Columbia Mutual Insurance Company (Columbia Mutual) brought a declaratory judgment action against Cliff F. Schauf, d/b/a Cliffs Home Repair, (Schauf) seeking a declaration of the coverage provided by an insurance policy that Columbia Mutual issued to Schauf. The trial court held that the policy provides no coverage for damage Schauf caused to a house he was painting because the policy contains an exclusion for property damage to “[t]hat particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the ‘property damage’ arises out of those operations.” After opinion by the Missouri Court of Appeals, Western District, this Court granted transfer to consider the scope of the exclusion in Columbia Mutual’s policy. The judgment is reversed, and the cause is remanded.
In May of 1994, Leonard and Elizabeth Sodaro (the Sodaros) entered into a contract with Frank Amberson (Amberson) in which Amberson agreed to build a house for the Sodaros. Amberson then entered into a subcontract with Schauf in which Schauf agreed to paint, stain, or lacquer all interior and exterior surfaces of the Sodaros’ house. On October 26, 1994, Schauf was spraying lacquer onto kitchen cabinets while his employees were spraying doors in a bedroom. After Schauf completed applying the lacquer to the kitchen cabinets, he began cleaning his spray equipment inside the house before he was to go home for the day. As Schauf started his pump generator to pump lacquer thinner through the lines of his sprayer, the pump generator started a fire, which caused extensive damage throughout the house and required the replacement of sheetrock, insulation, subflooring, molding, windows, a sliding door, and textured ceilings. Amberson and his insurer spent approximately $35,000 repairing the Sodaros’ house. Amberson sought recovery of these expenses from Schauf.
At the time of the fire, Schauf was insured under a business owner’s liability insurance policy issued by Columbia Mutual. On August 3, 1995, Columbia Mutual filed a declaratory judgment action against Schauf, Amberson, and the Sodaros seeking a determination of whether Schauf s insurance policy covers the damage Schauf caused to the Sodaros’ house. The parties filed cross motions for summary judgment. Amberson and Schauf argued that the policy covers all the damage caused by the fire. Columbia Mutual asserted that the insurance policy provides no coverage for the damage because the policy contains an exclusion for property damage to “[tjhat particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the ‘property damage’ arises out of those operations.” The trial court granted Columbia Mutual’s motion for summary judgment and denied summary judgment for Schauf and Amberson. This appeal followed.
Summary judgment is proper when the moving party has demonstrated “that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Rule 74.04(c)(3). The sole issue in this case is one of law: whether the damage at the Sodaros’ house is excluded from coverage by an exclusion in Columbia Mutual’s policy, which provides in pertinent part:
B. Exclusions
1. Applicable to Business Liability Coverage-
This insurance does not apply to:
* * * *
k. “Property damage” to:
* * * *
(5) That particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, *77 if the “property damage” arises out of those operations;
The rules regarding the interpretation of insurance policies are well settled. The provisions of an insurance policy are read in the context of the policy as a whole.
Shaffner v. Farmers Mut. Fire Ins. Co.,
The issue presented here is one of first impression in Missouri. To address the issue, it is necessary to understand the purpose of Columbia Mutual’s policy in general and the instant exclusion in particular. The Columbia Mutual policy insures, among other things, certain property damage caused by accident to the property of others. The intent of policies such as the instant one is to protect against the unpredictable, potentially unlimited liability that can be caused by accidentally causing injury to other persons or their property.
Weedo v. Stone-E-Brick, Inc.,
A commercial general liability policy such as Columbia Mutual’s is not intended to protect business owners against every risk of operating a business. James T. Hendrick & James P. Wiezel,
The New Commercial General Liability Forms
— An
Introduction and Critique,
FICC Quarterly 319, 322 (Summer 1986). Some risks, termed “business risks,” are considered the responsibility of the business owner, rather than the insurer; consequently, they are excluded from coverage.
Id.
Business risks are those risks that are the “normal, frequent, or predictable consequences of doing business, and which business management can and should control and manage.”
