Title: Lower Chesapeake Assoc. v. Valley Forge Insurance

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
LOWER CHESAPEAKE ASSOCIATES, A LIMITED 
PARTNERSHIP T/A WILLOUGHBY HARBOUR 
MARINA AND LITTLE BAY, LTD. 
 
v.  Record No. 991787   OPINION BY JUSTICE BARBARA MILANO KEENAN 
 
 
 
June 9, 2000 
VALLEY FORGE INSURANCE COMPANY 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK 
Jerome James, Judge 
 
In this appeal, we consider whether the trial court erred 
in ruling that the owner of a marina was entitled to insurance 
coverage under a commercial property insurance policy for damage 
to the marina's docks allegedly caused by a hurricane. 
 
Lower Chesapeake Associates, a limited partnership trading 
as Willoughby Harbour Marina, and its general partner, Little 
Bay, Ltd. (collectively, Lower Chesapeake), operate a commercial 
marina in Norfolk on Willoughby Bay (the marina).  The marina 
consists of four, seven-foot wide floating docks, designated as 
Docks A, B, C, and D, which provide about 300 boat slips for 
pleasure craft. 
On September 6, 1996, Hurricane Fran struck the coast of 
North Carolina and affected the Norfolk area with wind, rain, 
and a storm surge.  About five months earlier, Lower Chesapeake 
had obtained a commercial property insurance policy (the policy) 
for the marina from Valley Forge Insurance Company (Valley 
Forge).  Lower Chesapeake submitted a damage claim under the 
policy for "debris removal and repair and replacement of the 
damaged docks," based on damage allegedly caused by Hurricane 
Fran.  After Valley Forge denied coverage for the claim, Lower 
Chesapeake brought this breach of contract action seeking, among 
other things, an award of compensatory damages in the amount of 
$1.2 million. 
 
At a bench trial, James Ripley, Jr., the marina's dock 
master, testified that all four docks were damaged during 
Hurricane Fran as a result of wind blowing against the boats 
moored at the marina.  Ripley stated that some of the lines 
securing the moored boats broke, and that the boats repeatedly 
collided with the short finger piers that project from the main 
docks.  He also explained that many of the boat lines were tied 
to cleats that were affixed to the deck boards.  The wind caused 
boats to draw against the lines and the cleats, causing the deck 
boards to "pull up." 
 
Ripley testified that the waves during Hurricane Fran were 
insignificant and did not cause damage to the docks, but he 
agreed that the moored boats were "pitching" during the 
hurricane as a result of the wind and the waves.  He also 
acknowledged that he had told an insurance investigator soon 
after the hurricane that wind caused the wave action that 
damaged the docks. 
 
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Ripley explained that the floating docks were comprised of 
separate sections linked together by joints constructed of metal 
brackets and a type of flexible plastic or rubber.  He stated 
that before Hurricane Fran struck, the marina had experienced 
problems involving broken joints, and that additional joints had 
broken during a "nor-easter" storm in March 1996 (the March 
storm), prior to the effective date of the policy. 
 
Whenever a joint broke, marina personnel routinely repaired 
or "patched" it by replacing the flexible joint with a rigid 
connection between the dock sections.  These rigid connections 
were made by nailing or bolting boards across the top of the 
deck or onto the stringers, the horizontal support beams under 
the deck, at the location of a broken joint.  Similar repairs 
were made to the connections between the finger piers and the 
main docks.  Many of these repairs "gave way" during Hurricane 
Fran. 
 
The marina also had a floating wooden breakwater located 
between the docks and the entrance to the bay, which served to 
shelter the docks.  Ripley explained that many sections of the 
breakwater had broken away during the March storm and had not 
been replaced before Hurricane Fran struck. 
 
