Hathaway Development Co. v. Illinois Union Insurance

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
APRIL 18, 2008
THOMAS K. KAHN
No. 07-15155
CLERK
Non-Argument Calendar
________________________
D. C. Docket No. 07-00118-CV-MHS-1
HATHAWAY DEVELOPMENT COMPANY, INC.,
Plaintiff-Appellant,
versus
ILLINOIS UNION INSURANCE COMPANY,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(April 18, 2008)
Before MARCUS, WILSON and HILL, Circuit Judges.
PER CURIAM:
Plaintiff, general contractor/developer Hathaway Development Company,
Inc. (Hathaway), appeals from the district court’s order granting summary
judgment to the defendant, Illinois Union Insurance Company (IUI). In this
diversity action, Hathaway seeks to recover its construction costs of repair under
the terms of the general liability insurance policy (the Policy) issued to it by IUI
for the period May 30, 2005, to May 30, 2006.
Hathaway alleges that the costs were necessarily incurred in order to correct
the faulty workmanship of four subcontractors on three separate apartment
complex construction projects. The district court held that Hathaway could not
recover under the terms of the Policy. After thorough review of the record and
careful consideration of the parties’ briefs, we agree and, accordingly, affirm.
I.
The relevant facts are straightforward. The three Hathaway apartment
complexes and their respective subcontractors are: (1) Walden at Bartram Springs,
Jacksonville, Florida (Walden), Whisnant Contracting Company (Whisnant); (2)
Village Highlands, East Point, Georgia (Village), Admiral Concrete, Atlanta
Modular and Highlands Engineering; and (3) Walden Legacy, Knoxville,
Tennessee (Legacy), plumbing subcontractor Whisnant and Admiral Concrete.
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A.
On or about August or September 2005, Hathaway claims that Whisnant
installed the wrong-sized dishwasher supply line pipe in the underslab plumbing in
Walden.1 Hathaway demanded that it be replaced. The delay caused by the
demand for pipe replacement allowed the building pad’s compacted subgrade to be
exposed to the elements. When a major rainstorm occurred in late September or
early October 2005, the supply line pipes floated out of the ground, ruining the
building pad. The building pad had to be redone. Pursuant to Hathaway’s
warranty to the owner, it repaired the water-damaged Walden property in
November 2005.2
B.
In June 2005, due to a poorly designed (too low) foundation wall and the
improper installation of a drainage pipe behind the wall, preventing proper
drainage, water began leaking into the Village apartments. During that summer,
Hathaway undertook to repair the damage. In August 2005, it notified Admiral
Concrete, Atlanta Modular and Admiral Engineering of their potential liability for
1
Additionally, Whisnant did not have a Florida plumbing permit. Therefore, it could not
obtain an inspection to approve its installation, causing further delays.
2
Hathaway notified Whisnant’s insurer of the damage in late September or early October
2005.
3
shoddy workmanship.3 Repair and replacement continued through the fall of 2005,
with Hathaway paying for demolition, insulation, drywall, cabinets, trim, doors,
flooring and paint. Although Hathaway discussed the liability issue during this
period of time with the subcontractors, their insurers and their claims investigators,
nothing was resolved, and Hathaway finally contacted its insurance agent on
January 27, 2006. IUI received actual notice from Hathaway’s insurance agent on
February 13, 2006.
C.
On August 20, 2005, another dishwasher supply line installed by Whisnant
and Admiral Concrete ruptured at Legacy, damaging four units. Hathaway told the
subcontractors to contact their liability insurers on August 22, 2005.4 Hathaway
replaced the carpet, vinyl flooring, cabinets, paint and trim caused by the water
damage.5
II.
We review the district court’s grant of summary judgment de novo. See
Anderson v. Unum Provident Corp., 369 F.3d 1257, 1262 (11th Cir. 2004) (citation
3
Hathaway alleges that Admiral Concrete did not use the waterproofing membrane
specified for the retaining walls but, instead, substituted a damp proof spray, causing cracks in
the foundation walls.
