UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

 

No. 05-1149

 

AMERICAN MODERN HOME INSURANCE COMPANY,

Plaintiff - Appellee,

and

CONTINENTAL INSURANCE COMPANY; NIAGRA FIRE

INSURANCE COMPANY,

Third Party Defendants - Appellees,

versus

REEDS AT BAYVIEW MOBILE HOME PARK, LLC;

ARUNDEL MOBILE VILLAGE, INCORPORATED; BAYWOOD

MOBILE HOME PARK, LLC; DARLINGTON, LLC; P&B

PARTNERSHIP DUNDALK MOBILE HOMES; ELKRIDGE

MOBILE HOME PARK, INCORPORATED; PENWOOD MOBILE

HOME PARK, INCORPORATED; SOUTHEAST MOBILE HOME

PARK, INCORPORATED,

Defendants - Appellants,

and

PARKWAY VILLAGE ASSOCIATES LIMITED PARTNERSHIP,

Defendant,

and

CNA INSURANCE GROUP,

Third Party Defendant.
-2-

 

Appeal from the United States District Court for the District of

Maryland, at Baltimore. William D. Quarles, Jr., District Judge.

(CA-03-1869-WDQ)

 

Argued: February 1, 2006 Decided: April 14, 2006

 

Before WILKINS, Chief Judge, and WILKINSON and LUTTIG, Circuit

Judges.

 

Affirmed in part and reversed in part by unpublished per curiam

opinion. Chief Judge Wilkins wrote an opinion concurring in part

and dissenting in part.

 

ARGUED: Andrew David Levy, BROWN, GOLDSTEIN & LEVY, L.L.P.,

Baltimore, Maryland, for Appellants. Robert Edward Scott, Jr.,

SEMMES, BOWEN & SEMMES, Baltimore, Maryland; William Joseph Carter,

CARR MALONEY, P.C., Washington, D.C., for Appellees. ON BRIEF:

Shelly Marie Martin, BROWN, GOLDSTEIN & LEVY, L.L.P., Baltimore,

Maryland, for Appellants. Sean P. Edwards, SEMMES, BOWEN & SEMMES,

Baltimore, Maryland, for Appellee American Modern Home Insurance

Company.

 

Unpublished opinions are not binding precedent in this circuit.

See Local Rule 36(c). 
-3-

PER CURIAM:

Appellants, mobile home park owners, argue that appellees,

their liability insurers, must defend a class action suit brought

by park residents seeking damages stemming from improperly

installed foundations. For the reasons stated below, we hold that

the insurers were under no obligation to defend the class action

but that the insurers have no right to reimbursement for their

contribution to a fund to settle the claims against the parks.

I.

In August of 2002, residents of mobile home parks owned by

appellants filed a class action suit in a Maryland state court,

complaining about the parks’ alleged complicity in the faulty

installation of the foundations for their mobile homes. J.A. 271-

304. The residents claimed that the parks employed a company that

defectively installed mobile home foundations, that the parks knew

of the installer’s defective workmanship, and that the parks

required residents to use this installer. Id. The complaint

alleged violations of Maryland consumer protection and real

property laws, breach of contract, fraud, negligent

misrepresentation, conspiracy, unjust enrichment, fraud in the

inducement, negligence, and breach of warranty. Id. at 293-303. 

The parks tendered the residents’ complaint to their liability

insurers, American Modern Home Insurance Company (American Modern),
*

The parties dispute whether the subsequent amended complaints

were properly tendered to Continental and Niagra for defense.

Because we hold that none of the damages claimed in any of the

complaints was covered by the policies, this possible distinction

between these insurers and American Modern is of no moment.