Lower Chesapeake had obtained an estimate of $194,000 to 
make the permanent repairs necessitated by the March storm, but 
had not made those repairs before Hurricane Fran struck.  Ripley 
 
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described in detail the damage sustained by each section of each 
dock during Hurricane Fran, referring to numerous photographs 
that were admitted into evidence.  The damage to all four docks 
included loose and missing deck boards, displaced pilings, 
overturned utility pedestals, broken deck joints, and missing 
finger piers.  Ripley testified that Dock C "gave way" at its 
"dogleg" angle when wind pushed a moored boat against the dock.  
He acknowledged that the marina continued to use all of Docks A 
and B, and most of Docks C and D after the hurricane, without 
replacing any part of the docks. 
 
Robert Layton, whose home is adjacent to the marina, 
testified that he went to the marina during Hurricane Fran to 
help secure the boats.  He saw cleats, planks, and utility 
pedestals pull from the dock decking, and observed finger piers 
break loose from the docks after some of the boats hit against 
the docks.  Layton stated that Hurricane Fran did not cause 
"significant" waves, and that "for a hurricane event, it was a 
relatively flat occurrence." 
 
Michael Whitt testified that he rented a boat slip on Dock 
D of the marina from March 1995 until after Hurricane Fran 
struck.  He stated that he had complained to Ripley about the 
poor condition of the docks and the breakwater every week during 
the boating season.  Whenever the wind exceeded 20 to 30 miles 
 
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per hour, the cleats to which the boats were tied pulled from 
the deck boards because the deck wood was rotten. 
 
Whitt testified that there had been numerous "Band-Aid 
fixes" made to the docks, such as boards being nailed or bolted 
over rotted dock joints and finger pier connections.  He also 
explained that he frequently nailed boards across the decking 
near the cleats he was using in order to keep the cleats from 
"popping up," but that the deck wood was so rotten that these 
repair attempts were usually unsuccessful.  Whitt stated that 
sections of the breakwater would "break loose during any type of 
storm that produced a good wind," and that some disconnected 
sections frequently floated loose in the water.  He also 
testified that Dock C "broke in half" at its "dogleg" angle 
during Hurricane Fran. 
 
James W. Smith qualified as an expert witness and rendered 
opinions on the damage to the docks and the estimation of repair 
and replacement costs.  After Hurricane Fran, Smith inspected 
the marina's damage and estimated the cost of repairing all four 
docks.  He concluded that 80% of Dock C and 88% of Dock D had 
sustained "considerable damage," and that the least expensive 
means of repairing these docks was to replace them completely.  
Smith also testified that about 40% of Dock B and 20% of Dock A 
were damaged and required replacement. 
 
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Smith's total assessment of the replacement cost for all 
four docks was about $1.3 million.  He acknowledged, however, 
that he could not determine whether some of the damage he 
observed after Hurricane Fran had been caused by the earlier 
March storm.  He also explained that he had not distinguished 
between storm damage and damage caused by rot or poor 
maintenance. 
 
Jesse Herman Brown, Jr., also testified as an expert 
witness and rendered opinions on the damage to the docks and the 
estimation of repair and replacement costs.  He examined the 
marina about a month after Hurricane Fran and concluded that the 
structural framework of Docks C and D had deteriorated to the 
point that these docks could not be repaired.  Brown stated that 
this deterioration occurred over a period of years, and that the 
repairs made by marina personnel to the dock joints and finger 
pier connections were "[v]ery temporary, and dangerous." 
 
Brown estimated a cost of about $991,000 to replace Docks C 
and D.  He explained that he could not state the percentage of 
this cost attributable to the repair of damage caused by the 
hurricane, and that most of the damage he observed was caused by 
general deterioration and wear. 
 
