Case Title: Garneau v. Curtis & Bedell

Citation: 

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1992-02-01T00:00:00Z

Document:
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 91-183


 Martin and Melissa Garneau                   Supreme Court

                                              On Appeal from
      v.                                      Lamoille Superior Court

 Curtis & Bedell, Inc.                        February Term, 1992
 Insurance Company of North America


 Shireen Avis Fisher, J.

 Gene Ann Condon, P.C., Stowe, for third-party plaintiff-appellee, Curtis &
   Bedell, Inc.

 Samuel Hoar, Jr., of Dinse, Erdmann & Clapp, Burlington, for defendant-
   appellant, Insurance Company of North America


 PRESENT:  Gibson, Dooley, Morse and Johnson, JJ., and Peck, J. (Ret.),
           Specially Assigned


      DOOLEY, J.   This controversy over insurance coverage arises out of a
 lawsuit brought by plaintiffs, Martin and Melissa Garneau, against defendant
 Curtis & Bedell, Inc. (C & B), a contractor, over the construction of a
 house on plaintiffs' land.  The house was built too close to the property
 line in violation of zoning requirements, and plaintiffs sued C & B for the
 cost of remedying the problem.  C & B then brought a third-party complaint
 against its insurer, the Insurance Company of North America (INA), alleging
 that INA had a duty to defend it in the suit and to indemnify it for costs
 and damages it incurred.  INA appeals the superior court's denial of its
 motion for summary judgment, claiming that the court erred in concluding
 that INA had a duty to defend C & B against plaintiffs' suit.  We agree that
 plaintiffs' claim was not covered by C & B's insurance policy with INA and
 reverse.
      C & B contracted with plaintiffs to build a house on their property in
 Stowe.  In their complaint, plaintiffs alleged that C & B contracted to
 "site, construct, and landscape" the house pursuant to the terms of certain
 proposals and a Stowe zoning permit.  They further alleged that C & B
 "improperly and negligently" sited the house too close to the property line
 in violation of the zoning permit.  In its answer to the complaint, C & B
 denied that it ever had been responsible for siting the house.
      In its third-party complaint, C & B alleged that INA had issued to it a
 contractor's "package policy" that included liability coverage and that,
 under that policy, INA had a duty to defend C & B against plaintiffs'
 action, and to indemnify it for costs or damages from any judgment rendered
 against it.  INA denied coverage and moved for summary judgment, asserting
 that certain policy exclusions applied.  In particular, INA relied on the
 following "work product" and contract exclusions:
         We won't protect against claims for property damage to
         your products where the damage arises out of the
         products themselves or any part of them.  And we won't
         protect against claims for property damage to completed
         work you performed where the damage arises out of the
         work itself.

         We won't protect against claims for liability you assume
         under any contract other than an incidental contract as
         defined in the GLOSSARY.

 (Emphasis in original.)  It is undisputed that the contract between C & B
 and plaintiffs is not an incidental contract as that term is used in the INA
 policy.
      The court found that there was no disputed issue of material fact in
 the coverage suit between C & B and INA and found for C & B on the law.
 Although the court concluded that plaintiffs' complaint against C & B set
 forth a claim for property damage to C & B's completed work that arose out
 of the work itself and therefore was excluded from coverage under the
 policy, it found coverage because C & B denied in its answer that the
 contract required it to site the house and further denied that it did site
 the house.  The court reasoned that if C & B was correct in its defense,
 liability would not arise out of a contract or out of the "work itself" and
 would not be excluded.  Because it found it possible that the claim would be
 covered, the court held that INA had a duty to defend.
      We apply the same standard as the trial court in ruling on a motion for
 summary judgment.  See Kelly v. Town of Barnard, 155 Vt. 296, 299, 583 A.2d 614, 616 (1990).  Summary judgment should be granted when, taking all the
 allegations made by the nonmoving party as true, no genuine issue of
 material fact is presented and the moving party is entitled to judgment as a
 matter of law.  See id.  The parties agree that there is no factual dispute.
 The issue is solely one of law.
      Normally, the duty of an insurance company to defend in an action is
 measured by the underlying allegations in the complaint against its insured.
 Cooperative Fire Ins. Association of Vermont v. Gray, 156 Vt. ___, ___, 599 A.2d 360, 361 (1991); Commercial Union Ins. Co. v. City of Montpelier, 134
 Vt. 184, 185,