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Continental Insurance Company, and Niagra Insurance Company, for

defense, see id. at 259-60, but the insurers denied coverage

because “the Complaint does not seek damages for liability covered

under the terms of the policies for ‘property damage’ caused by an

‘occurrence,’” id. at 391-409.* The residents’ third amended

complaint, however, included allegations that their homes were

damaged as a result of the parks’ alleged conduct. See, e.g., id.

at 529 (“The home . . . is un-level with doors and windows out of

square.”). Because American Modern concluded that the third

amended complaint might allege property damage covered by its

policies, it agreed to defend the parks against it subject to a

reservation of its rights to dispute whether the residents’ claimed

losses were, in fact, covered under the policies. Id. at 582-600.

Prior to trial, the residents’ class action settled. See id.

at 601. In order to facilitate the settlement, which capped its

potential liability, see id. at 630, American Modern agreed to pay

$240,000 into the settlement fund, id. at 837. In letters sent to

the parks before the insurers’ payment, American Modern made clear

that it was paying into the settlement fund “under a complete

reservation of rights to recover back its contribution for damages
-5-

that are not covered by its insurance policies with the various

insureds.” Id. at 655.

American Modern filed this action in the district court after

the residents filed their first amended complaint. It sought a

declaration that the policy did not obligate the insurers to defend

the residents’ suit against the parks. Id. at 24-39. The district

court, deciding the case after the residents’ suit settled, held

that the insurers were under no obligation to defend the parks

because there was “no potentiality that the [residents’] tort

claims could be brought within the coverage of the policy.” Id. at

58. Without analysis, it also ordered the parks to “refund to

American Modern Home Insurance Group the funds that American Modern

paid to satisfy the terms of the class action settlement

agreement.” Id. at 60. We affirm the district court’s holding on

coverage but reverse its order requiring the parks to reimburse

American Modern for their contribution to the settlement fund.

II.

A.

The district court characterized the residents’ allegations as

claims for “breach[es] of their [the parks’] contractual duties to

the mobile homeowners by failing to properly install their mobile

homes.” J.A. 57. The district court then concluded that because

the definition of “property damage” under Maryland law “does not
-6-

include the normal, expected consequences of poor workmanship,”

there was no potential that the residents’ claims could be

considered claims for property damage covered by the policy. Id.

It therefore held that the insurers were not required to defend the

suit. Id. at 58.

The Maryland Court of Appeals has stated the test for deciding

whether an insurer has a duty under Maryland law to defend a tort

suit against its insured:

[T]wo types of questions ordinarily must be answered: (1)

what is the coverage and what are the defenses under the

terms and requirements of the insurance policy? (2) do

the allegations in the tort action potentially bring the

tort claim within the policy’s coverage? The first

question focuses upon the language and requirements of

the policy, and the second question focuses upon the

allegations of the tort suit.

St. Paul Fire & Marine Ins. Co. v. Pryseski, 438 A.2d 282, 285 (Md.

1981). In this case, the policies provide that the insurers have

“the right and duty to defend any ‘suit’ seeking” damages from the

insured due to “property damage” that is caused by an “occurrence.”

J.A. 109. The policy defines “property damage” as “physical injury

to tangible property” and defines “occurrence” as “an accident,

including continuous and repeated exposure to substantially the

same general harmful conditions.” Id. at 120-21. The policy does

not define “accident.”

According to the dictionary, an accident is “an event or

condition occurring by chance or arising from unknown or remote

causes.” Webster’s Third New International Dictionary 11 (1993).
-7-

None of the damage the residents allege can be characterized as

having been caused by an accident under this definition because

none of it occurred by chance or arose from unknown or remote

causes. The parks’ alleged failure to carry out contractual and

statutory obligations to assure that the foundations were properly

installed could not possibly be considered accidental. Indeed,

some of the damage alleged could arguably be characterized as

having been an expected or intended consequence of the parks’

actions, which damage the policy explicitly excludes from coverage.

J.A. 110.

