Michael Dolan v. Auto Owners Insurance Company

THIRD DIVISION
ELLINGTON, P. J.,
DILLARD and MCFADDEN, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules/
July 8, 2015
In the Court of Appeals of Georgia
A15A0384. DOLAN et al. v. AUTO OWNERS INSURANCE
COMPANY.
ELLINGTON, Presiding Judge.
Auto Owners Insurance Company filed this declaratory judgment action
seeking a determination that certain provisions contained in its commercial general
liability policy excluded coverage to its insured, Anthony Hite d/b/a Air Mechanix,
L.L.C. (“Air Mechanix”), for claims arising from Air Mechanix’s alleged negligent
installation of air conditioning ductwork into the home of Michael Dolan and Shana
Jackson. The trial court granted summary judgment to Auto Owners. For the
following reasons, we affirm in part and reverse in part.
To prevail on a motion for summary judgment, the moving party must
demonstrate that there is no genuine issue of material fact, and that the undisputed
facts, viewed in a light most favorable to the party opposing the motion, warrant
judgment as a matter of law. OCGA § 9-11-56 (c); Lau’s Corp. v. Haskins, 261 Ga.
491 (405 SE2d 474) (1991).
In brief sum, the pertinent facts are as follows. Dolan and Jackson filed a
complaint against Air Mechanix, among others,1 in the State Court of Chatham
County, asserting claims of negligence per se, professional and simple negligence,
and fraud. The complaint alleged that in March 2009, Air Mechanix replaced the duct
system of the air conditioning unit in their residence. In June 2009, Dolan and
Jackson discovered mold growth on the vent covers. An independent contractor
ultimately concluded that the duct system, which contained holes, gaps, loose
connections, and insufficient mastic, had been defectively installed in violation of the
applicable city ordinances, resulting in excessive moisture and mold contamination
throughout the residence. Dolan and Jackson allege that they grew ill with respiratory
problems as a result and were subsequently forced to vacate the residence and
abandon their personal belongings. Their complaint seeks to recover repair costs,
moving costs, expenses associated with rental property, costs of living, costs related
1
Dolan and Jackson’s complaint against several other defendants was the
subject of a separate appeal, Case Number A14A1066, and the trial court’s order in
that case was affirmed in an unpublished opinion.
2
to the replacement of personal property, medical expenses, punitive damages,
attorneys fees, and costs of litigation.
Auto Owners, as insurer of Air Mechanix, filed the instant declaratory
judgment action and sought summary judgment that Dolan and Jackson’s claims were
excluded under the terms of its commercial general liability policy. The policy at
issue has a general aggregate policy limit of $2,000,000 (for claims other than
“products-completed operations”), and an additional “products-completed operations”
aggregate limit of $2,000,000.
Under the general heading of “SECTION I - COVERAGES” and as a subset
of “COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY,”
the policy contains a provision entitled “Exclusions.” Auto Owners contends that
Dolan and Jackson’s property claims are defeated by Exclusions (j) (6) and (j) (7),
which provide:
2. Exclusions
This insurance does not apply to:
...
(j) Damage to Property
3
“Property Damage”2 to:
...
(6) That particular part of real property on which any insured or any
contractors or subcontractors working directly or indirectly on your
behalf are performing operations, if the “property damage” arises out of
those operations; or
(7) That particular part of any property that must be restored, repaired
or replaced because “your work”3 was incorrectly performed on it.
...
Paragraph (7) of this exclusion does not apply to “property damage”
included in the “products-completed operation hazard.”
The policy defines “products-completed operation hazard” as property damage or
bodily injury occurring away from property owned by the Air Mechanix and “arising
2
The policy defines “property damage” as “[p]hysical injury to tangible
property, including all resulting loss of use of that property” or “[l]oss of use of
tangible property that is not physically injured.”
3
The policy defines “your work” as “[w]ork or operations performed by you
or on your behalf” and “[m]aterials, parts or equipment furnished in connection with
such work or operations.”
