Leep v. Trinity Universal Insurance Company

Filing 75

ORDER granting 33 Motion for Partial Summary Judgment; denying 41 Motion for Summary Judgment. Signed by Magistrate Judge Timothy J. Cavan on 6/6/2017. (AEC)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
LANDY C. LEEP,

CV 16-57-BLG-TJC

Plaintiff,
ORDER REGARDING
CROSS MOTIONS FOR
PARTIAL SUMMARY
JUDGMENT

vs.
TRINITY UNIVERSAL INSURANCE
COMPANY,
Defendant/Third-Party
Plaintiff,
vs.
SPRAUGE CONSTRUCTION
ROOFING, LLC, a Montana Limited
Liability Company,
Third-Party Defendant.

Plaintiff Landy C. Leep (“Leep”) filed this action against Defendant/ThirdParty Plaintiff Trinity Universal Insurance Company (“Trinity”), seeking
declaratory judgment that a homeowner’s insurance policy issued by Trinity
provides coverage for certain losses to Leep’s residence. (Doc. 19.) Trinity filed a
Third Party Complaint against Third-Party Defendant Sprauge Construction
Roofing, LLC (“Sprauge”) for indemnity. (Doc. 13.)
Presently before the Court are Leep’s Motion for Partial Summary
Judgment, and Trinity’s Cross-Motion for Partial Summary Judgment. (Docs. 33,
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41.) The motions are fully briefed and ripe for the Court’s review. Having
considered the parties’ submissions, the Court finds Leep’s Motion for Partial
Summary Judgment should be GRANTED, and Trinity’s Cross Motion for Partial
Summary Judgment should be DENIED.
I.

BACKGROUND
A.

Factual Background 1

Leep owns a home located at 2532 North Shore Place, Billings, Montana
(the “Property”). (Doc. 35 at ¶ 2.) Leep purchased a homeowner’s policy from
Trinity numbered DG 306868 (the “Policy”). (Id. at ¶ 3.) While Leep was insured
by Trinity, the Property sustained damage as a result of a hail storm that occurred
on May 18, 2014. (Id. at ¶ 14.)
Leep contracted with Sprauge to repair the hail damage. (Id. at ¶ 15.)
Sprauge started the repair work on August 11, 2015, and completed the work
between August 12, 2015 and August 18, 2015. (Doc. 53 at ¶ 8.) Sprauge’s repair
work included tearing off and replacing roof lining and shingles. (Id. at ¶ 7.) The
parties dispute whether the work included replacing vent piping. (Compare Doc.
43 at ¶ 7 and Doc. 53 at ¶ 7.) Trinity contends Sprauge’s work included “replacing

1

The background facts are taken from the parties’ submissions, including Leep’s
Statement of Undisputed Facts (Doc. 35), Trinity’s Statement of Undisputed Facts
(Doc. 43), Trinity’s Statement of Disputed Facts (Doc. 44), Sprauge’s Statement of
Disputed Issues (Doc. 53), and the parties’ Statement of Stipulated Facts (Doc. 65).
The information is undisputed except where indicated.
2

three through-the-roof tubes and replacing furnace vent and flashing.” (Doc. 43 at
¶ 7.) Trinity points out that the roofing materials delivered to Leep’s Property on
August 11, 2016, included three “through the roof tubes.” (Doc. 35 at ¶ 17.)
Sprauge contends it only replaced a vent cap, and the “through the roof tubes,”
were caulking tubes. (Doc. 53 at ¶¶ 7, 11, 15.) Sprauge states it did not replace
any vent piping or “vents.” (Id.)
The Terms & Conditions of the contract executed between Leep and
Sprauge stated “[i]t is the responsibility of the owner to check the exhaust vents for
all furnaces and water heaters after the roofing project is complete.” (Doc. 35 at ¶
21.) Leep admitted that he did not “check the exhaust vents for all furnaces and
water heaters” after Sprauge’s installation of the new roof. (Doc. 65 at ¶ 26.)
On January 17, 2016, Leep’s house guest noticed water dripping from a
bathroom fan on the main level of the Property. Leep subsequently inspected the
second story of the Property and noticed moisture emanating from the ceiling.
Leep contacted a representative of Sprauge, Jack Sprauge, and set up an
appointment with him to visit the Property on January 19, 2016. (Doc. 65 at ¶8;
Doc. 53 at ¶ 9.)
On January 18, 2016, Leep located the Property’s attic access, and
discovered the furnace vent piping was disconnected, and the furnace exhaust was

