Court Opinion

ID: 9646798
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:11:33.228734+00
Date Added: 2024-06-11T18:11:42.024443
License: Public Domain

Tom Glaze, Justice, dissenting. I respectfully dissent from the majority’s decision and I will discuss each point in the same order as the majority considered it. I. THE JOHN REAVES CLAIM AND RESULTING LITIGATION IN JACKSON COUNTY CIRCUIT COURT CONSTITUTED AN OCCURRENCE WITHIN THE MEANING OF THE POLICY OF INSURANCE. The majority held that the damage suffered by John Reaves was an “occurrence” within the meaning of the policy because it was neither expected nor intended by the insured, Geurin Contractors. The insurance policy defined “occurrence” as follows: “[Occurrence” means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured. The key word in the definition above is “accident.” Although the insurance policy does not define that word, the Court in Continental Insurance Company v. Hodges, 259 Ark. 541, 534 S.W.2d 764 (1976), defined it as follows: The definition that has usually been adopted by the courts is that an accident is an event that takes place without one’s'foresight or expectation — an event that proceeds from an unknown cause, or is an unusual effect of a known cause, and therefore not expected. [Citing 44 Am. Jur. 2d Insurance, § 1219 (1969)]. [Emphasis supplied.] Consideration of the meaning of “occurrence” is incomplete without a concurrent consideration of the meaning of “accident.” Whether an event constitutes an “accident” is determined more by the effect or result of the event, not by the intent of the insured. Thus, although Geurin did not intend to damage Mr. Reaves’ business, the precise damage which he suffered, viz. loss of business, was foreseeable in view of the relative location of the store to the highway construction. The majority outlined the following so-called “unexpected” and “unintended” events which it opines constituted an "occurrence” and resulted in the store’s becoming inaccessible to Reaves’ customers: (1) finding soil cement during the grading operations; (2) finding the underlying soil to be unstable and not suitable for a road bed; (3) getting rain during the course of the construction. Geurin’s contract with the state highway department required him to remove the old highway surface and to replace it with a new surface. The contract also required the company to provide and maintain temporary access to businesses and parking lots along the construction route. The problems which Geurin encountered delayed completion of the job. Mr. Reaves was damaged by Geurin’s failure to provide adequate access to the grocery store. Geurin maintains that he neither intended nor expected the resulting damage and is therefore within the terms of the policy. Intention, however, is not the controlling factor in applying the policy provision. If the occurrence were an accident which resulted in property damage that was either expected or intended by the insured, the provision applies and there is no coverage. The real question here is whether the delays and resulting loss to Mr. Reaves were caused by events which were normal, foreseeable and to be anticipated by a construction company. Rain is not so unlikely an event that it is unexpected by a highway contractor. Although Geurin may not, in fact, have expected rain, it is reasonably foreseeable in Arkansas that at some time during a construction project rain will occur. Within the definition of "accident” provided by this Court, rain which could delay a construction project is neither an event that proceeds from an unknown cause nor an unusual effect of a known cause, and therefore unexpected. No evidence was presented to indicate that finding a spongy subsurface was unusual or unexpected. In fact, the testimony of Mr. W. A. Bigham, former Superintendent for Public Works for the City of Newport, was to the contrary. Mr. Bigham testified that he was not surprised that the subsurface was “wet and mucky” because he was familiar with it. He explained that it is in a low lying, easily flooded area, and “in fact, the City of Newport is kind of in a duck nest, easy to flood anywhere.” Given the wording of the contract provision which defines “occurrence” and the testimony below, the evidence is overwhelmingly in support of the appellee’s position. The facts indicate that the circumstances which led to Mr. Reaves’ lost profits were foreseeable and were not unusual for one in Geurin’s position. The majority cites cases from other jurisdictions which have absolutely no application to or bearing upon the case at bar. For example, in Ohio Casualty