Richard Potts, a forensic civil engineer, qualified as an 
expert witness on the causes of structural failure and was the 
only expert to express an opinion about the cause of the storm 
 
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damage incurred during Hurricane Fran.  He examined the marina's 
docks about three weeks after the hurricane and also consulted a 
report on the hurricane issued by the National Oceanic and 
Atmospheric Administration (NOAA).  That report indicated that 
the NOAA station nearest the marina recorded sustained wind 
speeds of 42 miles per hour, a peak gust of 63 miles per hour, 
and a storm surge of two feet, six inches. 
Potts explained that a storm surge is "the rise above 
normal elevation of the water due to the storm," and that this 
is a different phenomenon from waves or tides.  Although he had 
no data establishing the height of the waves at the marina 
during the hurricane, he concluded that there was a high 
probability that there was wave action of some degree.  Potts 
also explained that because large sections of the breakwater 
were missing, the breakwater could not dissipate as much of the 
wave energy as it was designed to do. 
 
Potts testified that he found "excessive deterioration 
[and] decay," especially on Docks C and D, which had occurred 
over a period of between several months and a few years.  He 
stated that the pattern of damage he observed on the docks was 
not consistent with damage caused by wind alone.  In Potts' 
opinion, the primary cause of the damage was long-term 
deterioration, combined with the impact of waves and surging 
water.  He noted that the docks failed at the joints, and that 
 
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due to the existing deterioration, movement caused by even small 
waves would have been sufficient to inflict the damage. 
 
Potts also testified that the repairs made by marina 
personnel to the docks' joints and finger pier connections prior 
to the hurricane were not effective.  He stated that the purpose 
of having flexible joints was to permit the floating dock 
sections to move with the water without experiencing undue 
stress.  The temporary repairs affixing rigid connections 
restricted the docks' flexibility and, thus, reduced their 
ability to withstand the stress caused by wave movement. 
The Valley Forge policy issued to Lower Chesapeake, in 
addition to standard provisions for commercial liability and 
property insurance coverage, also contained "commercial inland 
marine coverage."  Included in the inland marine coverage 
provisions was a form entitled "Piers, Wharfs, and Docks 
Coverage Form" (dock coverage form).  The relevant portions of 
the dock coverage form provide: 
A. 
COVERAGE 
 
We will pay for "loss" to Covered Property from any of 
the Covered Causes of Loss. 
 
1. 
COVERED PROPERTY, as used in this Coverage 
Form, means: 
 
a. 
Floating or fixed piers, wharfs and 
docks; 
 
b. 
Anchors and floats used with floating 
docks; 
 
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c. 
Covers, awnings, electrical wiring or 
plumbing which is permanently fixed to 
the pier, wharf or dock; or 
 
d. 
Buoys or moorings. 
 
. . . . 
 
3. 
COVERED CAUSES OF LOSS 
 
Covered Causes of Loss means RISK OF DIRECT 
PHYSICAL "LOSS" to Covered Property except 
those causes of "loss" listed in the 
exclusions. 
 
4. 
a. 
ADDITIONAL COVERAGE - COLLAPSE 
 
We will pay for direct "loss" caused by 
or resulting from risks of direct 
physical "loss" involving collapse of 
all or part of a building or structure 
caused by one or more of the following: 
 
(1) Fire; lightning; windstorm; hail; 
explosion; smoke; aircraft; 
vehicles; riot; civil commotion; 
vandalism; breakage of glass; 
falling objects; weight of snow, 
ice or sleet; water damage; all 
only as covered in the Coverage 
Form; 
 
(2) Hidden decay; 
 
(3) Hidden insect or vermin damage; 
 
. . . . 
 
We will not pay for loss or damage to 
the following types of property, if 
otherwise covered in this Coverage 
Form, under items (2), (3) . . . unless 
the loss or damage is a direct result 
of the collapse of a building: 
 
 
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outdoor radio or television 
antennas, including their lead-in 
wiring, mast or towers; awnings; 
gutters or down spouts; yard 
fixtures; outdoor swimming pools; 
fences; piers, wharves and docks; 
beach or diving platforms or 
appurtenances; retaining walls; 
walks; roadways and other paved 
surfaces. 
 
. . . . 
 
 
 
 
b. 
ADDITIONAL COVERAGE - DEBRIS REMOVAL 
 
We will pay for expenses you incur for 
the removal of debris of the Covered 
Property, which is occasioned by a 
"loss" covered by this Coverage Form.  
 
