaintiffs believe apply to Petitioner's claims:
This insurance does not apply to: . . .
Expected or Intended Injury
"Bodily injury" or "property damage" expected or intended from the standpoint of the insured.
Contractual Liability
"Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in the contract of the agreement . . .
Damage to Property
Premises you sell, give away or abandon, if the "property damage" arises out of any part of those premises.
Damage to Your Work
"Property Damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard."
This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
II.
Summary Judgment is available under Fed.R.Civ.P. 56(c) if the moving party can establish that 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 the moving party is entitled to a judgment as a matter of law."State Auto argues that the policy does not extend coverage for any property damage arising out of property that has been sold. All of the homeowners' complaints allege that Respondents conveyed the property to them, and that the property damage occurred after the sale. The Hendersons argue that claims do not arise out of the premises, but rather out of negligence during the development of land. The Hendersons argue that because development of the land occurred prior to the sale, the property sold exclusion does not apply.
The language of an insurance policy will be given its plain meaning. See St. Paul Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 S.W.2d 223, 226 (Ky. 1994). If the policy language is clear and unambiguous, a court will give effect to the discernable meaning of the policy. See Meyers v. Kentucky Medical Ins. Co., 982 S.W.2d 203, 208 (Ky.App. 1997). The provision at issue in the instant case has a clear meaning. The court will not read the Hendersons' interpretation into the exclusion. The property damage of the homeowners arose out of the property sold by the homeowners after it was sold. The damage occurred after the sale. Therefore, there is no duty to defend or liability coverage for the homeowners' lawsuits.
Although the Court is not aware of any Kentucky cases deciding this issue, the Court finds the decisions in Stull v. American States Insurance Co., 963 F. Supp. 492 (D.Md. 1997), and Reliance Insurance Co. v. Povia-Ballatine, 738 F. Supp. 523, 525 (S.D.Ga. 1990), to be persuasive. In Stull, the issue was whether an insurer had a duty to defend its insured, a gasoline station owner, against a negligent misrepresentation claim. The underlying claim was based on representations made to the purchaser of the station regarding the quality of the groundwater. In the declaratory judgment action, the insurer asserted three defenses, including that the premises alienated exclusion precluded coverage. The exclusion was identical to one in the instant case. The district court held in favor of the insurer, finding that the premises alienated exclusion precluded coverage. The court relied on Reliance Insurance Co. v. Povia-Ballatine, supra, in which the Georgia court stated "that the exclusionary clause applies so long as the plaintiff's alleged damages are incurred after the sale. The date of the . . . allegedly negligent act is irrelevant." Id. at 525.
Furthermore, LaSalle National Trust, N.A. v. Schaffner, 818 F. Supp. 1161 (N.D.Ill. 1993), does not support the Hendersons' argument. LaSalle involved an "alienated property" exclusion similar to the exclusion in the instant case. However, the case involved cleaning up water pollution. Because groundwater is not "owned" as a matter of legal title in Illinois, the court held that it could not be alienated, and thus, the exclusion did not apply. In the instant case, the lawsuit involves property to which the homeowners did have legal title, and then sold to the homeowners prior to the flooding.
State Auto also argues that other policy provisions preclude coverage. In light of the fact that the court finds that there is no coverage under the "premises sold" exclusion, it will not address the other arguments.
IT IS ORDERED:
Petitioner's motion for summary judgment (doc. #12) is GRANTED. The insurance policy provides no coverage for alleged acts or omissions of the Respondents concerning the claims made by Bradley S. and Eileen Murray, Trent J. and Carla J. Miles, Douglas E. and Jill Harrison, Andrew Deidrick, Kennard M. Allen, Christopher M. Pfaff, Robert Dean and Nettie Hamilton, David and Maria Richendollar, Daryin T. and Valerie J. Warren, Ricardo E. and Bernadette Robinson, Chris W. and Kimberly Garcia, James Edelblute, Vincent Allen and Melinda Edwards, and Jamie and May Ann Kavanaugh in their civil actions resulting from the flooding which occurred on or about March 1, 1997. The Petitioner need not provide a defense to the claims.
This case is DISMISSED.
This is a final and appealable order. There is no just cause for delay.
This is the ___ day of March 2000.