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Davies v. Barton Mutual Insurance Co.

Court of Appeals of Missouri, Southern District, First Division

October 4, 2017

DOUGLAS DAVIES and LYNETTE DAVIES, Plaintiffs-Respondents,
v.
BARTON MUTUAL INSURANCE COMPANY, Defendant-Appellant.

         APPEAL FROM THE CIRCUIT COURT OF BUTLER COUNTY Honorable Michael M. Pritchett

          OPINION

          DON E. BURRELL, J.

         Barton Mutual Insurance Company ("Insurer") appeals the judgment that awarded Douglas Davies and Lynette Davies ("Homeowners") $255,594 plus interest after a consolidated trial of Homeowners' equitable garnishment action and Insurer's petition for declaratory judgment. See sections 379.200 and 527.010.[1] Homeowners' equitable garnishment claim was based upon a judgment they had obtained against the Estate of Keith Broege ("Builder") in a jury trial of a breach of implied warranty of habitability claim based upon defects in a new house Homeowners had purchased from Builder ("the warranty trial"). We affirmed that judgment on appeal in Davies v. Estate of Broege, 410 S.W.3d 303, 304 (Mo. App. S.D. 2013).[2]

         Homeowners' equitable garnishment petition claimed that their "loss rests on an occurrence for which [Builder] was insured by [Insurer]." Conversely, Insurer sought a judgment declaring that it "owe[d] no duty to indemnify any portion of the" warranty trial judgment because there had been "no 'occurrence'" under Insurer's insurance contract with Builder ("the policy"). After "[a]ll issues and claims" had been submitted "upon the pleadings, briefings, exhibits and argument[s] of counsel[,]" the trial court found that the policy provided coverage because "[t]he failure of [Builder] to construct the house in such a manner that it did not consistently flood when it rained constitute[d] an occurrence" under the policy.

         In three points, Insurer claims the judgment was erroneous as a matter of law because: (1) Builder's breach of the implied warranty of habitability "was not an 'occurrence'"; (2) "there was no 'property damage'"; and (3) "coverage was excluded" under the terms of the policy. Because the warranty trial did not establish as a matter of law that what Homeowners suffered constituted an "occurrence" under the policy, we find a portion of Insurer's first point to have merit. The judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.[3]

         Applicable Principles of Review and Governing Law

When reviewing a court-tried case, we view all evidence and inferences in the light most favorable to the judgment and disregard all contrary evidence and inferences. Ortmann v. Dace Homes Inc., 86 S.W.3d 86, 88 (Mo.App. E.D.2002). However, where the facts are derived solely from written documents such as pleadings, stipulations, exhibits, and depositions, we decide only whether the trial court drew the proper legal conclusions from the facts stipulated. Glass v. Missouri Property Ins. Placement Facility, 912 S.W.2d 653, 656 (Mo.App. S.D.1995). . . . Finally, even where the facts are derived from stipulated exhibits and agreements, we must accept the evidence and inferences favorable to the prevailing party and disregard all contrary evidence.

Gen. Motors Acceptance Corp. v. The Windsor Grp., Inc., 103 S.W.3d 794, 796–97 (Mo. App. E.D. 2003) (quotation omitted).[4]

The interpretation of an insurance policy is an issue of law, subject to de novo review. Mendenhall v. Property and Casualty Ins. Co. of Hartford, 375 S.W.3d 90, 92 (Mo. banc 2012). "[I]n construing the terms of an insurance policy, this Court applies the meaning which would be attached by an ordinary person of average understanding if purchasing insurance...." Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo. banc 2009). The general rule in interpreting insurance contracts is to give the language of the policy its plain meaning. Gavan v. Bituminous Cas. Corp., 242 S.W.3d 718, 720 (Mo. banc 2008). If language in an insurance policy is ambiguous, this Court resolves the ambiguity against the insurer-drafter. Mendenhall, 375 S.W.3d at 92; Krombach v. Mayflower Ins. Co., Ltd., 827 S.W.2d 208, 211 (Mo. banc 1992). An ambiguity exists only when a phrase is "'reasonably open to different constructions.'" Mendenhall, 375 S.W.3d at 92.

Allen v. Cont'l W. Ins. Co., 436 S.W.3d 548, 553–54 (Mo. banc 2014).

         "To establish an equitable garnishment claim, the plaintiff must prove that he obtained a judgment in his favor against the insurance company's insured, the policy was in effect when the incident occurred and that the injury is covered by the insurance policy." Kotini v. Century Sur. Co., 411 S.W.3d 374, 377 (Mo. App. E.D. 2013). The plaintiff bears "the burden of showing by substantial evidence that the claim falls within the coverage provided by the insurance contract." Id. at 378.

         Facts and Procedural History

         Our summary of the facts is drawn from the materials submitted to the trial court on the date set for trial.[5] We therefore "'accept the evidence and inferences favorable to'" Homeowners, Gen. Motors, 103 S.W.3d at 797, looking only to see if "the trial court drew the proper legal conclusions[.]" Id. (quotation omitted).

         In late 2008 and early 2009, Homeowners purchased and moved into a new house built by Builder. "Shortly after moving in, they noticed water accumulation in the lower level. Repeated water intrusions over the following months caused a host of problems, including foul smells, soaked carpeting, wall damage, and mold and mushroom growth. [Builder] eventually sent crews to clean the house after every hard rain." Davies, 410 S.W.3d at 304. During the warranty trial, Homeowners took "the position that the problem's cause remained unknown[.]" Id. The jury found that "the house was not fit for" the use for which it was purchased. "[W]ithin a reasonable time after [Homeowners] knew or should have known the [house] was not fit for such use, [Homeowners] gave [Builder] notice thereof, and . . . as a direct result of the house being unfit for such use, [Homeowners] were damaged." The jury "assess[ed] the damages of [Homeowners] at $255,594[.]"

         Homeowners' action for equitable garnishment and Insurer's action for declaratory judgment followed the entry of the judgment in the warranty trial, and those separate actions were consolidated for trial. Both claims relied upon the policy, which provided "COMMERCIAL LIABILITY COVERAGE" to Builder. The following provisions of the policy are relevant to Insurer's claims on appeal:

DEFINITIONS
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