. . . . 
 
B.  EXCLUSIONS 
 
1. 
We will not pay for a "loss" caused directly 
or indirectly by any of the following.  Such 
"loss" is excluded regardless of any other 
cause or event that contributes concurrently 
or in any sequence to the "loss": 
 
. . . . 
 
e. 
WATER 
 
. . . . 
 
(4) Flood, surface water, waves, 
tides, tidal waves, overflowing of 
any body of water, or their spray, 
all whether driven by wind or not. 
 
. . . . 
 
3.  We will not pay for a "loss" caused by or 
resulting from any of the following.  But if 
 
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"loss" by a Covered Cause of Loss results, we 
will pay for the resulting "loss": 
 
a. 
Weather conditions.  But this exclusion only 
applies if weather conditions contribute in 
any way with a cause or event excluded in 
paragraph 1. above to produce the "loss"; 
 
. . . . 
 
c. 
Collapse except as provided in the 
Additional Coverage - Collapse section of 
this Coverage Form. 
 
d. 
Wear and tear, marring, denting or 
scratching; . . . gradual deterioration, 
depreciation; mechanical breakdown; insects, 
vermin, rodents, birds or other animals; 
corrosion, rust, dampness or dryness, . . . 
 
. . . . 
 
F. 
DEFINITIONS 
 
 
"Loss" means accidental loss or damage. 
 
 
After hearing the parties' evidence, the trial court found 
that part of Dock C had collapsed as a result of a "windstorm" 
and "water damage" and, thus, was covered under Section A(4)(a), 
"Additional Coverage - Collapse," of the dock coverage form.  
The court ruled that because part of Dock C had suffered a 
collapse, the policy's exclusions set out in Section B did not 
apply.  However, the trial court concluded that Docks A, B, and 
D had not suffered collapses.  The court found that the damage 
to these docks resulted from causes excluded under Section B of 
the dock coverage form.  The trial court entered judgment in 
 
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favor of Lower Chesapeake for the damage to Dock C in the amount 
of $500,000. 
 
Lower Chesapeake appeals from the trial court's denial of 
coverage for the damage sustained by Docks A, B, and D.  Valley 
Forge assigns cross-error to the trial court's ruling that the 
policy provided coverage for the damage to Dock C. 
 
The judgment of a trial court, sitting without a jury, is 
entitled to the same weight as a jury verdict and will not be 
set aside unless it appears from the evidence that the judgment 
is plainly wrong or without evidence to support it.  Code 
§ 8.01-680; Willard v. Moneta Bldg. Supply, Inc., 258 Va. 140, 
149, 515 S.E.2d 277, 283 (1999); Cardinal Dev. Co. v. Stanley 
Constr. Co., 255 Va. 300, 302, 497 S.E.2d 847, 849 (1998).  The 
court's factual finding that part of Dock C sustained a 
collapse, while the other three docks did not, is central to the 
resolution of this appeal.  Lower Chesapeake argues that the 
evidence established that all four docks suffered collapses, 
while Valley Forge contends that none of the docks did. 
 
Since the term "collapse" is not defined in the policy, the 
term must be given its ordinary and accepted meaning.  See Craig 
v. Dye, 259 Va. 533, 538, 526 S.E.2d 9, 11-12 (2000); 
Lumbermen's Mut. Cas. Co. v. Keller, 249 Va. 458, 460-61, 456 
S.E.2d 525, 526 (1995).  An ordinary and accepted meaning of the 
word "collapse" is "to break down completely: fall apart in 
 
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confused disorganization: . . . disintegrate."  Webster's Third 
New International Dictionary 443 (1993). 
 
The trial court stated that it did not use "a dictionary 
definition" of the term, but instead reviewed the photographs of 
the damaged docks and the other evidence and concluded that the 
damage to part of Dock C was "what the policy meant when it says 
collapse."  The court also stated that it compared the 
photographs of the other docks to the photographs of Dock C and 
concluded that only Dock C satisfied the term "collapse" as set 
forth in the policy. 
 
