In this insurance coverage dispute, Jonathan Aten (Aten) appeals the district court’s grant of the motion to dismiss filed by Scottsdale Insurance Company (Scottsdale) on the grounds Scottsdale never breached its policy of insurance because Aten’s damages either (1) were not a result of a covered occurrence or, alternatively, (2) even if the damages were a result of a covered occurrence, they were properly excluded under the policy’s terms. On appeal, Aten asserts the district court erred in (1) granting Scottsdale’s motion to dismiss and (2) ruling that damages to Aten’s home did not constitute an occurrence under the policy terms.
I. BACKGROUND
On March 16, 2004, Aten contracted with Leslie Joe Hanke and Castlerock Construction LLC (Castlerock) to construct a house in St. Paul, Minnesota. Work commenced in April 2004 and was completed before the November 1, 2004 closing of the mortgage on the property. Upon taking possession of the house, Aten discovered a wide variety of defects in the construction of the home. Castlerock also did not pay for certain materials used in the home’s construction, requiring Aten to satisfy an $11,035.62 materialman’s lien on the house. 1
In December 2005, Aten commenced an action against Hanke and Castlerock in Ramsey County, Minnesota District Court, seeking to recover damages for the defective construction and the lien Aten was required to satisfy. Neither defendant appeared, and a default judgment was entered against the defendants and in favor of Aten for the $11,035.62 Aten paid to satisfy the lien and for an additional $90,000 “to remedy and correct the defects and deficiencies in the construction of the home.” In its findings of fact, the state court found “[t]here was trim missing, exposed sheetrock screws, damaged pieces of sheetrock installed, interior walls that were not plumb, floors that were uneven, gaps between the flooring and the wall/ trim, doors off center, door jambs improperly installed, uneven and cracked floors in the garage and basement, with the basement floor not graded properly towards the drain causing water damage.” (Emphasis added). The court further found the home construction was “inadequate and defective, including but not limited to problems with the basement and garage floors, sheetrock and drainage.”
Because neither defendant appeared, Aten had no opportunity to conduct any discovery to find out whether any of the deficiencies or defects were the result of work done by subcontractors, or whether Castlerock caused damage to work done by subcontractors. The state court acknowledged some work was performed by subcontractors by noting, “[s]ome of the Plaintiffs complaints, however, deal with cosmetic issues and matters not related to work performed by Castlerock.” Because Aten never had the opportunity to discover exactly what work was done by Castlerock and what work was done by subcontractors, Aten could not (1) name in his state
On June 6, 2006, Aten commenced the instant action against Scottsdale. Scottsdale had issued a commercial general liability insurance policy (Policy) to Castlerock that was in force during the construction period. Aten alleges Scottsdale is obligated under the Policy to pay the default judgment entered against Castlerock in the state court action, asserting claims for (1) breach of the implied covenant of good faith and fair dealing; (2) breach of contract; and (3) unjust enrichment.
On July 6, 2006, Scottsdale filed a notice of removal in the United States District Court for the District of Minnesota, removing this action to federal court. Scottsdale then filed a motion to dismiss all of the claims, which the district court granted. This appeal follows.
II. DISCUSSION
“We review a Rule 12(b)(6) dismissal
de novo,
accepting the claimant’s allegations of fact as true and affirming only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.”
Reis v. Walker,
For there to be coverage under the Policy there must first be an “occurrence.” If an occurrence exists, the next step is to determine whether the occurrence resulted in “property damage” or “bodily injury.” If property damage or bodily injury resulted, then the insurer must pay the claim unless the losses are otherwise excluded by an express policy exclusion. See Donald Malecki and Arthur Flitner, CGL Commercial General Liability 5, 10-11, 24-25 (National Underwriter Company 2005).
An occurrence is defined in the Policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policy does not define accident, but Black’s Law Dictionary defines accident as “[a]n unforeseen and injurious occurrence not attributable to mistake, neglect, or misconduct.” Black’s Law Dictionary 15 (7th ed. 1999).
In
O’Shaughnessy v. Smuckler Corp.,
Having found an occurrence alleged with resulting property damage, the next step is to determine if the resulting claim is otherwise excluded by an express policy exclusion. Scottsdale asserts the claim should be excluded under the “Your Work” exclusion which excludes from coverage “ ‘[pjroperty damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products completed opera
Here, the state court’s default judgment specifically found “cracked floors in the ... basement, with the basement floor not graded properly towards the drain causing water damage.” The state court further noted “[s]ome of the plaintiffs complaints, however, deal with cosmetic issues and matters not related to work performed by Castlerock,” thereby acknowledging some work was performed by others. Thus, the facts could support a compensable claim if discovery establishes either (1) the basement floor was poured or leveled by a subcontractor, or (2) the work which suffered water damage because of the improperly graded basement floor was work done by a subcontractor.
Because relief may be appropriate under a “set of facts that could be proved consistent with the allegations,” Reis,
III. CONCLUSION
For the foregoing reasons, we reverse and remand for further proceedings in accordance with this decision.
Notes
. This issue is not part of the action.