Insurance Company v. Terrace Enterprises, Inc., 260 N.W.2d 450 (Minn. 1977), the Court determined that faulty construction of an apartment building was an “occurrence” under the terms of the policy. The damage which resulted when the building settled was the direct result of the work the contractor performed in constructing the apartments. The case at bar would only be comparable if the damage had been to the highway which the contractor built rather than the lost profits Mr. Reaves suffered in his business. In Grand River Lime Company v. Ohio Casualty Insurance Company, 289 N.E.2d 560 (Ohio Ct. App. 1972), a class action suit alleging damage and personal injury to some two hundred plaintiffs, the primary question was whether the insurer was obligated to defend the insured. The Court held the company not liable to defend against allegations of “knowledge and willful intent of the defendant” because the definition of “occurrence” in the policy applied only to accidents “neither expected nor intended by the insured.” However, allegations of nuisance, trespass or negligence, according to the Court, fell within the policy provisions. Unlike the case of Grand River Lime Company, here appellee does not allege that Geurin willfully or intentionally caused damage to Mr. Reaves’ property. Rather, appellee contended that the resultant damage was not beyond the foresight or expectation of Geurin. The policy provision in issue in Grand River Lime Company simply is not the same as the one under consideration here. The Ohio case is so far off point on its facts that one must stretch his imagination to compare tha't Court’s holding and facts to the instant case. In Elco Industries, Inc. v. Liberty Mutual Insurance Company, 90 Ill. App. 3d 1106, 414 N.E.2d 41 (1980), cited by the majority, manufactured goods were recalled because of a defective component part made by the insured. The insured paid a settlement to the buyer because the insured’s failure to manufacture the part according to the buyer’s specifications resulted in the buyer’s having to remove, repair and replace the parts. The insurance company maintained that the installation of defective parts was not an “occurrence” under the terms of the policy. The Court held that there was an “occurrence,” pointing out “the word ‘accident’ should not be construed to exclude claims involving negligence or breach of warranty; otherwise the insured is afforded little or no protection.” Id. at 44. Actually, the holding in Elco Industries is compatible with appellee’s contentions here. Appellee does not contend that claims involving negligence which result in an “occurrence” ought to be excluded from coverage, but only that there was no "occurrence” under the terms of the policy in the instant case. The majority also cites Gruol Construction Company v. Insurance Company of North America, 524 P.2d 427 (Wash. App. 1974), wherein the Court found that the damage caused by dry rot in an apartment building was not foreseeable. The Court indicated that the insurer would not have been liable were the damage “not unusual, unexpected or unforeseen and, therefore, notan ‘accident.’ ” The facts in Gruol are easily distinguishable from the instant case. Here, the damage caused by the store’s being inaccessible, i.e., loss of business, was foreseeable. Reviewing the cases from other states which the majority cites, I do not find them persuasive in holding that there was an "occurrence” under the terms of the policy. Although they do interpret the word “occurrence,” the fact situations are so different that the cases are inapposite to the facts and issues before us. II. THE JOHN REAVES CLAIM AND RESULTING LITIGATION IN JACKSON COUNTY CIRCUIT COURT WAS NOT SPECIFICALLY EXCLUDED FROM COVERAGE UNDER THE POLICY. If there was no occurrence under the terms of the policy, then by the terms of the policy, the appellee is not obligated to pay. The policy provides coverage for property damage under Coverage B, which reads in pertinent part: The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of. . . property damage to which this insurance applies, caused by an occurrence. Without an “occurrence” no property damage is covered by the insurance policy. Even if there was an “occurrence” as the majority held, the damages which Mr. Reaves suffered are excluded by other policy provisions. The majority strained to find “property damage” under the terms of the policy, even though the damage was not physical damage to tangible property. Instead, the damages here involved lost profits due to the inaccessibility by customers to Mr. Reaves’ store. By definition, “property