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Schwindt v. Underwriters at Lloyd's of London

filed: April 15, 1996.


Superior Court County: Snohomish. Superior Court Cause No: 94-2-00527-6. Date filed in Superior Court: September 8, 1994. Superior Court Judge Signing: Larry McKeeman.

Cox, J., Baker, C.j., Coleman, J., concur

Author: Cox

COX, J. -- Joan Schwindt and Richard Jones brought this action against four insurers to recover for damage to their building. The damage was caused by Pan Pacific Builders, the contractor who constructed the building. The trial court granted the insurers' motion for summary judgment, concluding that the policy did not cover the

claims. Because the claimed damage falls within the policy's exclusions for "defective products" and "faulty work," we affirm.

Joan Schwindt and Richard Jones were partners who contracted with Pan Pacific Builders to build Bellingham Surgery Center. Pan Pacific procured property damage liability insurance from Underwriters at Lloyd's of London, St. Katherine Insurance Company, PLC, Terra Nova Insurance, Ltd., and Sphere Drake Insurance PLC.

The Broad Form Property Damage Liability Insurance issued to Pan Pacific grants coverage as follows:

Any or all liability imposed by law against the Assured for loss of or damage to or destruction of property of others (including but not limited to, damage resulting from loss of use of property damaged or destroyed and all other indirect and consequential damage for which legal liability exists in connection with such damage to or destruction of property of others) sustained or alleged to have been sustained during the currency of this insurance and arising from any cause whatsoever out of the operations, activities, work and/or business of the Assured anywhere in the world, in connection with the Assured's business as stated above.

The exclusions clause of the policy excludes coverage for claims made against the assured:

(1) for repairing or replacing any defective product or products manufactured, sold or supplied by the Assured or any defective part or parts thereof nor for the cost of such repair or replacement; or

(2) for the loss of use of any such defective product or products or part or parts thereof, or

(3) for damage to that particular part of any property upon which the Assured is or has been working caused by the faulty manner in which the work has been performed . . . .

Construction of the medical center did not go well. Schwindt and Jones sued Pan Pacific, alleging negligent

workmanship and breach of contract. Among other things, Schwindt and Jones claimed that mechanical equipment, doors, and door hardware, all of which were supplied and installed by Pan Pacific, were defective. Schwindt and Jones spent funds replacing this defective material.

Further discovery revealed more physical damage to the building. The air conditioner chiller that was installed by subcontractors of Pan Pacific had to be rebuilt and ultimately replaced. Damage to the chiller was caused by a defective valve and poor wiring. Glass block towers installed by subcontractors had to be repaired and replaced because they broke and caused water leakage. This leakage in turn caused steel structural members to rust.

Windows Pan Pacific installed had to be repaired due to leakage in the ceilings on two floors. A new drainage system was installed to stop leakage caused by a poor roof design by subcontractor architects. Waterproofing done by Pan Pacific on the basement walls had to be repaired due to seepage in the basement. This seepage discolored the basement wall, flooded portions of the basement, and ruined the floor tile. Finally, the exterior marble supplied and installed by Pan Pacific dulled and cracked because it was made of material too soft to withstand weather.

Pan Pacific filed a claim seeking coverage under the insurance policy. The insurers declined coverage. Pan Pacific commenced this action against the insurers to obtain a declaratory judgment for coverage and alleging breach of the insurance contract. During this action, Schwindt, Jones, and Pan Pacific mediated a settlement. As part of that settlement, Pan Pacific assigned to Schwindt and Jones its claim against the insurers. The insurers then moved for summary judgment against Schwindt and Jones, claiming that the policy did not cover the damage alleged in their claim. The trial court granted the insurers'

motion for summary judgment and dismissed the complaint. Schwindt and Jones appeal.

Policy Coverage

Schwindt and Jones contend that the trial court erred by granting summary judgment because the insurance policy to which Pan Pacific is a party covers damage to the "property of others." They assert that the policy covered damage to the medical center because it was their building, not Pan Pacific's, and therefore it qualified as the "property of others."

The insurers first argue that the record does not support such a finding. Alternatively, they argue that even if the alleged damage falls within the granting clause as damage to the property of others, it was nonetheless excluded from coverage under the "defective product" and "faulty work" exclusions of the policy. We hold that the exclusions apply.

When reviewing a summary judgment, we engage in the same inquiry as the trial court.*fn1 We apply the standards of CR 56(c) after considering the facts and inferences therefrom most favorably toward the nonmoving party. We review questions of law de novo.*fn2

Granting summary judgment under CR 56(c) is proper "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 the moving party is entitled to judgment as a matter of law." Summary judgment is not proper if reasonable minds could draw different conclusions from

undisputed facts or if all of the facts necessary to determine the issues are not present.*fn3

The interpretation of an insurance policy is an issue of law.*fn4 Insurance policy language is interpreted as it would be understood by an average person and in a manner that gives effect to each provision.*fn5 "Determining whether coverage exists is a 2-step process. The insured must show the loss falls within the scope of the policy's insured losses. To avoid coverage, the insurer must then show the loss is excluded by specific policy language."*fn6

There is no dispute that the claimed damage is based on information in the pleadings, the information developed during discovery, and the affidavits attached to Schwindt and Jones' answer to the summary judgment motion. The ...

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