UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 04-1536

TRAVELERS INDEMNITY COMPANY OF AMERICA,

Plaintiff - Appellant,

versus

MILLER BUILDING CORPORATION; WAL-MART STORES,

INCORPORATED,

Defendants - Appellees,

and

I.B. VENTURES, LLC; PENNSYLVANIA

MANUFACTURERS’ ASSOCIATION INSURANCE COMPANY,

Defendants.

Appeal from the United States District Court for the Eastern

District of Virginia, at Richmond. James R. Spencer, District

Judge. (CA-03-441-3)

Submitted: May 19, 2005 Decided: July 20, 2005

Before TRAXLER and DUNCAN, Circuit Judges, and Eugene E. SILER,

Jr., Senior Circuit Judge of the United States Court of Appeals for

the Sixth Circuit, sitting by designation.

Reversed and remanded by unpublished opinion. Senior Judge Siler

wrote the opinion, in which Judge Traxler and Judge Duncan joined.
2

Lee H. Ogburn, Steven M. Klepper, KRAMON & GRAHAM, P.A., Baltimore,

Maryland, for Appellant. 

Unpublished opinions are not binding precedent in this circuit.

See Local Rule 36(c).
3

SILER, Senior Circuit Judge: 

The Travelers Indemnity Company of America appeals the

district court’s determination that it is obligated to indemnify

Miller Building Corporation for alleged damages of Wal-Mart Stores,

Inc. Because the allegedly defective performance of Miller’s

subcontractor was not an “occurrence,” and because a policy’s

subcontractor exception to an exclusion does not grant or extend

coverage, the district court’s grant of summary judgment on this

issue is reversed and the case remanded for further proceedings

consistent with this opinion. 

BACKGROUND

Miller, a general contractor, obtained commercial general

liability (“CGL”) policies from Travelers. These CGL policies

obligate Travelers to indemnify Miller for bodily injury or

property damage caused by an “occurrence.” An “occurrence” is

defined by the policies to be “an accident, including continuous or

repeated exposure to substantially the same general harmful

conditions.” The policies contained various exclusions, including

a “your work” exclusion that limits coverage for property damage to

the insured’s work. “This [“your work”] exclusion does not apply

[however] if the damaged work or the work out of which the damage

arises was performed on [the insured’s] behalf by a subcontractor.”
4

Wal-Mart and I.B. Ventures, LLC hired Miller to complete site

development work on two adjacent pieces of property in Chesterfield

County, Virginia. Wal-Mart also hired Miller to build a Wal-Mart

store on one of the lots. Miller used a subcontractor to complete

the site development work; however, this subcontractor allegedly

selected and used defective fill material. The allegedly defective

fill material expanded, resulting in damage to buildings on both

properties, including the store that Miller built for Wal-Mart. 

Wal-Mart and I.B. Ventures sued Miller in state court for

property damages. Travelers subsequently sought a declaratory

judgment in federal court to determine coverage under the CGL

policies. The district court granted summary judgment in favor of

Wal-Mart and I.B. Ventures. In this appeal, Travelers contests

only the district court’s determination that it is required to

indemnify Miller for Wal-Mart’s damages. 

ANALYSIS

The district court’s grant of summary judgment is reviewed de

novo. Monumental Paving & Excavating, Inc. v. Pennsylvania Mfrs.’

Ass’n Ins. Co., 176 F.3d 794, 797 (4th Cir. 1999). This court also

reviews de novo the district court’s contract interpretation.

Seabulk Offshore Ltd. v. American Home Assurance Co., 377 F.3d 408,

418 (4th Cir. 2004). “The interpretation of a written contract is

a question of law that turns upon a reading of the document itself,
*Similarly, the Virginia Circuit Court of Fairfax County

determined that “defective workmanship cannot constitute a covered

‘occurrence’ . . . , as faulty workmanship by the insured is almost

always foreseeable.” Pulte Home Corp. v. Fid. & Guar. Ins. Co.,

No. 210454, 2004 WL 516216, *5 (Va. Cir. Ct. Feb. 6, 2004).

5

and a district court is in no better position than an appellate

court to decide such an issue.” Id. at 418.

The district court applied Virginia law and the parties do not

contest that issue on appeal. Although the Supreme Court of

Virginia does not appear to have considered whether a contractor’s

deficient performance can constitute an “occurrence,” the U.S.