4
out of . . . [Air Mechanix’s] work . . . when all the work to be done at the job site has
been completed.”
Additionally, Auto Owners asserts that Dolan and Jackson’s personal injury
claims are defeated by a separate endorsement pertaining to damage caused by “fungi
or bacteria” (the “Fungi Endorsement”). The Fungi Endorsement excludes coverage
for any “‘bodily injury’ arising out of . . . ‘[a] fungi or bacteria incident,’” and
includes in its definition of “fungi” all “mold, mildew, mycotoxins, spores, scents or
byproducts produced or released by any type or form of fungus.” A “fungi or bacteria
incident” is defined as:
an incident which would not have occurred, in whole or in part, but for
the actual, alleged or threatened inhalation of, ingestion of, contact with,
exposure to, existence of, or presence of, any “fungi” or bacteria on or
within a building or structure, including its contents, regardless of
whether any other cause, event, material or product contributed
concurrently or in any sequence to such damage.
The endorsement also limits coverage for “property damage” resulting from a “fungi
or bacteria incident” to $50,000.
The trial court held that Dolan and Jackson’s claims were defeated in their
entirety by Exclusions (j) (6) and (j) (7), quoted above. The trial court further held
5
that their bodily injury claims were excluded by the Fungi Endorsement, which it
noted also limited recovery for property damage to $50,000. This appeal follows.
We begin our analysis by noting that
[a]s with any other contract, where the terms of an insurance contract are
clear and unambiguous, and capable of only one reasonable
interpretation, the court is to look to the contract alone to ascertain the
parties’ intent. Even when the trial court is authorized to construe an
insurance contract, because a pertinent provision is ambiguous, the trial
court must construe strictly against the insurer any ambiguities in the
contract and any exclusion from coverage sought to be invoked by the
insurer as drafter of the document and must read the insurance contract
in accordance with the reasonable expectations of the insured where
possible.
(Citations and punctuation omitted.) Henderson v. Georgia Farm Bureau Mut. Ins.
Co., 328 Ga. App. 396, 399 (1) (762 SE2d 106) (2014). Moreover, “[a]n insurer
seeking to defeat a claim based on a policy exclusion has the burden of proving that
the exclusion is applicable, and the absence of evidence does not prove the exclusion
applies.” (Citation omitted.) Hathaway Dev. Co. v. Am. Empire Surplus Lines Ins.
Co., 301 Ga. App. 65, 70 (3) (686 SE2d 855) (2009); see Am. Strategic Ins. Corp. v.
Helm, 327 Ga. App. 482, 486 (759 SE2d 563) (2014) (“[A]n insurer seeking to
invoke a policy exclusion carries the burden of proving its applicability in a given
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case, with the exclusion to be strictly construed against the insurer.”) (citation and
punctuation omitted).
1. Property Damage. Dolan and Jackson argue that the trial court erred in
holding that their claims for property damage were defeated by the Exclusions (j) (6)
and (j) (7). Specifically, they contend that the “Exclusions” subsection in its entirety
applies only to claims falling within the general aggregate policy limit, as opposed
to those falling within the products-completed operations aggregate. They assert
instead that the “products-completed operations hazard” has a separate and distinct
set of exclusions contained within its definition. They further argue that, in any event,
Exclusions (j) (6) and (j) (7) do not extend to work already completed, thus included
in the “products-completed operations hazard,” as that term is defined in the policy.
We reject Dolan and Jackson’s over-generalized proposition that the
“Exclusions” provision in the policy never limits claims falling within the product-
completed operations aggregate. That position has no support in a plain reading of the
document. See York Ins. Co. v. Williams Seafood of Albany, Inc., 273 Ga. 710, 712
(1) (544 SE2d 156) (2001) (noting that an insurance policy “should be read as a
layman would read it”). The “Exclusions” subsection is located on the
“COMMERCIAL GENERAL LIABILITY COVERAGE FORM” under the heading
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“SECTION I - COVERAGES[.] COVERAGE A. BODILY INJURY AND
PROPERTY DAMAGE LIABILITY,” and begins with the general proposition that
“This insurance does not apply to . . . .” Nothing in the language of the policy
supports that the Exclusions provision should be limited as Dolan and Jackson
suggest. See Ryan v. State Farm Mut. Auto. Ins. Co., 261 Ga. 869, 872 (413 SE2d
705) (1992) (looking at the policy as a whole and considering the “ordinary and legal
meaning of the words employed” in order to ascertain the intended allocation of
coverage and costs).
