261 F. Supp. 3d 1071
D. Mont.2017Background
- Leep owned a home insured by Trinity; roof replaced by Sprauge in August 2015 after hail damage.
- In January 2016 Leep discovered the furnace exhaust pipe disconnected in the attic; moisture and mold damage followed.
- Leep reported a claim to Trinity; Trinity investigated and denied coverage citing the Policy’s faulty workmanship and mold/maintenance exclusions.
- Leep sued for declaratory relief and breach of contract; Trinity filed a third‑party indemnity claim against Sprauge.
- Cross‑motions for partial summary judgment focused on (1) whether the Policy’s faulty workmanship exclusion barred coverage and (2) whether the Policy’s ensuing‑loss exception preserved coverage for the resulting water‑vapor/mold damage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the faulty workmanship exclusion apply to bar coverage? | Leep: exclusion shouldn’t apply because Sprauge’s contracted scope was exterior roof work and not the heating system. | Trinity: exclusion applies because any loss ‘‘caused by’’ faulty workmanship is excluded, regardless of contractual scope. | Court: exclusion may apply in theory, but disputed material facts (whether Sprauge actually disconnected the vent / acted unworkmanlike) preclude summary judgment for Trinity. |
| Was Sprauge’s workmanship shown as a matter of law to be faulty and the proximate cause? | Leep: factual record (and contract terms) do not establish that Sprauge is the undisputed cause. | Trinity: adjuster, engineer, and HVAC tech opine the vent was disconnected during roofing; Leep also made statements blaming Sprauge. | Court: credibility conflicts and competing affidavits create genuine fact issues; summary judgment for Trinity denied on causation/workmanship. |
| If faulty workmanship exclusion applies, does the Policy’s ensuing‑loss exception restore coverage for the resulting damage? | Leep: yes — ensuing‑loss clause covers losses that follow from excluded workmanship (here, water‑vapor/mold damage from furnace discharge). | Trinity: argues for a narrower construction requiring a separate, independent cause to trigger ensuing‑loss coverage. | Court: applies Montana law and ordinary meaning; interprets ensuing‑loss broadly to cover the ensuing water‑vapor/mold damage. Ambiguities construed for insured; ensuing‑loss exception preserves coverage. |
| Outcome on coverage at summary judgment | Leep: seeks declaration of coverage. | Trinity: seeks dismissal of coverage claim. | Court: grants Leep’s motion (coverage exists under ensuing‑loss exception); denies Trinity’s cross‑motion. |
Key Cases Cited
- Scentry Biologicals, Inc. v. Mid-Continent Cas. Co., 319 P.3d 1260 (Mont. 2014) (Montana law on insurance contract interpretation)
- Vision One, LLC v. Philadelphia Indem. Ins. Co., 276 P.3d 300 (Wash. 2012) (ensuing‑loss clause can carve out exception to workmanship exclusion)
- Arnold v. Cincinnati Ins. Co., 688 N.W.2d 708 (Wis. 2004) (broad ensuing‑loss interpretation; ensuing loss need not be separate and independent)
- TMW Enterprises, Inc. v. Federal Ins. Co., 619 F.3d 574 (6th Cir. 2010) (narrow view: ensuing loss requires separate, independent cause)
- Bartram, LLC v. Landmark Am. Ins. Co., 864 F. Supp. 2d 1229 (N.D. Fla. 2012) (ensuing loss coverage for damage following excluded defective construction)