The Maryland Court of Appeals has applied a broader definition

of “accident” to allegations of negligence, holding that negligence

can be deemed accidental if it “causes damage that is unforeseen or

unexpected by the insured.” Sheets v. Brethren Mutual Insurance

Co., 679 A.2d 540, 548 (Md. 1996). Sheets held that a negligent

misrepresentation suit against the insured triggered the insurer’s

duty to defend because it was “conceivable” that the insured did

not anticipate the damage that resulted from the insured’s

negligent misrepresentation. Id. at 551. Unlike Sheets, in this

case it is not conceivable that the parks’ alleged conduct “may

have taken place without [the parks’] foresight or expectation” of

the damage caused. Id. Negligent interactions with residents

regarding obligations relating to the foundations and negligent

interactions with companies responsible for installing foundations
-8-

foreseeably and expectedly lead to damage to the mobile homes

sitting on the foundations.

Even if the parks’ conduct was not accidental, the parks argue

that the damage alleged was caused by an occurrence because the

policy defines “occurrence” to include “continuous or repeated

exposure to substantially the same general harmful conditions,” see

J.A. 120, and the damage alleged resulted from continuous or

repeated exposure to the defective foundations. This argument is

premised upon a misunderstanding of the term “occurrence,” which

the policy defines as “an accident, including continuous or

repeated exposure to substantially the same general harmful

conditions.” Id. The continuous-or-repeated-exposure clause does

not, as the parks contend, expand coverage to include all damage,

whether accidental or not, that results from continuous or repeated

exposure. Rather, the clause is most naturally understood as

modifying “accident” to prevent temporal limitation. In other

words, the clause renders an accidental event that spans some

period of time as much a covered occurrence as an accidental event

that happens in a moment’s time. Under all circumstances the

requirement that the damage-causing events or actions be

accidental, which requirement has not been satisfied here, remains.

Because the damage alleged in the residents’ complaint was not

caused by an occurrence, it was not potentially covered by the
-9-

insurers’ policies. Accordingly, the insurers had no duty to

defend the suit.

B.

Having concluded that the policies did not cover the

residents’ alleged damages, the district court apparently assumed

that the parks had to reimburse American Modern for its

contribution to the settlement fund and ordered the parks to do so.

See J.A. 60.

Neither the policy nor the endorsements contains any provision

that gives American Modern a right to reimbursement for settlement

payments made in cases in which there is no coverage, and the parks

never agreed to grant American Modern any such right in the

correspondence that preceded American Modern’s contribution.

Nevertheless, American Modern asks the court to hold that it has

right to reimbursement. As proof of the existence of its right to

reimbursement, American Modern principally relies upon its repeated

reservation of that right.

Because neither the policy nor any subsequent agreement

between American Modern and its insureds grants American Modern a

right to reimbursement, we cannot conclude that American Modern has

such a right. American Modern’s repeated reservation of its

asserted right to reimbursement is entirely inconsequential.
-10-

Assiduous reservation of a non-existent right does not bring that

right into existence.

CONCLUSION

For the reasons stated herein, we affirm the judgment of the

district court that the insurers were under no obligation to defend

the suit against the parks. We reverse the district court’s order

requiring the parks to reimburse American Modern for its settlement

payments.

AFFIRMED IN PART AND REVERSED IN PART
-11-

WILKINS, Chief Judge, concurring in part and dissenting in part:

I concur in the majority opinion to the extent that it holds

that the district court erred in requiring the parks to reimburse

American for the money it contributed toward the settlement of the

underlying suit. But I respectfully dissent from the portion of

the opinion affirming the grant of the insurers’ motion for summary

judgment on the issue of their duty to defend.

I.

The parks argue that the district court erred not only in

granting summary judgment to the insurers on the issue of their

duty to defend the parks but also in denying their own partial

summary judgment motion on the same issue. I agree on both

accounts.

We review the grant of summary judgment de novo, viewing the

disputed facts in the light most favorable to the nonmoving party.

See Edelman v. Lynchburg College, 300 F.3d 400, 404 (4th Cir.

2002). Summary judgment is warranted when the admissible evidence

forecasted by the parties “demonstrates that no genuine issue of

material fact exists and that the moving party is entitled to

judgment as a matter of law.” Williams v. Staples, Inc., 372 F.3d

662, 667 (4th Cir. 2004).

