Court Opinion

ID: 9846788
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:48:25.169068+00
Date Added: 2024-06-11T09:19:49.698284
License: Public Domain

THOMAS, Judge,
dissenting.
The endorsement denominated “Dwelling under Construction” appears to be controlling and exclusive in determining the liability of Federal Insurance Company (Federal). Therefore, I respectfully dissent.
An “endorsement” is defined as “[a]n amendment to a contract, such as an insurance policy, by which the original terms are changed.” American Heritage College Dictionary 454 (3d ed. 1997). In the case at bar, the Dwelling Under Construction endorsement, clearly listed on the “Dwelling Fire Policy” cover page, establishes the amount of insurance available to plaintiffs Thomas and Sandy Rouse (the Rouses) at any given time during construction. As noted on the first page of endorsements, “THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ CAREFULLY.”
The Dwelling Under Construction endorsement reads as follows
The limit of liability stated in the declarations for Coverage A is provisional. The actual amount of insurance on any date while the policy is in force will be a percentage of the provisional *75amount. The percentage will be the proportion that the actual value of the property bears to the value at the date of completion.
Form DP 1143 (emphasis added).
When a provision in a contract “contains a definition of a term used in it, this is the meaning which must be given to that term wherever it appears in the policy, unless the context clearly requires otherwise. . . .” Kruger v. State Farm Mut. Auto Ins. Co., 102 N.C. App. 788, 790, 403 S.E.2d 571, 572 (1991) (emphasis added). Here, the “Dwelling Under Construction” form is an endorsement to the policy, which necessarily alters it. Because endorsements are utilized to change or modify other provisions in the policy which ordinarily would be binding in establishing coverage or determining liability, anything else in the policy with which it conflicts becomes a nullity. See generally Greenway v. North Carolina Farm Bureau Mutual Ins. Co., 35 N.C. App. 308, 313, 241 S.E.2d 339, 342-43 (1978).
As used, the distinction between “amount of insurance” and “actual limit of liability” is not meaningful. Further, the Rouses point to nothing in the contract, case law or the General Statutes that forbids Federal to use “amount of insurance” interchangeably with “limit of liability.” It is common knowledge that the amount of insurance an insured has on property is the limit of liability for the insurer. This does not contravene the plain language meaning of the policy terms. Hence, there is no ambiguity. It is important to note that “the most fundamental rule [in interpreting insurance policies] is that the language of the policy controls. . . . [T]he .court must enforce the policy as written and may not reconstruct [it] under the guise of interpreting an ambiguous provision.” Ledford v. Nationwide Mutual Insurance Company, 118 N.C. App. 44, 50, 453 S.E.2d 866, 869 (1995) (quoting Nationwide Mutual Ins. Co. v. Mabe, 115 N.C. App. 193, 198, 444 S.E.2d 664, 667 (1994). Thus, the provision stands as exclusive.
This is a “Builder’s Risk” policy. See generally Baldwin v. Lititz Mutual Insurance Company, 99 N.C. App. 559, 393 S.E.2d 306 (1990). One of the crucial words in the endorsement is “provisional,” which sets the amount of insurance available, or the liability assumed by Federal, to be a changing amount as construction proceeds. As the percentage of the construction increases, the amount of insurance on the property increases. This was the parties’ bargain. It is logical for a dwelling under construction to have varying coverage limits as it comes closer to its completion. Accordingly, the “limit of liability” is provisional, or temporary.
*76Federal was concerned with the potential for suffering a large loss. Correspondence was introduced as part of Federal’s summary judgment motion, showing that the company had expressed such concern to its agent, Gilliams, Barbour, Barefoot & Yancey, Inc., who forwarded notice of Federal’s list of “critical recommendations” to the Rouses and defendant Williams Realty & Building Company in January 1997. The list included placing fire extinguishers on site and installing a fire alarm system to be utilized during construction. The recommendations also contained a section that explained “while on site it was noted that the property had been vandalized. In an attempt to discourage future vandals, it is recommended that a driveway gate be installed throughout construction.” R. pp. 57 and 61. In the letter from the insurance agent to the Rouses, it was observed that “[t]he largest losses that Chubb [Federal’s parent company] has had have occurred during construction. They recently had a $800,000 loss under a Builder’s Risk.” (Sic). R. p. 62. In the letter to the Rouses the agent said, “Chubb is the best company in the country for large homes like yours but they are very strict. They recently paid a $800,000 fire loss on a dwelling under construction.” R. p. 63.
The house was destroyed by fire, set by vandals, on 19 December 1997.
If the insurance coverage had been increased, or if calculations had been for the building to necessarily remain in a lower state of completion for a longer period of time, it would have been reasonable to expect a proportionate increase in the safeguards demanded by Federal. The amount of the premium paid by the Rouses, likewise, was based on a set of expectations.
It is undisputed that the provisional limit of liability was $2,369,000. It was stipulated that the actual value of the house on 19 December 1997 was $2,353,960 with the estimated completed cost to be $3,141,244. The house was therefore 74.9% complete at the time of the fire and, accordingly, the amount of insurance was 74.9% of $2,369,000, which totals $1,774,381. That is the amount already paid by Federal to the Rouses.
Indeed, if the building had been completed within the cost expectations which formed the basis of the policy — that construction would be completed at a total cost of $2,369,000 — the Rouses would have either moved in prior to the time of the vandalism and fire or, certainly, would have had a more secure structure with completion exceeding 99%.
*77For these reasons, I respectfully dissent and vote to reverse the trial court’s denial of Federal’s summary judgment motion and the grant of the Rouses’ motion for summary judgment.