Filed: Oct. 31, 2008
Latest Update: Feb. 12, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 07-1525 TRAVELERS INDEMNITY COMPANY OF AMERICA; THE TRAVELERS INDEMNITY COMPANY, Plaintiffs - Appellees, COLONY INSURANCE COMPANY; DONEGAL GROUP, INCORPORATED, Defendants – Appellees, and FOUNDATIONS UNLIMITED, INCORPORATED; NICHOLAS JOHN ALAN WHITE, Defendants, v. TOWER-DAWSON, LLC, Defendant – Appellant. Appeal from the United States District Court for the District of Maryland, at Baltimore. William D. Quarles, Jr., District
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 07-1525 TRAVELERS INDEMNITY COMPANY OF AMERICA; THE TRAVELERS INDEMNITY COMPANY, Plaintiffs - Appellees, COLONY INSURANCE COMPANY; DONEGAL GROUP, INCORPORATED, Defendants – Appellees, and FOUNDATIONS UNLIMITED, INCORPORATED; NICHOLAS JOHN ALAN WHITE, Defendants, v. TOWER-DAWSON, LLC, Defendant – Appellant. Appeal from the United States District Court for the District of Maryland, at Baltimore. William D. Quarles, Jr., District ..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-1525
TRAVELERS INDEMNITY COMPANY OF AMERICA; THE TRAVELERS
INDEMNITY COMPANY,
Plaintiffs - Appellees,
COLONY INSURANCE COMPANY; DONEGAL GROUP, INCORPORATED,
Defendants – Appellees,
and
FOUNDATIONS UNLIMITED, INCORPORATED; NICHOLAS JOHN ALAN
WHITE,
Defendants,
v.
TOWER-DAWSON, LLC,
Defendant – Appellant.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District
Judge. (1:05-cv-02644-WDQ)
Argued: September 24, 2008 Decided: October 31, 2008
Before WILKINSON, Circuit Judge, HAMILTON, Senior Circuit Judge,
and James C. CACHERIS, Senior United States District Judge for
the Eastern District of Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Michael Evan Jaffe, THELEN, REID, BROWN, RAYSMAN &
STEINER, L.L.P., Washington, D.C., for Appellant. Lee Hedgecock
Ogburn, KRAMON & GRAHAM, Baltimore, Maryland, for Appellees. ON
BRIEF: Todd J. Wagnon, THELEN, REID, BROWN, RAYSMAN & STEINER,
L.L.P., Washington, D.C., for Appellant. Stuart M. G. Seraina,
KRAMON & GRAHAM, Baltimore, Maryland, for Appellees Travelers
Indemnity Company of America and The Travelers Indemnity
Company; Laura Campbell Walters, DRECHSLER, LARKIN & WALTERS,
P.C., Baltimore, Maryland, for Appellee Colony Insurance
Company; Michael B. Mann, MANN & CASEY, P.A., Towson, Maryland,
for Appellee Donegal Group, Incorporated.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Tower-Dawson, LLC (Tower), the developer of The Villages at
Tower Oaks (Tower Oaks), a residential development in Rockville,
Maryland, appeals the district court’s grant of summary judgment
on its claim that Travelers Indemnity Company of America,
Travelers Indemnity Company, Colony Insurance Company, and
Donegal Group (collectively the Insureds) had an obligation to
indemnify Foundations Unlimited, Inc. (Foundations) for the
costs incurred by Tower in installing a new retaining wall in
front of the defective one Foundations installed in Tower Oaks
and for the costs to repair federally-protected wetlands located
adjacent to Tower Oaks which were damaged by Tower during its
installation of the new retaining wall. For the reasons that
follow, we affirm.
I
The Insureds issued commercial general liability (CGL)
policies (the Policies) to Foundations, covering a time period
beginning on August 28, 1995 and ending on August 28, 2003. The
Policies provided coverage for damages that Foundations owed
because of “property damage” caused by an “occurrence.”
Property damage is defined as either a “[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
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physically injured.” Occurrence is defined as “an accident,
including continuous or repeated exposure to substantially the
same general harmful conditions.”
The Policies’ grant of coverage for property damage caused
by an occurrence is limited by a “your work” exclusion.
Specifically, the your work exclusion provides that coverage to
the named insured, in this case Foundations, does not apply to
“‘property damage’ [due] to ‘your work’ arising out of it or any
part of it.”
In August 1995, Tower contracted with Foundations to
construct a 770-foot retaining wall at Tower Oaks. Construction
began shortly thereafter, and Foundations completed the
retaining wall some time in 1996.
In 2001, the retaining wall began to show signs of failure,
and eventually a seventy-foot section of the retaining wall
collapsed in 2003, causing damage to several homeowners’
property and federally-protected wetlands adjacent to the
development.
In order to prevent further damage to the homeowners’
property and the federally-protected wetlands adjacent to the
development, Tower stabilized the area around the retaining wall
by installing wood and gravel bracing. Once the slope was
stabilized, Tower constructed a new retaining wall immediately
in front of the defective one. With the two retaining walls in
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place, the land both above and below the walls was stabilized.