The parks first contend that the district court erred in

determining that they did not face potential liability under the
-12-

complaints for “property damage” caused by an “occurrence.”

Indeed, they argue that such damages were within the scope of the

complaints as a matter of law. I agree.

“As a court sitting in diversity, we have an obligation to

interpret the law in accordance with the Court of Appeals of

Maryland, or where the law is unclear, as it appears that the Court

of Appeals would rule.” Wells v. Liddy, 186 F.3d 505, 527-28 (4th

Cir. 1999). Under Maryland law, the obligation of an insurer to

defend its insured is determined by the allegations in the

underlying claims against the insured. See Brohawn v. Transamerica

Ins. Co., 347 A.2d 842, 850 (Md. 1975). If the plaintiffs in the

underlying case “allege a claim covered by the policy, the insurer

has a duty to defend.” Id. In addition, even if the plaintiffs in

the underlying case do not “allege facts which clearly bring the

claim within or without the policy coverage, the insurer still must

defend if there is a potentiality that the claim could be covered

by the policy.” Id. If the coverage issue depends upon policy

language that is ambiguous, the court “must resolve that ambiguity

in favor of the insured before it can conclude that the insurer has

or had an obligation to provide a tort defense.” St. Paul Fire &

Marine Ins. Co. v. Pryseski, 438 A.2d 282, 286 (Md. 1981).

Each of the policies here (the Policies) requires the insurer

to “pay those sums that the insured becomes legally obligated to

pay as damages because of ... ‘property damage’ ... to which this
1The insurers argue that the subsequent Ellerbe complaints do

not specifically make this allegation with regard to Ellerbe.

However, the subsequent complaints make similar allegations. See,

e.g., J.A. 445 (wherein first amended complaint alleged that “each

respective class member” had suffered damages “in the amount of the

purchase price of the home, un-leveling of the home, separation of

walls, doors and windows not being square and ... other damages”).

-13-

insurance applies.” J.A. 211. They place upon the insurers “the

right and duty to defend any ‘suit’ seeking those damages.” Id.

“Property damage” is defined to include “[p]hysical injury to

tangible property.” Id. at 223. The Policies provide coverage

only if the property damage is “caused by an ‘occurrence.’” Id. at

211.

All of the complaints requested compensation for property

damage. For example, the first Ellerbe complaint alleged in a

section labeled “Facts Applicable to All Counts,” that the

challenged installation procedure 

causes minimally the home to sink and separate due to the

undue structural forces on the walls of the home. In

extreme scenarios, a home can collapse suddenly and

without warning. Accordingly, this defective workmanship

results in a wide pattern of foundational problems with

resultant damages, some of which are so material a

rescission of the contract is the only appropriate

remedy. 

Id. at 286. This complaint further alleged that with regard to

Plaintiff Ellerbe’s home, there was “evidence of settling which ...

caused interior doors to no longer be square in the door frame.

The concrete pillars under the home ... cracked and are sinking

inward toward the center of the home.”1 Id. at 280 (internal
2The policy in Sheets defined “occurrence” exactly as do the

policies in the case at bar. Just as in the policies before us,

the policy there did not define “accident.”

-14-

quotation marks & emphasis omitted). This complaint sought

equitable relief and “all other remedies that equitably and

reasonably flow from Defendants’ breaches of statutory, common law

and contractual obligations.” Id. at 304. It also sought

compensation for violation of the relevant building code as well as

“such other and further relief as the Court appears just, equitable

and proper.” Id. Thus, the first Ellerbe complaint clearly

created the potential for the parks to be liable for property

damage caused to the homeowners, and the subsequent complaints

contained materially similar allegations.

Furthermore, the complaints created potential liability on the

part of the parks for property damage “caused by an ‘occurrence.’”

Id. at 211. The term “occurrence” is defined in the Policies as

“an accident, including continuous or repeated exposure to

substantially the same general harmful conditions.” Id. at 222.

