Hobson Construction Co. v. Great American Insurance

322 S.E.2d 632 (1984)

HOBSON CONSTRUCTION COMPANY, INC., Richard D. Wood and Margaretta Wood
v.
GREAT AMERICAN INSURANCE COMPANY.

No. 8328SC1211.

Court of Appeals of North Carolina.

December 4, 1984.

William E. Greene, Asheville for plaintiff-appellant Hobson Const. Co., Inc.

Van Winkle, Buck, Wall, Starnes & Davis by Larry C. Harris, Jr. and Robert H. Haggard, Asheville, for plaintiffs-appellants Richard D. Wood and Margaretta Wood.

Roberts, Cogburn, McClure & Williams by Isaac N. Northup, Jr., and Landon Roberts, Asheville, for defendant-appellee Great American Ins. Co.

EAGLES, Judge.

I

A declaratory judgment action is designed to establish in an expeditious fashion the rights, duties and liabilities of parties in situations usually involving an issue of law or the construction of a document where the facts involved are largely undisputed. Its purpose is to settle uncertainty in regard to the rights and status of parties where there exists a real controversy of a justiciable nature. Wright v. McGee, 206 N.C. 52, 173 S.E. 31 (1934). All orders, judgments and decrees in an action for declaratory judgment may be reviewed as other orders, judgments and decrees. G.S. 1-258. Declaratory judgment is appropriate for the construction of insurance contracts and in determining the extent of coverage under an insurance policy. Insurance Co. v. Simmons, Inc., 258 N.C. 69, 128 S.W.2d 19 (1962). The trial court properly undertook to interpret and apply the insurance policy in question to the facts here.

II

In this appeal, appellants assign the following five issues as error:

(1) Refusal of the trial court to find as fact and conclude as a matter of law that the Woods sustained "property damage" as that term is defined in the policy of insurance in question by virtue of the Woods' loss of use of the concrete arch dam for its intended purpose.

(2) Refusal of the trial court to find as fact and conclude as a matter of law that repeated flowing of impounded water under the foundation of the dam was an "occurrence" as that term is defined in the policy of insurance in question.

(3) Refusal of the trial court to find as fact and conclude as a matter of law that Hobson contracted with Great American for "completed operations coverage" and that the "occurrence" arose out of a "completed operations hazzard" as that term is defined by the policy of insurance in question.

(4) Refusal of the trial court to find as fact and conclude as a matter of law that certain exclusions contained within the policy of insurance in question are inconsistent, ambiguous, and susceptible of two interpretations, thereby affording coverage that would obligate Great American to satisfy the Woods' judgment against Hobson.

(5) The trial court's signing and entry of the judgment in this matter.

Appellee responds saying that there has been no showing of the "property damage" alleged by appellants to have arisen out of the loss of use of uninjured or undestroyed tangible property. We agree with appellee. Further, we find this issue dispositive of the appeal since appellants must prevail on this first issue in order for us to reach the remaining four issues.

We note that the insured here, the plaintiff-appellant Hobson, has the burden of bringing itself within the insuring language of the policy. Once it has been determined that the insuring language embraces the particular claim or injury, the burden then shifts to the insuror to prove that a policy exclusion excepts the particular injury from coverage. Nationwide Mutual Fire Ins. Co. v. Allen, 68 N.C.App. 184, 314 S.E.2d 552 (1984). Our examination of the record before us reveals that Hobson has failed to show that the loss complained of is embraced within the insuring language of the policy. Consequently, we need not reach the issue of whether the complained of injury is excepted from coverage by an exception in the policy of insurance.

As applied to the facts in this case, in order for coverage to exist under the general liability insurance policy issued by Great American to Hobson, the insured (Hobson) must have become legally obligated to pay damages as a result of "property damage." If "property damage" occurred while the policy was in effect, the insuror must pay the legal damages due to such "property damage" absent some exclusion contained in the policy. On the other hand, if no "property damage" (as defined in the policy) occurred, the insuror would not be liable under the policy.

Property damage is defined in the policy of insurance as:

(1) Physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or

(2) Loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

In their pleadings in the original action, appellants Woods alleged that due to the breach of contract by Hobson and Edens, appellants Woods incurred damage "in the nature of repair and cost of completion of the project." The pleadings do not allege physical injury or destruction of tangible property which might be compensable under the first quoted policy definition, nor do the pleadings allege "loss of use" of tangible property which has not been physically injured or destroyed due to an occurrence which might be compensable under the second quoted definition. Plaintiff-appellants Woods and Hobson now (for the first time) argue, on appeal of the declaratory judgment, that compensable "property damage" occurred when the Woods lost the use of tangible personal property—the dam constructed by Hobson, the insured—due to the dam's failure to hold water and the ensuing order to drain the lake, all of which were due to the failure of Hobson and Edens to complete their contractual obligations. The damages awarded by the jury at trial were awarded on the basis of repair and completion cost and not on the basis of loss of use. There is no evidence in the record before us to indicate any evidence of damages resulting from loss of use, which is the theory of recovery argued on appeal by appellants.

We hold that appellants have failed to bring their particular injury within the insuring language of the policy. The order of the trial court is affirmed.

Our resolution of the first assignment of error disposes of the appeal and makes it unnecessary to consider appellants' remaining assignments of error.

Affirmed.

WEBB and BRASWELL, JJ., concur.