3

venting into the attic. (Doc. 65 at ¶ 9.) The furnace vent pipe should have exited
the Property through an exterior roof vent. (Id. at ¶ 10.)
On January 19, 2016, Jack Sprauge met Leep at the Property at 8:00 a.m.,
and they inspected the attic. (Id. at ¶ 11.) That same day, Leep also met with Tom
L. Roberts (“Roberts”), an HVAC service technician from Comfort Heating & Air
Conditioning, to examine the disconnected furnace vent pipe. (Id. at ¶ 12.) During
the service appointment, Leep advised Roberts that Sprauge had recently replaced
the roof, and Leep stated his belief that the furnace vent pipe became disconnected
during the roofing construction. (Id. at ¶ 12.) Roberts observed the disconnected
furnace pipe, and also noticed one of the straps securing the furnace vent piping to
the attic ceiling joists was broken in half. (Id. at ¶ 13.) Roberts opined that the
furnace vent pipe became disconnected during the roofing construction and
replacement of the furnace roof vent and flashing. (Doc. 49 at ¶ 15.)
On January 19, 2016, Leep reported a water damage claim to Trinity claims
representative, Laura Shamhart (“Shamhart”). (Doc. 65 at ¶ 14.) Leep identified
the date of loss as August 1, 2015. (Id.) When Leep reported his claim to
Shamhart, he indicated the Property’s furnace vent pipe was disconnected from the
exterior vent and the furnace exhaust had been venting into the attic space. (Id. at
15.) He stated Sprauge had replaced the roof in August 2015, and also

4

communicated his belief that Sprague did not properly connect the new roof vent
to the attic. (Id.; Doc. 49 at ¶ 17.)
On January 21, 2016, Trinity sent field adjuster, Thomas J. Lynn (“Lynn”)
of Insurance Claim Adjusters, Inc. to inspect the Property. (Doc. 65 at ¶ 16.)
During the inspection, Leep again communicated to Lynn his belief that Sprauge
had detached the Property’s furnace vent pipe. (Id. at ¶ 17.) Lynn observed
moisture damage at the Property, including a large amount of mold in the attic area
and wet insulation which was in need of replacement. Lynn completed a loss
report on January 25, 2016, opining the damage appeared to have occurred over an
extended period of time, and that it was caused by the detached furnace vent pipe.
(Id. at 18.) Lynn opined that Sprauge’s detaching the furnace vent pipe caused
moisture and/or water damage to the Property. (Doc. 53 at ¶ 21.)
On January 29, 2016, Trinity mailed a letter to Leep, stating in part: “[Leep]
indicated during [Trinity’s] inspection that [Leep] believe[s] the cause of this
damage [i.e., water and or moisture damage] is related to the roofing contractor’s
failure to properly install the furnace vent and cap when the roof was replaced in
August of 2015.” (Doc. 65 at ¶ 19.) Trinity then requested the opportunity to
further investigate the claim, including having an engineering inspection of the
Property conducted. (Id.)

5

On February 2, 2016, professional engineer, Scott A. Curry (“Curry”) of EFI
Global Inc. conducted a site visit and engineering investigation at the Property.
During the site visit, Curry interviewed Leep and his contractors, Steven Hanlin
and Rusty of SERVEPRO and Bob Pentecost of Bob Pentecost Construction.
(Doc. 65 at ¶ 20.) Leep communicated to Curry his belief that Sprauge
disconnected the furnace vent pipe during the roofing work. (Id. at ¶ 21.) At the
time of Curry’s visit, the furnace vent pipe had been reconnected. (Id. at ¶ 22.)
Curry completed an engineering report on February 6, 2016. (Doc. 53 at ¶
26.) Curry opined that the attic and a significant portion of the residence interior
was wetted from a furnace vent that was disconnected in the attic. (Id.) Curry also
opined that Sprauge’s disconnecting the furnace vent pipe in the late summer of
2015 is consistent with the nature and extent of water and/or moisture damage to
the Property. (Id.)
Contrary to these opinions and Leeps statements, Sprauge asserts it did not
replace any vent piping or vents; it disputes that it detached or disconnected the
furnace vent piping; and disputes that its’ work caused any of the damage to
Leep’s home. (Doc. 53 at ¶¶ 7, 11-15, 17, 19, 21, 24, 25, 27.)
Trinity sent Leep a letter on February 22, 2016 denying his claim. (Doc. 65
at ¶ 23; Doc. 37-6.) The letter advised that the Property sustained damage as “the
result of improperly installed roof vent flashing and furnace vent flu,” which was
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excluded from coverage under the exclusions for faulty, inadequate or defective
design, specifications, workmanship, repair, construction, renovation or
remodeling, and faulty, inadequate or defective materials used in repair,
construction or renovation. (Doc. 37-6 at 2. 2) Trinity also cited to limitations in
coverage for mold, fungus and wet or dry rot. (Id. at 5-6.)
On March 8, 2016, Leep’s attorney sent a letter responding to Trinity’s
coverage decision. (Doc. 65 at ¶ 24; Doc. 37-8.) Leep’s attorney pointed out that
the furnace vent flu was not within the scope of work contracted between Leep and
Sprauge. (Doc. 37-8). The letter stated “[t]here was not defective repair or
renovation because the repair and renovation did not require the roofer to check
exhaust vents of all furnaces and water heaters, rather the contract made it the
responsibility of the owner to check exhaust vents and water heaters.” (Id. at 2.)
On April 6, 2016, Trinity sent Leep another letter declining coverage. (Doc.
65 at ¶ 24; Doc. 37-7.) Trinity maintained that there was no coverage due to faulty
workmanship, and also stated coverage was excluded due to Leep’s failure to
maintain the property. (Id.) The letter stated “[t]he efficient proximate cause of
the loss was the contractor’s improper repair of the roof that caused the vent to
become dislodged. The ensuing damage that resulted from the moisture