Under Maryland law, “an act of negligence constitutes an ‘accident’

under a liability insurance policy when the resulting damage was an

event that takes place without the insured’s foresight or

expectation.” Sheets v. Brethren Mut. Ins. Co., 679 A.2d 540, 548

(Md. 1996) (internal quotation marks & alteration omitted).2

Regarding foresight or expectation, the test is a subjective, not

an objective one: That the damage “should have been foreseen or
-15-

expected by the insured” does not disqualify it from having been

caused by an accident. Id. at 549. Indeed, were the law

otherwise, liability policies would be largely useless because they

would almost never cover any negligence liability, since a

defendant is liable only for the foreseeable results of his

breaches of duty. See id. 

The majority opinion holds that the complaints did not allege

facts that even potentially could constitute an occurrence,

reasoning that “it is not conceivable” that the parks failed to

foresee or expect the damage caused by the installations of the

foundations. Ante, at 7-8. I do not believe that this is correct.

The complaints allege that the failure to satisfy code

requirements regarding the footers may not have been intentional.

See, e.g., J.A. 277, 289-90 (first Ellerbe complaint alleging that

“[t]he defective footers” may be “due to and based upon a

systematic and fundamental misunderstanding [of] ... the

requirements for footers in the State of Maryland”). And, although

the complaints allege some intentional torts, they also allege

causes of action against the parks for, among other things,

negligent misrepresentation, violation of building code,

negligence, breach of warranty, and torts arising from breach of

contract. See Brohawn, 347 A.2d at 850 (holding that liability

insurer had duty to defend insured against complaint that alleged

intentional tort and negligence in the alternative even when policy
-16-

excluded coverage for intentional torts); Minnick’s, Inc. v.

Reliance Ins. Co., 422 A.2d 1028, 1030 (Md. Ct. Spec. App. 1980)

(“Once it is determined that the insurance policy creates a duty to

defend against claims made within the policy’s coverage and it is

further determined that the complaint alleges the cause of action

within the policy's coverage, the company is obligated to defend

the suit, notwithstanding alternative allegations outside the

policy's coverage, until such time, if ever, that the claims have

been limited to ones outside the policy coverage.” (internal

quotation marks omitted)).

If the failure to install the homes correctly amounted only to

negligence, the parks may not have known that the homes were being

installed incorrectly. In that event, there simply would be no

basis for concluding that the parks actually expected that the

installations would damage the homes; thus, the damage could

possibly have been caused by an occurrence. The unexpected nature

of the liability is the reason that this sort of claim, in which a

company has accidentally caused damage to other property by

negligently performing its work, is exactly the sort that

commercial general liability (CGL) policies are designed to cover.

See, e.g., Haynes v. Am. Cas. Co., 179 A.2d 900, 903-04 (Md. 1962)

(holding that when contractor hired to do excavation work cut down

trees that turned out to be on a third party’s property, damage was

“caused by accident” (internal quotation marks omitted)). 
-17-

But even assuming for a moment that all of these claims

alleged that the parks knew that the installations did not satisfy

the building code--and therefore were negligent--the parks still

may have believed that the installations were sufficient to keep

the homes from sagging and separating. To conclude otherwise would

be to assume that the code requirements were the absolute bare

minimum necessary to prevent such damage and that the parks knew

that, but there is no support whatsoever for either assumption.

Considering that the complaints are silent regarding whether the

parks realized that their installations would cause the homes to

separate, the majority has no basis for concluding that the parks

necessarily realized this.

Relying primarily on Lerner Corp. v. Assurance Co. of America,

707 A.2d 906 (Md. Ct. Spec. App. 1998), the insurers argue that the

property damage alleged here was not even potentially caused by an

occurrence because it necessarily was “foreseen” by the parks. In

Lerner, the plaintiffs were a developer and a firm that provided

the developer with construction management services. See Lerner

Corp., 707 A.2d at 907. The developer built and sold a building to

the United States pursuant to a contract providing that acceptance

of the work performed under the contract was deemed to be final

except as to latent defects. See id. at 907-08. After the

building was sold, GSA discovered latent defects in the building’s

exterior facade. See id. at 908. The plaintiffs undertook to
-18-

repair the facade and then sued their CGL insurers for indemnity.