Despite the trial court's statement that it did not rely on 
a dictionary definition of the term "collapse," the court 
properly applied the ordinary and customary meaning of that term 
when reaching its conclusion.  The photographs and evidence to 
which the trial court referred show that all the docks lost deck 
boards and finger piers, and sustained various other minor 
damage, but that only Dock C suffered a complete break, which 
occurred at its "dogleg" angle.  A complete break of this nature 
falls within the ordinary and customary meaning of the term 
"collapse."  Thus, the trial court's conclusion that only one 
section of Dock C had suffered a "collapse," within the meaning 
of the policy term, is not plainly wrong or without evidence to 
support it. 
 
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Next, we consider whether the exclusions listed in Section 
B of the dock coverage form preclude coverage for the damage 
sustained by Docks A, B, and D.  The trial court made a factual 
finding that these docks did not suffer a collapse, and that the 
damage to these docks was caused by wind-driven water and 
gradual deterioration, which were excluded causes under Sections 
B(1)(e)(4) and B(3)(d) of the dock coverage form.  Lower 
Chesapeake contends, however, that even if these docks did not 
suffer a "collapse," the policy covers losses sustained to those 
docks because Valley Forge failed to meet its burden of proving 
that this damage resulted from an excluded cause.  In response, 
Valley Forge asserts that the trial court correctly found that 
the damage to these docks resulted, at least in part, from 
excluded causes. 
 
Under the plain terms of Section B(1), coverage is excluded 
under the policy if a loss is caused "directly or indirectly" by 
one of the enumerated causes or events, "regardless of any other 
cause or event that contributes concurrently or in any sequence" 
to the loss.  The evidence amply supports the trial court's 
finding that the damage to Docks A, B, and D resulted, at least 
in part, from the excluded causes of "[f]lood, . . . waves, 
tides, tidal waves, . . . all whether driven by wind or not," or 
from the excluded cause of "gradual deterioration," or from any 
combination of these excluded causes.  Since the trial court's 
 
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factual finding on this issue is supported by the evidence, we 
will affirm that part of the judgment denying coverage under the 
policy for the damage to Docks A, B, and D.*
 
We next consider whether the trial court correctly 
concluded that the exclusions in Section B of the dock coverage 
form do not apply to losses encompassed within the provisions of 
the "Additional Coverage-Collapse" section of the form.  Lower 
Chesapeake contends that the exclusions in Section B do not 
apply to losses resulting from a collapse, while Valley Forge 
asserts an opposite interpretation of the two sections of the 
policy. 
 
Courts interpret insurance policies, like other contracts, 
in accordance with the parties' intentions as determined from 
the words they have used in their contract.  Floyd v. Northern 
Neck Ins. Co., 245 Va. 153, 158, 427 S.E.2d 193, 196 (1993).  
The interpretation of policy provisions presents a question of 
                     
 
*Lower Chesapeake also argues that the trial court erred in 
denying coverage for Docks A, B, and D because the evidence 
showed that the damage was caused by decay, not by gradual 
deterioration and, thus, Section B(3)(d) is inapplicable.  Lower 
Chesapeake further contends, in essence, that because Valley 
Forge failed to conduct a "loss control survey" of the marina, 
as permitted by the policy, Valley Forge has forfeited any right 
to assert deterioration as an excluded cause of loss.  However, 
the trial court based its denial of coverage to Docks A, B, and 
D on a finding that the damage to these docks was caused by 
deterioration and wind-driven water.  Thus, we do not address 
these arguments since the trial court's finding that wind-driven 
water contributed to the damage is a sufficient reason to 
exclude coverage under the policy language. 
 
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law that we consider de novo.  Craig, 259 Va. at 537, 526 S.E.2d 
at 11. 
 