Nevertheless, we agree with Dolan and Jackson to the extent that they argue
that Exclusions (j) (6) and (j) (7) do not bar coverage for their claims. Exclusion (j)
(6) excludes coverage for property damage arising out of operations that Air
Mechanix or anyone on its behalf “are performing.”4 The policy’s use of the present
tense verb, at the very least, creates an ambiguity as to whether it was intended to
include completed work. And because ambiguities will be construed against Auto
4
We note that the question as to whether the specific claims being asserted by
Dolan and Jackson otherwise fall within the scope of Exclusion (j) (6) is not currently
before us and will not be addressed. See generally Transp. Ins. Co. v. Piedmont
Const. Grp., LLC., 301 Ga. App. 17, 18-19 (1) (686 SE2d 824) (2009) (exploring the
breadth of “that particular part of real property” in a nearly identically worded
exclusion when damage caused by faulty workmanship extends beyond that of the
contractor’s work itself).
8
Owners, the drafter, and in favor of coverage, we will narrowly read the exclusion to
apply only to work currently being performed. See Hathaway Dev. Co., 301 Ga. App.
at 73 (3) (holding that policy provision excluding coverage for property damage on
which insured was “performing operations” did not apply to completed work).
Likewise, as admitted by Auto Owners, Exclusion (j) (7) has no application to
completed work. By its express terms, the exclusion “does not apply to ‘property
damage’ included in the ‘products-completed operations hazard.’”5 Dolan and
Jackson contend that all of the work to be done by Air Mechanix at their residence
had been completed prior to the damage so as to fall within the “[p]roducts-completed
operations hazard,” and the record contains no evidence to dispute that assertion. It
follows that Auto Owners failed to meet its burden of proving that Exclusion (j) (7)
defeated Dolan and Jackson’s claims. See Hathaway Dev. Co., 301 Ga. App. at 70
(3).
5
We do not agree with Auto Owners that a separate provision excluding
coverage for “‘[p]roperty damage’ to ‘your work’ arising out of it or any part of it and
included in the ‘products-completed operations hazard’” applies to these claims.
“Your work” is defined in the policy as “[w]ork . . . performed by you or on your
behalf” and “[m]aterials, parts or equipment furnished in connection with such work
or operations.” This clearly does not exclude from coverage costs associated with
damage to the residence and other personal property stemming from mold
contamination and excess moisture.
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2. Bodily Injury. Dolan and Jackson further argue that the trial court erred in
holding that the Fungi Endorsement defeats their claims for bodily injury. This
contention, however, is based upon the same argument that we rejected in Division
1; namely, that the Fungi Endorsement does not apply to claims falling within the
products-completed operations aggregate. The endorsement modifies the “commercial
general liability coverage” and is an added exclusion to the policy’s coverage of
bodily injury and property damage liability. Nothing in the language of the Fungi
Endorsement or the policy itself justifies a conclusion that it was not intended to limit
coverage falling within the products-completed operations aggregate. See Ryan, 261
Ga. at 872.
In sum, we reverse the trial court’s order and judgment to the extent that it held
that Dolan and Jackson’s property damage claims were defeated by Exclusions (j) (6)
and (j) (7), but affirm the trial court’s ruling that recovery for their bodily injury
claims are barred by the Fungi Endorsement, which also limits the recovery on their
property damage claims to $50,000.
Judgment affirmed in part and reversed in part. Dillard and McFadden, JJ.,
concur.
10