See id.

Some of the CGL policies at issue in Lerner defined

“occurrence” to require that any resulting property damage be

“neither expected or intended from the standpoint of the Insured.”

Id. at 909 (internal quotation marks omitted). The Court of

Special Appeals concluded that 

[i]f the damages suffered relate to the satisfaction of

the contractual bargain, it follows that they are not

unforeseen. In other words, and in the context of this

case, it should not be unexpected and unforeseen that, if

the Building delivered does not meet the contract

requirements of the sale, the purchaser will be entitled

to correction of the defect. 

Id. at 912. The Lerner court went on to explain, however, that 

if the defect causes unrelated and unexpected ...

property damage to something other than the defective

object itself, the resulting damages, subject to the

terms of the applicable policy, may be covered. For

example, if a collapse of the veneer had injured a user

of the facility or damaged property other than the veneer

itself, these may well be covered.

 

Id.; see 9A Steven Plitt et al., Couch on Insurance § 129:4 (3d ed.

2005) (“[A]lthough a commercial general liability policy does not

provide coverage for faulty workmanship that damages only the

resulting work product, the policy does provide coverage if the

faulty workmanship causes bodily injury or property damage to

something other than the insured’s work product.”).

The case at bar is distinguishable from Lerner because here,

the complaints seek primarily to impose liability for damage not to
-19-

the foundations themselves, but to the rest of the homes. That

damage was allegedly caused by the “harmful condition[]” of

“continuous ... exposure to” an incomplete foundation, the

incompleteness of which was allegedly the parks’ legal

responsibility. J.A. 222.

Indeed, that the scope of the product or work for which the

parks were responsible was limited to, at most, the installation of

the homes and did not include their construction is the critical

point in this case. The insurers attempt to blur this distinction

by essentially blending the parks with the companies that sold them

the homes (“the Retailers”), as if they were one entity. See,

e.g., Appellee’s Br. at 46 (“The uncontradicted allegations were

that plaintiffs had a contract with the Parks to deliver a nondefective home that had a proper foundation, which is the gravamen

of the Complaint(s).”). The bottom line, however, is that none of

the Ellerbe complaints allege that the Ellerbe plaintiffs

contracted with the parks for purchase of the homes. 

The insurers point out that the Ellerbe plaintiffs’ purchase

contract with the Retailers allegedly included both construction of

the homes and their installation. In other words, the complaints

alleged that they purchased installed homes. That is true, and

that would be relevant if the Retailers were the insureds here.

Because the Retailers were responsible for constructing each entire

installed home, under Lerner, they necessarily would have foreseen
3

The insurers contend that even if the complaints created some

potential liability for property damage caused by an occurrence,

the summary judgment should be affirmed as to Continental Insurance

Company and Niagra Fire Insurance Company because they did not

insure any parks after 1995. I disagree. The Policies cover

liability for “property damage” only if the damage “occurs during

the policy period.” J.A. 211. But because the Ellerbe plaintiffs

alleged that the improper installations dated back to 1993, nothing

in the complaint rules out the possibility that some of the alleged

property damage had occurred by 1995.

The insurers also maintain that, all other issues aside, they

are entitled to summary judgment against three parks in which none

of the named plaintiffs reside. That is incorrect as well. Each

of the parks named in the class action suit was at risk of a

judgment in favor of its residents regardless of whether its

residents were named. Because the insurers could have been

required to indemnify the parks for such a judgment, they were

required to defend their insureds.

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that they would be liable for repairing the entire home to the

extent they did not deliver what they promised. But since the

parks at most had the duty to install the homes, they are

considered to have foreseen only the cost of repairing the

installation. The complaints therefore created the potentiality

that the parks would become liable for property damage they had not

foreseen.3

II.