Id.
Excluding such risks from
coverage
lowers insurance rates
and
provides an incentive for business owners to manage their businesses more effectively. Stewart Macaulay,
Justice Traynor and the Law of Contracts,
13 Stan. L.Rev. 812, 825-26 (1961). “The [bjusiness [rjisk [ejxclusions are based on the apparently simple premise that general liability coverage is not intended as a guarantee of the quality of an insured’s product or work.” Reference Handbook on the Comprehensive General Liability Policy: Coverage Provisions, Exclusions, and Other Litigation Issues 79 (Peter J. Neesen ed., 1995). In an attempt to give effect to the intent underlying both the coverage and exclusion provisions of commercial liability policies, courts have interpreted such policies as insuring the risk of the insured causing damage to other persons and their property, but not insuring the risk of the insured causing damage to the insured’s own work.
Weedo,
The exclusion at issue in this ease, an exclusion for property damage to “[tjhat particular part of real property on which [the insured]
1
is performing operations, if the ‘property damage’ arises out of those operations,” is a business risk exclusion.
Glens Falls Ins. v. Donmac Golf Shaping,
The instant exclusion is derived from an older exclusion for property in the “care, custody or control” of the insured.
See id.
As applied to real property on which the insured is performing operations, the “care, custody or control” exclusion was intended to exclude from coverage the business risk of faulty workmanship.
Royal Indem. Co. v. Smith,
When a standard endorsement to the standard policy containing the “care, custody or control” exclusion was drafted, the “care, custody or control” exclusion was replaced by exclusions designed to be more narrow, thus allowing more coverage.
Vinsant,
Against this background, the language of the instant exclusion can be analyzed to determine if the exclusion applies and, if so, the extent of property damage that it excludes from coverage. In order for the instant exclusion to apply, Schauf must have been performing operations on real property within the meaning of this provision. Perform means “to carry out or bring about: ACCOMPLISH, EXECUTE.” Webster’s Third New International Dictionary 1678 (1966). Operation is defined as “a doing or performing of a practical work....” Id. at 1581. In this context, on is “used as a function word to indicate the object of action or motion.” Id. at 1575. Real property in this case, as both parties agree, means the Sodaros’ house.
Both parties focus upon whether Schauf was performing operations on real property at the time he started the fire. Determining the applicability of the instant exclusion by examining whether Schauf was performing operations at the time of the damage is consistent with the use of the present tense
“is
performing operations.” This interpretation is also consistent with that given by courts and commentators to both the instant exclusion and its predecessor, the “care, custody or control” exclusion.
Action Auto Stores, Inc. v. United Capitol Ins. Co.,
At the time Schauf started the fire, he was in the Sodaros’ dining room finishing his cleaning of the spray equipment that he used to apply lacquer to the Sodaros’ kitchen cabinets thirty minutes earlier. When Schauf was cleaning his equipment, he was performing operations on real property within the meaning of this exclusion because he was performing part of his contract to paint the Sodaros’ house.
See Goldsberry Operating Co. v. Cassity, Inc.,
Schauf asserts that the exclusion does not apply. He argues that he was not performing operations on real property because he was cleaning his equipment before going home for the day, not painting the house. His urged narrow construction, however, disregards the fact that the object of his cleaning was to advance his work of painting the Sodaros’ house. To construe the exclusion so narrowly that it applies only at the moment an insured is intentionally touching the real property that is the object of his work would, in effect, read the exclusion out of the policy.
See Vinsant,
This conclusion gives effect to the intent of the provision at issue. The instant exclusion is designed to exclude from coverage the business risk of faulty workmanship.
Glens Falls,
Schauf next argues that the exclusion should not apply in this case because, he asserts, the fire was an accident and not the occurrence of faulty workmanship. Schaufs assertion disregards the fact that accidental damage can constitute a business risk.
