Opinion ID: 1873435
Heading Depth: 2
Heading Rank: 2

Heading: Progressive Damage

Text: American Family claims that the trial court erred in overruling its motion for directed verdict at the close of all the evidence because Sherry failed to present evidence to support each element of its breach of contract claim. [2] To make a submissible case for its breach of contract claim, Sherry was required to present evidence from which the jury could have a reasonable basis for finding that (1) there was a contract between Sherry and American Family that included certain rights and obligations between the parties, (2) American Family breached its obligation under the contract, and (3) American Family's breach damaged Sherry. Teets v. Am. Family Mut. Ins. Co., 272 S.W.3d 455, 461 (Mo.App.2008). In reviewing whether the plaintiff made a submissible case, an appellate court views the evidence in a light most favorable to the plaintiff and gives the plaintiff the benefit of all reasonable inferences while disregarding all contrary evidence and inferences. Id. Whether the plaintiff made a submissible case is a question of law subject to de novo review. Id. Under the terms of the American Family policy, Sherry is entitled to coverage if Sherry is legally obligated to pay damages because of property damage caused by an occurrence that happened during the policy period. The central issue in this case is whether Sherry's damages claim arose during the policy period. Sherry's insurance policy's declaration page states that the policy period began December 5, 2002. At trial, the parties disputed the end date of the policy. American Family contended that Sherry canceled the policy in September 2003, while Sherry maintained that it did not cancel the policy and that the policy ended December 5, 2003, which is the end date on the policy's declaration page. The standard of review requires an appellate court to view the evidence in the light most favorable to the judgment, so it is assumed that the policy ended December 5, 2003. As such, to carry its burden at trial, Sherry was required to present evidence that the property damage occurred between December 5, 2002, and December 5, 2003. Sherry argues that there is coverage because the damage began during the policy period and was progressive from that point forward. Sherry's progressive damage theory was premised on allegations that unanticipated and repeated exposure to poor soil conditions under the house, beginning during the policy period, caused the house to settle out of level, which caused property damage to the house's foundation. American Family argues that there is no coverage because the damage was not detected and confirmed by Sherry until July 2004. The question is whether the occurrence triggering coverage under the American Family policy was the poor soil condition and ensuing progressive damage or the eventual detection and confirmation of the property damage caused by those poor soil conditions. American Family asserts that an occurrence under its policy is tantamount to an accident. Sherry does not dispute this assertion and notes that a number of cases have defined an occurrence as an accident. See American States Ins. Co. v. Mathis, 974 S.W.2d 647, 650 (Mo.App.1998). The determinative inquiry into whether there was an occurrence or accident is whether the insured foresaw or expected the injury or damages. Columbia Mut. Ins. Co. v. Epstein, 239 S.W.3d 667, 672 (Mo.App.2007). While an accident does not include expected or foreseeable damage, it is also true that an accident is not necessarily a sudden event; it may be the result of a process. Id. This principle is illustrated in Scottsdale Insurance Co. v. Ratliff, 927 S.W.2d 531 (Mo.App.1996). In Scottsdale , the plaintiff was insured under an occurrence-type commercial policy similar to the American Family policy at issue in this case. The plaintiff alleged that a pest control company negligently failed to detect a termite infestation. Id. at 534. The damage was not detected until structural problems arose after the insurance policy had expired. The plaintiff alleged that the termites were present during the alleged negligent inspection and that the termites continued to damage the house progressively. The court of appeals held that the insurer had a duty to defend the pest control company because, if true, these facts would constitute an occurrence under the policy. Rather than restricting coverage only to the period of time after the plaintiff had discovered the damage, the injury was a continuing one, beginning at the time of the negligent inspection and continuing until discovery. Id. Similarly, in Stark Liquidation v. Florists' Mut. Ins. Co., 243 S.W.3d 385 (Mo. App.2007), the plaintiff filed suit alleging that the defendant sold fruit trees infected with a disease that prevented the trees from bearing fruit and that the disease then spread to the remainder of the fruit crop. Id. at 394. The defendant's liability insurer claimed that the property damage did not occur within the policy period because the farmer and merchant did not discover that the bacterial disease was present until several years after the policy expired. Id. at 393. Nonetheless, the court of appeals held that because the evidence showed that the bacterial infection was present from the moment the trees were delivered, the occurrence of the injury was within the policy period. Id. at 394. Scottsdale and Stark establish the proposition that an occurrence-type policy, such as the American Family policy at issue in this case, covers cases of progressive injury where the cause of the damage is present during the policy period but the damage is not apparent until after the policy period. Although the jury improperly was called to determine the legal issue of coverage, American Family was not prejudiced because, as a matter of law, the policy covers the type of claim made by Sherry in this case. The issue then becomes whether Sherry presented sufficient evidence to establish an occurrence during the policy period. The evidence presented by Sherry in this case is analogous to Scottsdale and Stark . In both cases, the cause of the damage was present during the coverage period but was not apparent at that time. Similarly, Sherry introduced evidence showing that the home inadvertently was constructed on soil that was incapable of providing adequate support and that, as a result of this unforeseeable circumstance, the home progressively was damaged to the point of being uninhabitable. Sherry testified that his company did not foresee that the home would suffer irreparable damage from settlement. Sherry admitted that he knew the home was built on fill dirt but testified that the home was equipped with foundation piers designed to provide further stabilization and that the house passed all county inspections. Viewed in the light most favorable to the verdict, there is evidence to support Sherry's claim that the cause of the damage commenced during the policy period and, therefore, constituted an insurable occurrence. Finally, American Family argues that even if Sherry's progressive damage theory is valid and supported by evidence, there is no coverage because Sherry was not legally obligated to repurchase the home. After American Family informed Sherry that it would not undertake further investigation the claim until the homeowners filed a lawsuit, Sherry repurchased the home pursuant to a settlement agreement. A settlement agreement is a contract that creates legally enforceable obligations. Because of the settlement agreement, Sherry legally was obligated to pay damages to the homeowners. American Family's argument that Sherry was not legally obligated to pay damages is without merit. Sherry made a submissible case of breach of contract by introducing evidence that there was a contract between Sherry and American Family, that American Family breached its obligation under the contract, and that American Family's breach damaged Sherry. The trial court did not err in overruling American Family's motions for directed verdict and judgment notwithstanding the verdict on Sherry's claims for breach of contract.