The insurers also maintain that selected Policy exclusions

demonstrate that the claims in the complaints necessarily fell

outside the scope of the Policies. The parks argue that the
4Although Century I says “insured” rather than “insurer,” it

is clear from the context and the authorities cited that that was

simply a typographical error.

-21-

exclusions, as a matter of law, do not preclude the insurers’ duty

to defend here. I agree with the parks. 

The exclusions cited by the insurers are among those

collectively known as the “business risks exclusions.” Century I

Joint Venture v. United States Fid. & Guar. Co., 493 A.2d 370, 374

(Md. Ct. Spec. App. 1985). In Century I, the Maryland Court of

Special Appeals noted: 

Courts have uniformly held that the purpose of exclusions

such as these, for damages to the insured’s work product

or work project out of which an accident arises, is to

remove any obligation of the insure[r]4 to pay for the

repair or replacement of the policyholder’s own defective

work or defective product. Conversely, it is equally

well established that such business risk exclusions

permit coverage for damages to other property or for

other accidental loss caused by the defective product or

defective work. 

Id. at 374-75 (citations omitted). I will address seriatim the

exclusions identified by the insurers. 

The first concerns liability for property damage to “[t]hat

particular part of any property that must be restored, repaired or

replaced because ‘your work’ was incorrectly performed on it.”

J.A. 214-15 (exclusion 1(k)(6)). The language of this exclusion

begs the question, “On what ‘particular part’ of the property were

the installations here performed? Was it simply the bottom

surfaces of the homes, or should the installations be considered to
-22-

have been performed on the homes in their entirety?” The former

construction is at least reasonable, and the record contains no

extrinsic evidence clarifying the parties’ intentions. Thus, the

“particular part” exclusion does not necessarily bar coverage here.

See Frankel v. J. Watson Co., 484 N.E.2d 104, 105-06 (Mass. App.

Ct. 1985) (holding that “particular part” exclusion precluded

coverage only for foundation itself and not for rest of the

property when insured was retained to move farmhouse and construct

new foundation for it but negligently constructed foundation,

causing damage to the superstructure of the farmhouse).

The insurers next rely on exclusion 1(l), which applies to

liability for “‘Property damage’ to ‘your product’ arising out of

it or any part of it.” J.A. 215. Even if the parks had a product

here, it certainly cannot be said that the entire homes were their

product. Thus, this exclusion is not dispositive.

The insurers also rely on exclusion 1(m), which concerns

liability for “‘Property damage’ to ‘your work’ arising out of it

or any part of it and included in the ‘products-completed

operations hazard.’” Id. The Policies state that “[t]his

exclusion does not apply if the damaged work or the work out of

which the damage arises was performed on your behalf by a

subcontractor.” Id. Here, because the complaints do not specify

whether the installers of the homes were the parks’ subcontractors,

this exclusion is not dispositive. 
-23-

The insurers finally identify exclusion 1(n), which excludes

coverage for:

“Property damage” to ... property that has not been

physically injured, arising out of:

(1) A defect, deficiency, inadequacy or dangerous

condition in “your product” or “your work”; or

(2) A delay or failure by you or anyone acting on your

behalf to perform a contract or agreement in

accordance with its terms.

This exclusion does not apply to the loss of use of other

property arising out of sudden and accidental physical

injury to “your product” or “your work” after it has been

put to its intended use.

Id. (emphasis added). Here, the complaints alleged that the homes

were physically injured. Thus, this exclusion would not apply.

 For all of these reasons, the allegations of the complaints

show that the Ellerbe plaintiffs’ claims had the potential to fall

outside all the business risks exclusions identified by the

insurers. As a matter of law, the exclusions did not preclude the

insurers’ duty to defend.

III.

In sum, I would hold that the district court erred not only in

granting the insurers’ motion for summary judgment but also by

denying the parks’ motion for partial summary judgment. I

respectfully dissent from the majority opinion to the extent that

it holds otherwise.