2

Unless otherwise noted, all page numbers cited herein refer to page numbers in
the Court’s electronic filing system.
7

disseminating into the attic space through the dislodged vent is not a separate loss
under the policy but would be considered a direct result of the contractor’s failure
to properly repair the roof.” (Doc. 37-7 at 1.) The letter continued, “our
investigation indicates that the roofer’s workmanship resulted in the separation of
the vent within the attic space and set the other causes of damage in motion.
Together with the insured’s failure to inspect the pipe, or maintain the property as
outlined in the contract with Sprauge, the subsequent accidental discharge of water
or steam from within the heating system would not have occurred and cannot be
considered a separate loss under the policy.” (Id. at 2.)
B. Procedural Background
On April 13, 2016, Leep filed the instant action in the Montana Thirteenth
Judicial District Court, Yellowstone County, Montana, seeking a declaration that
the Policy provides coverage for his claim. (Doc. 1.) Leep also brought a cause of
action for violation of the Consumer Protection Act, Mont. Code Ann. § 30-14103. (Id.) On May 17, 2016, Trinity removed the case to federal court based on
diversity jurisdiction under 28 U.S.C. § 1441(b). (Id.)
On June 3, 2016, Trinity filed a Third-Party Complaint against Sprauge.
(Doc. 13.) Trinity alleges that if the furnace vent became disconnected as alleged
by Leep, and/or the moisture entered the attic past the furnace vent roof flashing,
Sprauge completed its work in a negligent or unworkmanlike manner. (Id. at ¶ 12.)
8

Therefore, Trinity contends that if the Court finds in Leep’s favor on the coverage
issue, Trinity is entitled to indemnity and/or contribution from Sprauge. (Id. at ¶¶
15-22.)
On June 6, 2016, Leep filed a First Amended Complaint, which removed the
Consumer Protection Act claim, and added causes of action for breach of insurance
contract and breach of the Montana Unfair Trade Practices Act. (Doc. 19.)
On March 28, 2017, the Court granted in part, and denied in part Sprauge’s
motion for judgment on the pleadings. (Doc. 60.) The Court dismissed Trinity’s
claim for contribution, but permitted Trinity’s indemnification claim to go forward.
(Id.)
On October 13, 2016, Leep filed a motion for partial summary judgment on
the issue of whether there is insurance coverage for the damage to his home under
the Policy. (Doc. 33.) Leep argues the faulty workmanship exclusion does not
apply because connecting or ensuring connection of the furnace vent was not
within Sprauge’s scope of work. Leep further argues, that even if the exclusions
for faulty workmanship or maintenance apply, the loss is nevertheless covered
under the policy’s ensuing loss exception. Finally, Leep asserts that the intrusion
of water vapor is an otherwise covered event, and the coverage limits for mold and
fungi do not apply.

