Lords Landing v. Continental Ins.

Filed: October 16, 1997
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 95-2568
Lords Landing Village Condominium Council of
Unit Owners,
Plaintiff - Appellant,
versus
The Continental Insurance Company,
Defendant - Appellee.
O R D E R
The Court amends its opinion filed September 17, 1997, as
follows:
On page 3, second full paragraph, line 7 -- the phrase "con-
tinuous of repeated exposure" is corrected to read "continuous or
repeated exposure."
For the Court - By Direction
/s/ Patricia S. Connor
Clerk
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
LORDS LANDING VILLAGE
CONDOMINIUM COUNCIL OF UNIT
OWNERS,
Plaintiff-Appellant,
No. 95-2568
v.
THE CONTINENTAL INSURANCE
COMPANY,
Defendant-Appellee.
On Remand from the United States Supreme Court.
(S. Ct. No. 96-1033)
Decided on Remand: September 17, 1997
Before WIDENER and NIEMEYER, Circuit Judges, and
PHILLIPS, Senior Circuit Judge.
_________________________________________________________________
Vacated and remanded by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
Kevin Thornton, KAPLAN & KAPLAN, P.A., Baltimore, Maryland,
for Appellant. Jeffrey R. Schmieler, Gregory Ryder Black,
SAUNDERS & SCHMIELER, Silver Spring, Maryland, for Appel-
lee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
The Council of Unit Owners at the Lords Landing Village Condo-
minium complex ("Unit Owners") successfully sued Wellington
Homes, the developer, and obtained a $1.1 million judgment for
numerous defects in the condominium complex. Specifically, the Unit
Owners complained that a defective fire protection system, faulty
insulation, and rotted wood which resulted from a painting subcon-
tractor's poor workmanship amounted to breaches of express and
implied warranties. The Unit Owners also complained that Welling-
ton Homes was guilty of misrepresentation in selling the condomin-
ium units.
Unable to collect the $1.1 million judgment from Wellington
Homes, the Unit Owners brought the present action against Continen-
tal Insurance Company, which had issued a general liability insurance
policy to Wellington Homes for the relevant period. The policy pro-
vided coverage for property damage if caused by an "occurrence,"
which was defined by the policy as "an accident, including continuous
or repeated exposure to substantially the same general harmful condi-
tions." Continental Insurance disputed coverage and defended the
action by arguing, in part, that the damage to the condominium com-
plex was the natural result of poor workmanship and thus not an "oc-
currence" as defined in the policy.
The district court agreed with Continental Insurance and held, as
a matter of law, that property damage that is the natural, probable
consequence of poor workmanship is not caused by an "accident," and
thus not by an "occurrence," regardless of whether the work was per-
formed by the contractor or a subcontractor.
On the basis of IA Construction Corp. v. T&T Surveying, Inc., 922
F. Supp. 1213 (D. Md. 1993); Reliance Ins. Co. v. Mogavero, 640 F.
Supp. 84 (D. Md. 1986); and Ed. Winkler & Son, Inc. v. Ohio Casu-
alty Ins. Co., 441 A.2d 1129 (Md. App. 1980), we affirmed, holding
that "``accident' means an ``undesigned, sudden and unexpected event,
usually of an afflictive or unfortunate character, and often accompa-
nied by a manifestation of force, but it does not mean the natural and
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ordinary consequences of a negligent act.'" Lords Landing Village
Condominium Council v. Continental Ins. Co., No. 95-2568, 1996
WL 439073 at *1 (4th Cir. Aug. 6, 1996), quoting IA Construction,
922 F. Supp. at 1215, quoting Ed. Winkler & Son, 441 A.2d at 1132.
We also refused to view the "accident" component of "occurrence"
subjectively, holding that to do so would be inconsistent with the lan-
guage of the policy and was not required by Maryland insurance law.
See id. at *1-2.
The Supreme Court granted the plaintiff's petition for writ of cer-
tiorari, vacated our decision, and remanded the case to us for recon-
sideration in light of the recent Maryland Court of Appeals decision
in Sheets v. Brethren Mutual Ins. Co., 679 A.2d 540 (Md. 1996). See
Lords Landing Village Condominium Council v. Continental Ins. Co.,
117 S. Ct. 1731 (1997).
In Sheets, in the context of determining whether an insurer's duty
to defend the insured included a duty to defend against claims of neg-
ligent misrepresentation, the Maryland Court of Appeals examined
the meaning of the term "occurrence" in a general liability policy
employing language virtually identical to that involved in the present
case. In that policy too, an occurrence was defined as "an accident,
including continuous or repeated exposure to substantially the same
general harmful conditions," although the policy did not further
define the term "accident." Sheets, 679 A.2d at 545. After discussing
the major lines of jurisprudence as developed in cases both in Mary-
land and elsewhere, the Maryland court clarified its precedents to
hold that "when a negligent act causes damage that is unforeseen or
unexpected by the insured, the act is an ``accident' under a general lia-
bility policy." Id. at 548 (emphasis added). This newly articulated
standard requires a factual determination of the subjective expecta-
tions of the insured with regard to the damages incurred, for the Court
of Appeals noted, "If we were to adopt an objective standard and hold
that the term ``accident' as used in liability insurance policies excludes
coverage for damage that should have been foreseen or expected by
the insured, such insurance policies would be rendered all but mean-
ingless." Id. at 549. The court expressly repudiated the foreseeability
analysis of Ed. Winkler & Son, on which we had earlier relied. See
Sheets, 679 A.2d at 549-50.
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Because the district court and the parties themselves did not have
the benefit of the Sheets decision at the time that the motion for sum-
mary judgment was originally presented to the district court, there has
thus far been no determination of the factual question of the insured's
subjective foresight with regard to the plaintiff's damages. Whether
this may be appropriately determined on summary judgment is best
considered by the district court. The court may also wish to reconsider
the parties' arguments with regard to the applicability of exclusions
from coverage also found in the policy -- arguments that it found
unnecessary to resolve in its original decision.
Accordingly, we vacate the district court's order and remand this
case to the district court for further consideration in light of the Sheets
decision to determine the applicability of that case and to consider
any other factual or legal arguments that may become relevant.
VACATED AND REMANDED
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