damage” under the policy in question is “[p]hysical injury to or destruction of tangible property . . . including the loss of use thereof at any time resulting therefrom.” The only allegation of destruction of tangible property was the claim for meats and produce which spoiled because customers did not come to the store. Mr. Reaves’ premises were not physically damaged. “Property damage” is also defined in the policy as “loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence . ” No evidence exists that Mr. Reaves was unable to use his store during the period of construction or that he was forced to close as a result of an inability to use his property. The only element of damages submitted to the jury when Mr. Reaves brought action against Geurin was for loss of profits, an intangible property right. Appellant cites Hamilton Die Cast, Inc. v. United States Fidelity and Guaranty Company, 508 F.2d 417 (7th Cir. 1975), to support the contention that “actual injury or damage... to tangible property resulting in loss of intangibles” is not excluded under the terms of the policy. Yet, in the case at bar, no physical injury or damage occurred to Mr. Reaves’ store; the injury was to his pocketbook. In the Hamilton Die Cast case, the Court found that the losses which Midland claimed were intangible property rights, “loss of investment, loss of anticipated profits, and loss of goodwill,” id. at 419, exactly the types of losses which Mr. Reaves claimed. Reaves maintained that he lost profits from his business while his customers could not easily get to his store and that he had to spend sums of money to retrieve his steady customers whom he had lost to his competition while the road construction was underway. On these facts, I fail to see how the majority could find that “property damage” occurred within the terms of the insurance policy. The last exclusion which the majority held inapplicable to the case at bar is paragraph (m) of the insurance policy. It provides that the policy does not cover losses of tangible property not physically injured or destroyed resulting from a delay in or lack of performance by the insured. The exclusion is clear in its terms. Although insurance policies are to be construed most favorably to the insured and against the insurer, Ritchie Grocer Company v. Aetna Casualty & Surety Company, 426 F.2d 499 (8th Cir. 1970), and all reasonable doubts are to be resolved in favor of an insured who had no part in preparing the contract, State Farm Mutual Automobile Insurance Company v. Traylor, 263 Ark. 92, 562 S.W.2d 595 (1978), when language is clear and unambiguous, the Court is bound to enforce the contract. In Southern Farm Bureau Casualty Insurance Company v. Williams, 260 Ark. 659, 543 S.W.2d 467 (1976), the Arkansas Supreme Court said: It is unnecessary to resort to rules of construction in order to ascertain the meaning of an insurance policy when no ambiguity exists. . . . The terms of an insurance contract are not to be rewritten under the rule of strict construction against the company issuing it so as to bind the insurer to a risk which is plainly excluded and for which it was not paid. Id. at 664, 543 S.W.2d at 470. The testimony at trial was to the effect that Mr. Reaves’ losses were the result of the time involved in resurfacing the highway. The reasons for the delay in completing the job were finding an unstable subsurface and having rain for several days in a row, which prevented the workers from proceeding. The language in exclusion (m) does not require that a delay be intentional — only that a delay occur. It is not disputed that appellant’s job performance was delayed, and therefore the insurance coverage was excludable on these facts. The trial court’s judgment should not be reversed. Supplemental Opinion on Denial of Rehearing delivered August 25, 1982 636 S.W.2d 645 Lawson Cloninger, Judge. Appellee, Bituminous Casualty Corporation, filed a petition for rehearing in this case requesting clarification of this court’s decision to determine appellee’s obligation to appellant. We remand the case to the trial court with directions to enter judgment for Geurin for $22,227.00, the amount of the Reaves judgment, and directing the trial judge to (1) determine whether Geurin is entitled to an attorney’s fee in the defense of the Reaves claim, and to fix the amount of the fee, if any, (2) fix a reasonable attorney’s fee for Geurin in the appeal of the Reaves case, the trial of the instant case, and the appeal in the instant case, and (3) fix the amount of the costs, expenses, and interest due Geurin in both trials and both appeals. Glaze, J., dissents.