To construct the new retaining wall, Tower decided to access the
site through the federally-protected wetlands, but this caused
further damage to those wetlands. Following the construction of
the new retaining wall, Tower repaired the homeowners’ property
and remediated the federally-protected wetlands. For the costs
it incurred, Tower instituted arbitration proceedings against
Foundations, which resulted in an award to Tower in the sum of
$2,015,603, an amount which has not been paid.
Travelers Indemnity Company of America and Travelers
Indemnity Company (collectively Travelers) instituted this
declaratory judgment action, seeking a declaration that it had
no duty under the CGL policies it issued to Foundations to
indemnify Tower for any portion of the arbitration award Tower
obtained against Foundations. Travelers joined as defendants
Colony Insurance Company and Donegal Group, each of whom filed
counterclaims seeking a declaration that their policies did not
require them to indemnify Tower in connection with the
arbitration award.
On cross-motions for summary judgment, the district court
held that the Insureds were obligated to indemnify Tower for
some of its costs, but not others. More specifically, the
district court held that the damage to the homeowners’ property
and the federally-protected wetlands caused by the collapse of
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the original retaining wall was a covered loss under the
Policies. The district court also held that the cost of the
emergency bracing was a covered loss as well, concluding that
the cost was incurred to prevent imminent or further damage to
third party property. The district court held that the cost of
installing the new retaining wall was not a covered loss under
the Policies because it was not caused by an occurrence or,
alternatively, the loss was barred by the “your work” exclusion.
Finally, the district court held that the cost of repairing the
further damage to the federally-protected wetlands brought about
by the installation of the new retaining wall was not a covered
loss because the loss was not accidental.
Tower appeals the portion of the district court’s decision
adverse to its interests. The Insureds have not challenged any
portion of the district court’s decision.
II
We review de novo the district court’s grant of summary
judgment. Ellis v. Metro. Life Ins. Co., 126 F.3d 228, 232 (4th
Cir. 1997). We will affirm the district court’s decision “if
the pleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c). We view the record and
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all reasonable inferences drawn therefrom in the light most
favorable to the nonmoving party, here Tower. Williams v. Giant
Food Inc., 370 F.3d 423, 428 (4th Cir. 2004).
On appeal, Tower argues that the district court erred when
it determined that the cost of installing the new retaining wall
and the cost of repairing the damage to the federally-protected
wetlands brought about by the installation of the new retaining
wall were not covered losses under the Policies. In resolving
this argument, we apply Maryland’s substantive law regarding the
interpretation of an insurance policy, which the parties agree
applies to this case. French v. Assurance Co. of Am., 448 F.3d
693, 700 (4th Cir. 2006). Under Maryland law,
[a]n insurance policy is interpreted in the same
manner as any other contract. Maryland courts do not
follow the rule that an insurance policy must be
strictly construed against the insurer. The principal
rule in the interpretation of contracts is to effect
the intentions of the parties. When a contract’s
wording is clear, the court will presume that the
parties intended what they expressed, even if the
expression differs from the parties’ intentions at the
time they created the contract. If reasonably
possible, effect must be given to every clause and
phrase of a contract, so as not to omit an important
part of the agreement.
Nationwide Ins. Co. v. Rhodes, 732 A.2d 388, 390-91 (Md. Ct.
Spec. App. 1999) (citations and internal quotation marks
omitted).
The Policies provided coverage for damages that Foundations
owed because of “property damage” caused by an “occurrence.”
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The Policies define an “occurrence” as “an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions.”
Under Maryland law, in order for there to be an occurrence
under a CGL policy, there must be an accident. Lerner Corp. v.
Assurance Co. of Am., 707 A.2d 906, 911 (Md. Ct. Spec. App.
1998). Typically, a CGL policy does not define there term
accident.
French, 448 F.3d at 698. However, under Maryland
law, “an act of negligence constitutes an ‘accident’ under a
liability insurance policy when the resulting damage takes place
without the insured’s actual foresight or expectation.”
Id.
Our decision in French is instructive on the question of
what constitutes an accident under Maryland law. There, a
contractor built a single family home for the appellants.
Pursuant to the parties’ contract, the exterior of the home was
clad with a synthetic stucco system known as the Exterior
Insulating Finishing System (EIFS).
Id. at 696. Nearly five
years after the home was completed, the appellants discovered
extensive moisture and water damage to the walls of their home,
resulting from the defective cladding of the home with the EIFS.
Id. The appellants spent over $500,000 to correct the defects
in the EIFS exterior of the home and to remedy the resulting
damage to the otherwise nondefective structure and walls of the
home.
Id. The appellants brought an action against the
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contractor, and the question before this court was whether the
contractor’s insurer was required to cover the claim under the
contractor’s CGL policy. Id.
Applying Maryland law, we concluded that the insurer was
required to cover any unexpected property damage that occurred
to something other than the defective object as a result of the
defective object, but the insurer was not required to cover any
damage to the defective object itself:
[I]f the defect causes unrelated and unexpected
property damage to something other than the defective
object itself, the resulting damages . . . may be
covered. For example, if a collapse of [a] veneer had
injured a user of the facility or damaged property
other than the veneer itself, these may well be
covered.