*80
Goldsberry,
Having determined that the exclusion applies, this Court must determine its scope. The exclusion bars coverage only for the 'particular part of the real property on which the insured is performing operations. By using the words particular part, the provision evidences the intent to narrow the scope of the exclusion as much as possible. In other words, the subject of the insured’s work is defined with great specificity.
Although it may be possible to define the scope of the instant exclusion in the abstract, applying the exclusion to real property in eases such as the instant one is far from easy. Houses and buildings can be divided into so many parts that attempting to determine which part or parts are the subject of the insured’s operations can produce several reasonable conclusions. For example, the “particular part of the real property on which [the insured] is performing operations” could mean, as Columbia Mutual contends, “the entire area of real property that Schauf is scheduled to work.” Under this interpretation, any damage the insured causes to property in the area in which he was contracted to work would be excluded from coverage.
See William Crawford, Inc. v. Travelers Ins. Co.,
Another possible definition of the instant exclusion is that the “particular part of real property on which [the insured] is performing operations” is only the part of the property that is the subject of the insured’s work at the time of the damage. Under this interpretation, only the damage the insured causes to the particular part of the property that is actually the object of the insured’s work when the damage occurs is excluded from coverage; any other damage would not be subject to the exclusion. See Donald S. Malecki & Arthur L. Flitner, Commercial General Liability 43 (3rd ed.1990):
The purpose of [the “particular part” exclusion] is to exclude only “that particular part” of property on which work is being performed by or on behalf of the insured. For example, say that a subcontractor is erecting steel beams in a building. One of the beams falls, while being attached, and damages the work of the general contractor and other subcontractors. The general contractor, if held responsible for the loss, should be protected under its policy for damage caused by the beam, but coverage should not be expected for damage to the beam that fell_If considered real property, the beam is excluded as “that particular part of real property ...”
Each is a reasonable interpretation; thus, an ambiguity exists.
See Krombach v. May
flower
Ins. Co.,
Excluding coverage only for damage the insured causes to the property on which he is actually working also is consistent with the construction given the predecessor “care, custody or control” clause, which this exclusion was designed to narrow.
See e.g., Connie’s Constr.,
In accordance with the relevant maxims of construction and the language and purpose of the instant exclusion, this Court holds that the instant exclusion denies coverage for property damage to the particular part of the real property that is the subject of the insured’s work at the time of the damage, if the damage arises out of those operations.
Applying the holding to the facts of this case compels a conclusion that the exclusion applies to any damage to the kitchen cabinets. When the damage in this case occurred, Schauf was cleaning from his spray equipment the lacquer he had applied to the kitchen cabinets. Because cleaning the lacquer was the last step in the job of lacquering the kitchen cabinets, the kitchen cabinets were the particular part of the real property that was the subject of Schauf s operations at the time of the damage. Consequently, damage to the kitchen cabinets is excluded from coverage.
The judgment of the trial court is reversed, and the cause is remanded for further proceedings not inconsistent with this opinion.
Notes
. Because the phrase "you or any contractor or subcontractor working directly or indirectly on your behalf” is not at issue in this case, the references to this phrase in the exclusion here and henceforth are abbreviated as "the insured.”
.
Other cases cited by Columbia Mutual do not adopt Columbia Mutual’s proffered definition. These cases hold only that when an insured is performing operations on one area of a single unit of property, the unit of property is the "particular part” of property to which the exclusion applies.
Vinsant,
. Relying on the intent of the business risk exclusions in general, Schauf argues for another interpretation of the instant exclusion. Schauf asserts that if the exclusion does apply, it should apply to bar coverage only for the damage to Schauf s work, his paint job. Although Schauf’s contentions are consistent with the general purpose of the business risk exclusions, they contradict the language of the exclusion at issue here. The excluded damage is not for damage to "your work," which is the subject of another exclusion not at issue here, but is for damage to the "particular part of real property on which [the insured] is performing operations.” Schauf's paint was not the particular part of real property on which he was performing operations; consequently, the exclusion does not bar coverage only for damage to his paint job.
See Vinsant,