District Court for the Western District of Virginia recently

predicted how the Virginia Supreme Court would decide the issue.

See Hotel Roanoke Conference Ctr. Comm’n v. Cincinnati Ins. Co.,

303 F. Supp. 2d. 784, 786 (W.D. Va. 2004). It followed American

Fire & Casualty Insurance Co. v. Doverspike, 36 Va. Cir. 263, 1995

WL 1055839 (1995), in deciding that poor performance on a

renovation contract could not be considered an accident or

occurrence, and concluded that “[t]he insurance policy issued to

the [contractors] is a general liability policy covering accidents

causing bodily injury or property damage. It is not a performance

bond. It does not cover poor workmanship.” Hotel Roanoke, 303 F.

Supp. 2d. at 786-87 (quoting American Fire & Cas. Ins. Co., 36 Va.

Cir. at 264, 1995 WL 1055839).*

 The Hotel Roanoke court

additionally noted that “a wealth of case law from other states

[also] supports the conclusion that damages resulting from the
6

insured’s defective performance of a contract and limited to the

insured’s work or product is not covered by a commercial general

liability policy because it is ‘expected’ from the standpoint of

the insured.” Hotel Roanoke, 303 F. Supp. 2d at 787. The damage

to the Wal-Mart store allegedly was a result of Miller’s

subcontractor’s defective performance. As a result, such damage is

not considered to be “unexpected,” or caused by an “occurrence.” 

Wal-Mart did not file an appellate brief. It settled and is

not a party in this appeal. In its memorandum in support of its

motion for summary judgment, however, its arguments for coverage

for its damages were based not upon the existence of an

“occurrence,” but upon the subcontractor exception to the “your

work” exclusion. Travelers does not dispute that the subcontractor

exception would prevent denial of coverage under the “your work”

exclusion if the damage to the Wal-Mart store were considered to be

property damage caused by an “occurrence.” It does dispute,

however, the district court’s apparent determination that coverage

would be created by the subcontractor exception and would exist

even absent an “occurrence.” 

In support of its determination that the subcontractor

exception provided coverage, the district court cited, inter alia,

L-J, Inc. v. Bituminous Fire & Maine Ins. Co., 567 S.E.2d 489, 494

(S.C. Ct. App. 2002), rev’d, ___ S.E.2d ___, 2004 WL 1775571 (S.C.

Aug. 9, 2004)). In reversing, the Supreme Court of South Carolina
7

determined that there had been no “occurrence,” so there was no

need to consider the “your work” exclusion and subcontractor

exception. Id. at *4. It continued its discussion, however, “to

reverse the court of appeals’ determination that an exception to an

exclusion ‘restores’ coverage.” Id. Because South Carolina law

provided that “an exclusion does not provide coverage but limits

coverage,” the court determined that the lower court had erred in

stating that an exception to an exclusion “restore[d]” coverage.

Id. at *5 (quoting Engineered Prods., Inc. v. Aetna Cas. & Sur.

Co., 368 S.E.2d 674, 675-76 (S.C. Ct. App. 1988)). The

subcontractor exception merely rendered the “your work” exclusion

inapplicable; it did not itself provide coverage. Id. at *4-5. We

find this holding to be consistent with Virginia law. See

Nationwide Mut. Ins. Co. v. Wenger, 222 Va. 263, 267, 287 S.E.2d

874, 876 (1981) (quoting Haugan v. Home Indem. Co., 86 S.D. 406,

413, 197 N.W.2d 18, 22 (1972) (“Exclusion (a) does not extend or

grant coverage. To the contrary it is a limitation or restriction

on the insuring clause.”); see also RML Corp. v. Assurance Co. of

Am., No. CH02-127 (Va. Cir. Ct. Dec. 31, 2002) (citing Wenger, 222

Va. at 267, 287 S.E.2d at 876) (“[E]xclusions do not extend or

grant coverage. . . . The Court rejects [the] argument that

language excepting subcontractor’s work from [an] exclusion . . .
8

extends coverage under the CGL policy to all repairs of

subcontractors’ defective workmanship.”).

Because the damage to the Wal-Mart store was not unexpected

and, therefore, not an “occurrence,” and because an exception to an

exclusion does not grant or extend coverage, Travelers is not

required under this policy to indemnify Miller for Wal-Mart’s

damages.

REVERSED AND REMANDED