Id. at 702 (alterations and internal quotation marks omitted).
Thus, when there is no property damage “to otherwise
nondefective parts of [a] building,” there is no “accident” or
“occurrence.” Id. at 703. Thus, coverage exists only “to
remedy unexpected and unintended property damage to the
contractor’s otherwise nondefective work-product caused by the
. . . defective workmanship.”
Id. at 706. And if a product
does not meet the contract requirements of a sale, it should not
be unforeseen that “the purchaser will be entitled to correction
of the defect.”
Id. at 702.
The Maryland Court of Appeals’ decision in Woodfin Equities
Corp. v. Harford Mutual Insurance Co.,
678 A.2d 116 (Md. Ct.
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Spec. App. 1996), overruled in part on procedural grounds, 687
A.2d 652 (Md. 1997), also is instructive on the question of what
constitutes an accident under Maryland law. ∗ In that case, a
hotel hired the insured to install a Heating, Ventilation, and
Air Conditioning (HVAC) system.
Id. at 118-19. The HVAC system
was defective, and carpeting and drywall had to be destroyed to
remedy the defect.
Id. at 121, 131. The insured sought
coverage for the costs of the carpeting and drywall. The
Maryland Court of Special Appeals found that the insurer was not
required to cover the property damage because pulling up
carpeting and breaking through drywall to access the HVAC system
was not property damage, but rather the “cost incurred in
replacing and repairing the HVAC systems.”
Id. at 132 n.8. The
Woodfin court further explained: “Voluntarily pulling up
carpeting or breaking through dry-wall to access the HVAC units
is not property damage. . . . Even if it could be considered
‘property damage,’ we would hold that it was not caused by an
‘occurrence,’ because the so-called damage was not accidental.”
Id.
Under these authorities, it is evident that the cost of
installing the new retaining wall and the cost of repairing the
∗
Even though Woodfin was overruled on procedural grounds,
Maryland courts continue to find “Woodfin instructive on the
interpretation of CGL policies generally.” Lerner Corp., 707
A.2d at 910.
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damage to the federally-protected wetlands brought about by the
installation of the new retaining wall are not covered losses
under the Policies. With regard to the installation of the new
retaining wall, Foundations’ contractual obligation to Tower was
to furnish a retaining wall, one capable of protecting the land
both above and below the retaining wall. The original retaining
wall did not fulfill this purpose and needed to be either
repaired or replaced. The correction of the defective retaining
wall, either by replacing the original retaining wall or
installing a new one, simply was not unforeseen, just like it
was not unforeseen in French that the EIFS exterior would have
to be replaced as it was not capable of keeping moisture and
water out of the appellants’ home.
With regard to the cost of repairing the damage to the
federally-protected wetlands brought about by the installation
of the new retaining wall, these costs are not covered losses as
well. This damage was not caused by an accident; rather, it was
caused by the intentional act of Tower. Just like the carpeting
and drywall that had to be removed or destroyed in Woodfin to
remedy the defect in the HVAC units, the further damage to the
federally-protected wetlands was necessary to correct the defect
(inability to protect the land both above and below the
retaining wall) in the original retaining wall.
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In an attempt to make an end-run around these well-
established authorities, Tower states that the outcome of this
case is controlled by Aetna Ins. Co. v. Aaron, 685 A.2d 858 (Md.
Ct. Spec. App. 1996). In that case, the Maryland Court of
Special Appeals addressed whether remediation expenses incurred
in connection with the insured homeowner’s own property were
covered losses under a homeowner’s insurance policy covering
property damages, even though the policy contained an “owned
property” exclusion, which provided that coverage did not apply
if the property damage was to “property owned by the insured.”
Id. at 860. The Aaron court held that the owned property
exclusion did not preclude coverage for the costs of
preventative measures undertaken on the insured’s property to
prevent imminent damage to third-party property.
Id. at 866-70.
Aaron is of no help to Tower. Aaron did not involve a CGL
policy that provided for coverage for damages that were caused
by an “occurrence.” The inclusion of the occurrence provision
brings into play the well-settled Maryland law construing what
constitutes an accident in the construction context. If we were
to accept Tower’s invitation to apply Aaron outside of the
homeowner’s context and in the construction context, we would
turn the Maryland law on what constitutes an occurrence on its
head, as redoing the insured contractor’s work routinely has the
effect of preventing further or imminent damage to third-party
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property. We also note that the Court of Appeals of Maryland
has rejected a claim for coverage under a similar CGL policy to
the one in our case for measures taken to avoid imminent
property damage in the construction context. See W.M. Schlosser
Co., Inc. v. Ins. Co. of North America, 600 A.2d 836, 840 (Md.
1992) (“We conclude that under Maryland law, the liability
policy at issue here [which defines occurrence as an accident]
did not provide coverage for the preventive costs incurred by
Schlosser.”).
III
For the reasons stated herein, the judgment of the district
court is affirmed.
AFFIRMED
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