552 S.W.3d 726
Mo. Ct. App.2018Background
- The View, LLC bought and renovated a blighted Kansas City building into condominiums; purchasers became members of The View Home Owner's Association (VHOA).
- VHOA sued The View alleging negligence, construction defects, and breaches of contract and implied warranties; The View tendered defense to its insurer, The Burlington Insurance Company (TBIC).
- TBIC denied coverage, asserting the policy did not cover the alleged defects; The View executed a release assigning its claims against TBIC to VHOA and agreed not to contest judgment.
- After a bench trial, VHOA obtained a $3,964,209 judgment against The View and then sued TBIC for breach of contract (duty to defend/indemnify) and bad faith, asserting TBIC wrongfully refused defense/indemnity.
- TBIC moved for summary judgment; the trial court granted it, and VHOA appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TBIC had a duty to defend The View against VHOA's suit | The alleged property damage from defective construction falls within the policy’s definition of "property damage," creating a duty to defend | The policy covers only "property damage" caused by an "occurrence" (an "accident"); defects from controllable construction/workmanship are not accidental and are excluded | No duty to defend — defects are not an "occurrence" and exclusions apply |
| Whether TBIC had a duty to indemnify The View | If duties to defend exist, indemnity follows for covered damages | No duty to indemnify where no duty to defend; policy exclusions bar coverage | No duty to indemnify — follows duty-to-defend ruling |
| Whether VHOA can recover for bad faith refusal to defend/indemnify | TBIC acted unreasonably in denying defense/coverage | No bad faith where insurer had no contractual duty to defend/indemnify | No bad faith claim — cannot be vexatious refusal where no duty exists |
| Scope and effect of the Designated Operations (completed operations) exclusion | Exclusion inapplicable because some permits remained open; construction not "complete" | Exclusion bars claims arising from construction/completed operations; deeming work "not completed satisfactorily" would render exclusion meaningless | Exclusion applies — claims target completed construction; open permits or unsatisfactory completion do not negate exclusion |
Key Cases Cited
- Doe Run Resources Corp. v. American Guarantee & Liability Insurance, 531 S.W.3d 508 (Mo. banc 2017) (summary-judgment and insurance-contract interpretation principles)
- Allen v. Bryers, 512 S.W.3d 17 (Mo. banc 2016) (insurer's duty to defend broader than duty to indemnify; standards for determining duty to defend)
- Columbia Casualty Co. v. HIAR Holding, LLC, 411 S.W.3d 258 (Mo. banc 2013) (duty-to-defend analysis when complaint potentially within policy coverage)
- American States Ins. Co. v. Mathis, 974 S.W.2d 647 (Mo. App. 1998) (defective workmanship and failure to meet contract specifications are not an "accident"; no "occurrence")
- Hawkeye-Security Ins. Co. v. Davis, 6 S.W.3d 419 (Mo. App. 1999) (contractual breaches and warranty claims for poor workmanship do not constitute an "occurrence")
- Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74 (Mo. banc 1998) (CGL coverage not intended to guarantee quality of work; distinguishes risks businesses can control)
- Truck Insurance Exchange v. Prairie Framing, LLC, 162 S.W.3d 64 (Mo. App. 2005) (insurer must prove no possibility of coverage to avoid duty to defend)