4
The damage to one unit alone was $101,288.31.
5
Hathaway is not seeking the costs of replacing the dishwasher supply lines.
4
omitted). A motion for summary judgment should be granted when “the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law.” Id., citing
Fed.R.Civ.P. 56(c). In making this assessment, “we must view all the evidence and
all factual inferences reasonably drawn from the evidence in the light most
favorable to the nonmoving party.” Id. (citation omitted).
III.
Hathaway raises six issues on appeal. We discuss each in turn.
A.
Hathaway claims that, in its summary judgment order, the district court
improperly placed the burden of proof upon Hathaway, the insured, to disprove the
application of three certain insurance exclusions in the policy (the recall exclusion,
the mold exclusion and the business risk exclusion) barring its claim. Hathaway
claims that IUI, the insurer, did not even attempt to meet its burden, but instead
tried to shift its burden of proof to Hathaway, the insured. 6
In its brief, IUI does not dispute that it has the initial burden of proving that
the three pertinent policy exclusions apply. It merely claims that the district court
6
Hathaway cites no portion of the record evidence to support this allegation, however.
5
opinion cites undisputed evidence set forth in the record by IUI in support of its
judgment that the exclusions apply.
We have studied the record. We agree with IUI that the district court
opinion does not determine that Hathaway had the burden of proof as to the policy
exclusions, instead of IUI. We also agree with IUI that it presented undisputed
evidence in the record to indicate, many times through Hathaway’s own
admissions, that these three exclusions applied. This issue, therefore, is without
merit.
B.
Next, Hathaway claims the district court erred in determining that it did not
provide IUI with timely notice of the occurrence that might result in a claim as
soon as practicable under Georgia law. Hathaway claims that the notice provision
was not a “condition precedent” of recovery under the Policy, and, that it gave
notice as soon as was practicable under the circumstances.7
The notice condition in the Policy requires that “[the insured] must see to it
that [IUI is] notified as soon as practicable of an ‘occurrence’ or an offense which
may result in a claim . . . .” Hathaway admits that it did not notify IUI until eight
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Hathaway repaired, remedied and/or otherwise covered up the shoddy workmanship of
the subcontractors before IUI was aware there were problems. Prompt notice would have given
IUI the opportunity to inspect the workmanship, prior to any repairs being made, in order to
make an informed decision.
6
months after the events occurred at Village, more than five months after the events
occurred at Legacy, and more than four months after the events occurred at
Walden.8
The district court held that, whether notice is timely is usually a question of
fact; however, “an unexcused significant delay may be unreasonable as a matter of
law.” Canadyne-Georgia Corp. v. Continental Ins. Co., 999 F.2d 1547, 1555 (11th
Cir. 1993) (citation omitted). We agree with the district court that Georgia courts,
applying similar notice requirements, have held that delays such as are present here
are unreasonable as a matter of law. See, e.g., Allstate Ins. Co. v. Edwards, 237
F.Supp. 195, 197-98 (N.D.Ga. 1964)(nine months); Caldwell v. State Farm Fire &
Cas. Ins. Co.. 385 S.E. 2d 97 (Ga. 1989)(nine to ten months); Bituminous Cas.
Corp. v. J. B. Forrest & Sons, Inc., 209 S.E. 2d 6 (Ga. 1974)(four-month delay).
This issue is affirmed.9
C.
Hathaway’s next issue is that the district court erred in determining that it
failed to comply with the condition in the Policy prohibiting the voluntary making
8
The record indicates that Hathaway was aware of the incidents which occurred from
May 2005 to October 2005, yet did not send notice to its insurance agent until January 29, 2006.
IUI received actual notice on February 13, 2006.
9
Any further arguments Hathaway makes in regard to this issue, i.e., that the Policy fails
to use the exact words “condition precedent,” etc., are without merit.
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of payments or of assuming obligations. The Policy reads: “No insured will,
except at that insured’s own cost, voluntarily make a payment, assume any
obligation, or incur any expense, other than for first aid, without [IUI’s] consent.”