When an insurer drafts policy language setting forth 
exclusions that limit coverage under a policy, the insurer is 
required to use language that clearly and unambiguously defines 
the scope of the exclusions.  See S.F. v. West Am. Ins. Co., 250 
Va. 461, 465, 463 S.E.2d 450, 452 (1995); Granite State Ins. Co. 
v. Bottoms, 243 Va. 228, 233, 415 S.E.2d 131, 134 (1992); Smith 
v. Allstate Ins. Co., 241 Va. 477, 480, 403 S.E.2d 696, 697-98 
(1991).  If exclusionary provisions are ambiguous, such that 
they may be understood in more than one way, we will interpret 
the policy in a manner that provides coverage.  S.F., 250 Va. at 
464, 463 S.E.2d at 452; Granite State Ins. Co., 243 Va. at 234, 
415 S.E.2d at 134; Smith, 241 Va. at 480, 403 S.E.2d at 697. 
 
We conclude that the disputed policy language permits more 
than one reasonable interpretation of the applicability of 
Section B to collapse losses covered under Section A(4)(a).  As 
Lower Chesapeake notes, under Section B(3)(c) of the dock 
coverage form, losses resulting from collapse are specifically 
excluded from coverage "except as provided in the Additional 
Coverage-Collapse section of the Coverage Form."  Further, the 
exclusions set forth in Section B are specifically referenced in 
Section A(3), but Section A(4)(a) is silent regarding any such 
exclusions.  Based on these considerations, one reasonable 
 
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conclusion concerning the disputed policy language is that the 
Section B exclusions are inapplicable to the losses covered by 
Section A(4)(a). 
 
In contrast, as Valley Forge observes, Section A(4)(a)(1) 
provides coverage for losses resulting from collapse caused by 
windstorm or water damage "all only as covered in the Coverage 
Form."  Valley Forge contends that this language clearly 
subjects the collapse coverage of Section A(4)(a) to the other 
terms of the dock coverage form, including the exclusions set 
forth in Section B.  Under these considerations, a second 
reasonable conclusion that can be drawn from the disputed 
language is that the Section B exclusions are applicable to the 
collapse of part of Dock C. 
 
Because these provisions of the dock coverage form are 
ambiguous, we construe the policy in favor of providing coverage 
and hold that the exclusions in Section B are inapplicable to 
the collapse coverage of Section A(4)(a).  The evidence supports 
the trial court's findings that the collapse of part of Dock C 
was caused by "windstorm" or "water damage" and, thus, that this 
collapse is included within the coverage provisions of Section 
A(4)(a).  Therefore, we will affirm the trial court's judgment 
that the policy provides coverage for Lower Chesapeake's loss 
resulting from the collapse of part of Dock C. 
 
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Finally, Valley Forge argues that the evidence does not 
support the amount of damages awarded by the trial court for the 
damage sustained to Dock C.  We agree.  As stated above, Dock C 
sustained a complete break at its "dogleg" angle.  This damage 
to a limited portion of Dock C was the only damage found by the 
trial court to have resulted from a collapse and, thus, to 
qualify for coverage under the policy. 
 
Neither party presented evidence concerning the cost of 
repairing only the collapsed portion of Dock C.  Instead, James 
Smith testified that it would cost $584,551 to completely 
replace Dock C, plus an additional amount to pay for debris 
removal.  Jesse Brown testified that it would cost $991,014 to 
replace both Docks C and D entirely, except for one 16-foot 
section of Dock C that was salvageable.  Therefore, the trial 
court's award of $500,000 in damages to Lower Chesapeake as 
compensation for its loss resulting from the collapse of a 
limited portion of Dock C is not supported by the evidence and 
must be set aside. 
 
For these reasons, we will affirm in part, and reverse in 
part, the trial court's judgment and remand the case to the 
trial court for a determination of damages owed to Lower 
Chesapeake as a result of the collapse of part of Dock C. 
Affirmed in part, 
reversed in part, 
    and remanded. 
 
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