Teufel v. American
1 CA-CV 15-0736
Ariz. Ct. App.May 9, 2017Background
- Teufel bought an undeveloped lot (Longlook Property), insured it under the Longlook Policy while building a residence, and sold the completed home to Cetotor in May 2011.
- Teufel later purchased a second homeowner policy (82nd Place Policy) effective Jan 2012–Jan 2013.
- Cetotor sued Teufel in Nov 2012 for alleged improper hillside excavation and resulting damage (contract, negligence, fraud).
- Teufel tendered defense/indemnity to American Family under both policies; American denied coverage and refused to defend.
- Superior court granted summary judgment for American as to the Longlook Policy (no coverage because alleged damage occurred after that policy expired) and granted judgment for American under the 82nd Place Policy based on the contractual-liability exclusion; Teufel appealed and American cross‑appealed on the business‑pursuits exclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Longlook Policy duty to defend was triggered by Cetotor's complaint | Teufel: excavation during the Longlook policy period immediately damaged/stabilized the hillside, so the policy covers resulting property damage | American: policy covers only property damage that occurs during the policy period; alleged physical damage occurred after termination | Court: No duty under Longlook — allegations show physical damage occurred post‑policy, so summary judgment for insurer affirmed |
| Whether defective workmanship alone triggers coverage under these policies | Teufel: faulty excavation during the Longlook policy period produced damage and thus triggers coverage | American: defective workmanship alone is not covered absent resultant property damage within the policy period | Court: Defective workmanship standing alone is not covered; coverage requires resulting property damage during policy period |
| Whether 82nd Place Policy’s contractual‑liability exclusion bars coverage | Teufel: tort claims are independent of the sale contract; exclusion should not apply | American: liability is “under” the purchase contract (no liability absent the contract), so exclusion applies | Court: Exclusion did not apply as a matter of law — tort claims did not arise under or depend on the purchase contract; summary judgment for insurer on this ground reversed |
| Whether 82nd Place Policy’s business‑pursuits exclusion bars coverage | Teufel: his building/sale of the home was not necessarily a profit‑motivated, continuous business pursuit; disputed facts preclude summary judgment | American: Teufel acted as a builder‑vendor/business and exclusion applies to developer activity | Court: Exclusion not resolved as a matter of law on this record — factual disputes (pattern of building/sales, intent) mean insurer not entitled to summary judgment; reversal on this ground |
Key Cases Cited
- Double AA Builders, Ltd. v. Preferred Contractors Ins. Co., 241 Ariz. 304 (interpreting insurance coverage and duty to defend)
- Century Mutual Ins. Co. v. Southern Arizona Aviation, Inc., 8 Ariz. App. 384 (time of occurrence is time damage is experienced)
- United States Fidelity & Guaranty Co. v. Advance Roofing & Supply Co., Inc., 163 Ariz. 476 (defective workmanship alone not covered)
- Lennar Corp. v. Auto‑Owners Ins. Co., 214 Ariz. 255 (same principle regarding defective workmanship)
- Kepner v. Western Fire Ins. Co., 109 Ariz. 329 (duty‑to‑defend analysis—compare complaint allegations to policy scope)