The undisputed facts in the record in this case indicate that Hathaway
breached the Policy by undertaking to fix defects and make payments to residents,
albeit with good intention, yet without IUI’s prior consent. See note 7 supra. The
language is clear, and the district court was correct, in determining that Hathaway
made such payments at its peril and not at the cost of the insurer. We affirm the
judgment of the district court that Hathaway breached the condition of the Policy
prohibiting voluntary payments.
D.
The next issue Hathaway raises on appeal is that the district court erred in
determining that there was no “occurrence” as that term is defined in the Policy
and under Georgia law. The Policy provides: “This insurance applies to ‘bodily
injury’ and ‘property damage’ only if . . . [t]he ‘bodily injury’ or ‘property
damage’ is caused by an ‘occurrence’ . . . .” The Policy defines an “Occurrence”
as “an accident, including continuous or repeated exposure to substantially the
same general harmful condition.”
The district court determined, and we agree, that in this case the
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subcontractors’ work on the projects was “an injury accidentally caused by
intentional acts.” See Owners Ins. Co. v. James, 295 F.Supp. 2d 1354, 1364
(N.D.Ga. 2003). It does not constitute an accident under the Policy, and therefore
any damage resulting from that work is not covered. Id. at 1363-65.
E.
The fifth issue raised on appeal by Hathaway is that the district court erred
in determining that Hathaway was not legally obligated to pay the damages at issue
in this appeal. Using the same reasoning and analysis of Part III.C. , supra,
we affirm the judgment of the district court on this issue.
F.
We combine Hathaway’s sixth (recall exclusion), seventh (mold and fungi
exclusion) and eight (business risk exclusion) issues into one issue. That is, did the
district court err in determining that any one or all of these exclusions barred
Hathaway’s claim under the Policy?
First, as to the recall exclusion, the Policy excludes coverage of damages
incurred for the “repair . . . of . . . ‘your work’ . . . if such . . . work . . . is
withdrawn or recalled . . . from use by any person or organization because of a
known or suspected defect, deficiency, inadequacy or dangerous condition in it.”
The district court determined, and, after reading the record evidence, we agree, that
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Hathaway admitted that the damage to work performed at Walden and Village was
caused by the faulty workmanship of its subcontractors. It also admits that such
damage occurred while Hathaway and/or its subcontractors were performing work
at these projects. Therefore, the cost of damage repair is excluded under the
business risk exclusion of the Policy.
Secondly, as to the mold and fungi exclusion, the Policy excludes coverage
of any property damage “which would not have occurred . . . but for the . . .
presence of . . . any ‘fungi’ or bacteria on or within a building or structure . . .” as
well as the costs “arising out of the abating, . . . , cleaning up, removing, . . .
remediating or disposing of, or in any way responding to . . . ‘fungi’ or bac-
teria . . . .” “Fungi” is defined in the Policy as “any type or form of fungus,
including mold or mildew . . . .” The district court determined, and, after our
review of the record, we agree, that Hathaway admits that it is seeking the recovery
of its expenses incurred to clean up, remove and remediate mold, fungi and
bacteria at the Village and Legacy projects. Therefore, the cost of clean up is
excluded under the mold exclusion provision of the Policy.
Finally, as to the business risk exclusion, the Policy provides that the
insurance does not apply to “‘[p]roperty damage’ to . . . (5) [t]hat particular part of
real property on which you or any contractors or subcontractors working directly
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or indirectly on your behalf are performing operations, if the ‘property damage’
arises out of those operations; or . . . (g) [t]hat particular part of any property that
must be restored, repaired or replaced because ‘your work’ was incorrectly
performed on it.” The district court determined, and, after our review of the
record evidence, we agree that Hathaway is trying to recover its costs associated
with repairing and replacing faulty workmanship or work that was “withdrawn
from use” at the projects. Therefore, the costs of repair are excluded under the
business risk exclusion provision of the Policy.
IV.
Accordingly, we affirm the judgment of the district court granting IUI’s
motion for summary judgment.
AFFIRMED.
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