It’s an ill wind that blows no coverage
On the night of Christmas Eve or early on Christmas Day in 2014, strong winds blew through the town of Georgia, Vermont, causing a partially constructed livestock barn to collapse. Commercial Construction Endeavors, Inc. (CCE), the contractor that was building the barn, sought recompense for the resulting losses from its insurer, Ohio Security Insurance Company.
Ohio Security determined that CCE was at fault because the barn was not properly braced to withstand the weather conditions and that the resulting loss was covered under an endorsement for “Off[-]Premises Property Damage Including Care, Custody, or Control,” which provided coverage for damage to real property on which CCE was performing operations where the damage resulted from those operations. Ohio Security paid CCE $24,750—the full amount available under that endorsement, less a $250 deductible.
Although Ohio Security indicated that the off-premises endorsement payment exhausted the coverage available under the policy, CCE asserted that coverage also was available under the “Property Floater Coverage Form” included therein.
Section B of the floater, titled “Exclusions,” provided that the insurer would not pay for “loss” caused by or resulting from “[c]ollapse” except as provided in the Additional Coverage – Collapse section of the Coverage Form.”
Ohio Security determined that CCE’s loss was not covered under the floater, advising CCE that the policy did not provide coverage for materials after they have been installed into the building project. CCE sued Ohio Security for breach of contract, contending that coverage lay under A(4)(a) and (f) of the floater.
In the first of two summary judgment motions, Ohio Security argued that its off-premises endorsement payment exhausted the coverage available for the barn’s collapse under the policy because: the property floater, in section A, unambiguously limited its coverage to losses to “Covered Property”; “Covered Property” was defined as “[b]usiness personal property”; and the unfinished barn did not meet the definition of “business personal property” in A(1) because it was comprised of materials that had already been installed in a structure. In its response, CCE disputed that the components of the barn were transformed from business personal property to real property upon installation but argued that such characterization was irrelevant in any event because the “Additional Coverage – Collapse” subsection—in contrast to other portions of the floater—did not expressly limit coverage to “Covered Property,” and therefore the coverage provided by that subsection was not confined to business personal property.
The court categorized the barn as real property, not business personal property, but denied Ohio Security’s summary judgment motion. Because it found merit in both parties’ arguments, it concluded that the policy was necessarily ambiguous. Thus the court held that the “Additional Coverage – Collapse” subsection was not limited to “Covered Property” as defined therein.
In its second summary judgment motion, Ohio Security argued that the “Debris Removal” provision in the property floater at A(5)(a) did not provide coverage for costs incurred by CCE in removing the collapsed structure because these costs were not submitted within the 180-day timeframe set forth in the policy, and in any event the debris removal coverage extension was explicitly limited to “Covered Property,” and in any event the unfinished barn was not “Covered Property.” CCE no longer argued that the barn was “Covered Property,” conceding that the debris removal provision was thus inapplicable. It asserted, however, that it could recoup debris removal costs through the “Additional Coverage – Collapse” provision as the court construed it in response to the first summary judgment motion because debris removal constituted a “loss.” The court concluded that the 180-day deadline did not bar coverage because Ohio Security failed to show prejudice but determined that the express provision for debris removal coverage in A(5)(a) compelled the conclusion that debris removal was not covered in the collapse coverage in A(4) by its use of the general term “loss.”
The court held that CCE’s rebuilding expenses were covered under the policy but the cost of debris removal was not. CCE appealed, and Ohio Security cross-appealed.
With respect to the trial court’s finding that the Ohio Security policy was ambiguous, the high court found that it was not because the first sentence of section A stated that Ohio Security would pay only for “loss” to covered property. The fact that the phrase “Covered Property” was not explicitly included in subsection A(4), although it was repeated in some other subsections, did not alter the court’s conclusion. The trial court’s ruling on the first summary judgment motion was reversed.
This holding, the court said, compelled its ruling on Ohio Security’s second summary judgment motion, from which CCE had appealed. Regardless of whether the term “loss” as used in the property floater encompassed debris removal as CCE asserted, for the reasons set forth above, the court said no coverage was available under “Additional Coverage – Collapse” in A(4) of the floater. The debris removal was not a loss involving business personal property. As a result, it was not a loss to “Covered Property.” The trial court’s ruling on the second summary judgment motion was affirmed.
Commercial Construction Endeavors, Inc., v. Ohio Security Insurance Company—Supreme Court of Vermont—December 13, 2019—No. 2019-045.