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ALLIANZ INS. CO. v. IMPERO

August 20, 1986

Allianz Insurance Company, a foreign insurance company, Plaintiff,
v.
Michael G. Impero, an individual, d/b/a Impero Construction Company; Impero Construction Company, a Washington corporation, Defendants



The opinion of the court was delivered by: MCNICHOLS

 ROBERT J. McNICHOLS, United States District Judge

 The parties to this action filed Cross-motions for Summary Judgment. For the purposes of disposing of the motions, the facts as set forth in the plaintiff's Statement of Material Fact are taken as true and there are no genuine issues as to any material fact. The plaintiff's Statement of Material Fact (CP 23) is incorporated by reference in this memorandum.

 The court's duty is to interpret the provisions of the builder's risk insurance contract issued by the insurer to the defendant insured.

 The builder's risk policy provides coverage against "all risks of physical loss of or damage to . . . property in the course of construction" upon the construction site. The exclusion in the policy which is in controversy here provides:

 This policy does not cover:

 
* * * * *
 
(c) Cost of making good faulty or defective workmanship, material, construction or design, but this exclusion shall not apply to the damage resulting from such faulty or defective workmanship, material, construction or design. . . .

 Counsel represent that their research has not turned up a case in Washington interpreting this particular contractual provision. They are in agreement however, as to the Washington law relating to the interpretation of insurance contracts. Basically, that is if a reasonable interpretation of the provision would result in coverage, the court must find coverage. Both parties rely upon Kroll Constr. Co. v. Great American Insurance Co., 594 F. Supp. 304 (N.D. Ga. 1984) and Southern Cal. Edison Co. v. Harbor Insurance Co., 83 Cal. App. 3d 747, 148, 148 Cal. Rptr. 106 (1978). Neither of these cases is controlling but both are of assistance to the court in construing the clause in question.

 There is no dispute between the parties that the insured contractor had the duty to perform the contract in accordance with the plans and specifications and did not do so. The concrete walls, when completed, contained deficiencies not in accord with the specifications, and the contractor was required to make appropriate repairs. It is the cost of these repairs for which the insured seeks recovery under the all-risk policy. The insurer declined the claim, arguing that the claim is covered by the above-quoted exclusion.

 The deficiencies in the concrete resulted from the following factors. The concrete was delivered to the site in concrete trucks and pumped to the forms over a distance of approximately 120 feet. An inspector had the duty of testing the concrete by the use of "slump" tests to determine that the mix was proper. Unfortunately, the inspector performed the slump tests as the mixed concrete came out of the trucks and prior to the time it was pumped to the forms. As a result the water content in the poured concrete was inadequate. This resulted in the voids in the walls as the concrete cured. The parties agree that the fact that the inspector was not an employee of the contractor is not relevant. For purposes of this motion it is conceded that the walls were defective and the contractor had the duty to the owner to make repairs.

 The defendant contractor argues that the deficiencies in the walls resulted from faulty workmanship, to-wit: the mistake of the inspector and therefore constitute "damage resulting" within the meaning of the above cited exclusion. The insurer on the other hand argues that the cost incurred was for "making good faulty or defective workmanship, material, construction or design" and is excluded from coverage.

 The defective concrete caused no damage to any other portion of the structure, other persons or property. The sole claim is for the cost of correcting the deficiencies in the wall. Had the wall, as a result of the deficiencies in the concrete, collapsed and caused damage to some other portion of the work, or to equipment of a subcontractor or some similar thing, we would have a different case. However, when a contractor assumes the obligation of completing a structure in accordance with plans and specifications and fails to perform properly, he cannot recover under the all-risk policy for the cost of making good his faulty work. Clearly, such ...


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