BSI Constructors, Inc. v. Hartford Fire Insurance
2013 U.S. App. LEXIS 2164
| 8th Cir. | 2013Background
- BSI contracted to build a commercial building in Missouri; roof installed by Stephenson Roofing; Murphy Company and Industrial Sheet Metal Erectors also worked on project but not on roof.
- Project manager warned subcontractors to take precautions to protect the roof; damage occurred due to negligent actions of Murphy and Sheet Metal Erectors during construction.
- Roof sustained significant damage with hundreds of patches; roof replacement cost $174,000; insurer Hartford investigated and denied claim under faulty workmanship exclusion.
- BSI held a Builder's Risk Policy with Hartford (Jan 10, 2006–Aug 10, 2007); Hartford denied coverage citing the exclusion and later the loss exception.
- BSI sued Hartford in state court for breach of contract and vexatious refusal to pay; case was removed to federal court, where district court granted summary judgment for Hartford on both claims.
- Appellate panel affirmed the district court’s rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of faulty workmanship exclusion | BSI contends exclusion may not apply to fortuitous or extraneous damage | Hartford argues exclusion covers defective workmanship that damages the project | Exclusion applies to both defective product and defective process, excluding roof damage |
| Ambiguity of ensuing loss exception | Believes “other Covered Property” renders exception ambiguous | Hartford argues term unambiguous; only roof involved, no other covered property damaged | Ensuing loss exception unambiguous; applies only to property other than the roof; no coverage for roof loss under exception |
| Vexatious refusal to pay claim viability | BSI argues insurer must negate all factual scenarios to support vexatious claim | Hartford satisfied Rule 56 by showing no duty to defend/indemnify | Summary judgment proper; no duty to cover means no vexatious refusal claim |
Key Cases Cited
- Driscoll Co. v. Am. Prot. Ins. Co., 930 F. Supp. 184 (E.D. Pa. 1996) (faulty workmanship exclusion covers both product and process defects)
- Schultz v. Erie Ins. Grp., 754 N.E.2d 971 (Ind. Ct. App. 2001) (words in policy given ordinary meaning; workmanship can mean process or product)
- Risher v. Farmers Ins. Co., 200 S.W.3d 84 (Mo. Ct. App. 2006) (words given ordinary meaning; excludes coverage for defective workmanship)
- Vision One, LLC v. Phila. Indem. Ins. Co., 276 P.3d 300 (Wash. 2012) (en banc; explains ensuing loss concept)
- Haggard Hauling & Rigging Co. v. Stonewall Ins. Co., 852 S.W.2d 396 (Mo. Ct. App. 1993) (definition of 'other Covered Property' within exception)
- Jones v. Mid-Century Ins. Co., 287 S.W.3d 687 (Mo. 2009) (insurance contract ambiguity when coverage and exclusion cannot be reconciled)