9

On November 17, 2016, Trinity filed a cross-motion for partial summary
judgment, seeking a more limited ruling that the faulty workmanship exclusion in
the Policy precludes coverage, and requesting dismissal of Plaintiff’s claim for
breach of contract as a matter of law.3 (Doc. 41.) Trinity argues Sprauge did not
perform its work in a reasonable, workmanlike manner, and therefore, the faulty
workmanship exclusion bars coverage. Trinity further argues the ensuing loss
provision is not applicable because there was no separate, independent or
intervening cause of loss apart from Sprauge’s faulty workmanship.
Sprauge takes no position with regard to Leep’s motion for partial summary
judgment. (Doc. 40). Sprauge opposes Trinity’s motion, however, on grounds that
there are material issues of fact regarding how the furnace vent pipe was
disconnected. (Doc. 52.)
///
///
///
///

Trinity indicated that it was reserving its argument that there is no coverage based
on any other exclusions and/or limitations under the policy because “the primary
efficient cause of loss is Sprauge’s faulty workmanship.” (Doc. 42 at 14, n.1.)
The Court notes that Leep’s motion for partial summary judgment seeks a broader
ruling on coverage than Trinity’s motion, and that Trinity did not specifically
dispute Leep’s claims that the loss is otherwise covered under the policy, or that
the limitations on liability for mold and fungi do not apply.
10
3

II.

ANALYSIS
A.

Summary Judgment Standard

“The court shall grant summary judgment if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those which may affect
the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A dispute as to a material fact is genuine if there is sufficient evidence for
a reasonable fact-finder to return a verdict for the nonmoving party. Id.
The moving party bears the initial responsibility of informing the court of
the basis for its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, which it believes demonstrate the absence of a genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the
opposing party will have the burden of proof at trial, the moving party need only
point to an absence of evidence to support the nonmoving party’s case. Id.
When parties file cross-motions for summary judgment, as here, the Court
must consider each motion on its own merits. Fair Housing Council of Riverside
County, Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). The fact that
both parties have moved for summary judgment does not vitiate the Court’s
responsibility to determine whether disputed issues of material fact are present. Id.
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B.

Application of Montana Law

As noted, the Court’s jurisdiction over this action is based on diversity of
citizenship. Thus, the Court must apply the substantive law of Montana. Medical
Laboratory Mgmt. Consultants v. American Broadcasting Companies, Inc., 306
F.3d 806, 812 (9th Cir. 2002).
In actions based on diversity jurisdiction, the federal court “is to
approximate state law as closely as possible in order to make sure that the
vindication of the state right is without discrimination because of the federal
forum.” Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir. 1980). Federal courts
“are bound by the pronouncements of the state’s highest court on applicable state
law.” Appling v. State Farm Mutual Auto. Ins. Co., 340 F.3d 769, 778 (9th Cir.
2003) (citation omitted). But when an issue of state law arises and “the state’s
highest court has not adjudicated the issue, a federal court must make a reasonable
determination of the result the highest state court would reach if it were deciding
the case.” Medical Laboratory Mgmt. Consultants, 306 F.3d at 812 (citations
omitted). In doing so, the federal court must “look to existing state law without
predicting potential changes in that law.” Ticknor v. Choice Hotels Int’l, Inc., 265
F.3d 931, 939 (9th Cir. 2001) (citation omitted).
In Montana, the interpretation of an insurance contract is a question of law.
Scentry Biologicals, Inc. v. Mid-continent Cas. Co., 374 Mont. 18, 23 (2014). A
12

court interpreting an insurance policy is to read the policy as a whole and, to the
extent possible, reconcile the policy’s various parts to give each meaning and
effect. O’Connell v. Liberty Mut. Fire Ins. Co., 43 F.Supp.3d 1093, 1096 (D.
Mont. 2014) (citing Newbury v. State Farm Fire & Cas. Ins. Co. of Bloomington,
Ill., 343 Mont. 279 (2008)).
C.

The Policy

The Policy at issue in this case is an “all-risk” policy, meaning it provides
coverage for all perils, unless the specific peril is excluded. The Policy contains an
exclusion for faulty workmanship and maintenance. But the exclusion also
contains an ensuing loss provision. Generally, an ensuing loss provision operates
as an exception to the policy exclusion. See David J. Marchitelli, What Constitutes
“Ensuing Loss” Caused by Water Damage Within Coverage Provision of Property
Insurance Policy, 14 A.L.R.7th Art. 6 (2016). In the event an ensuing loss
provision is triggered, there is coverage, as long as the loss is not otherwise
excluded. Id. See also Vision One, LLC v. Philadelphia Indem. Ins. Co., 174
Wash.2d 501, 515 (2012) (explaining that an “ensuing loss clause operates to carve
out an exception to the policy exclusion,” and therefore “limit[s] the scope of what
is otherwise excluded under the policy. Such clauses ensure ‘that if one of the
specified uncovered events take place, any ensuing loss which is otherwise covered
by the policy will remain covered.’”).
13

The relevant provisions of the Policy provide:
SECTION 1 - EXCLUSIONS
2.

We do not insure for loss to property described in Coverages A and B
caused by any of the following.
However, any ensuing loss to property described in Coverages A and
B not excluded or excepted in this policy is covered.
...
c. Faulty, inadequate or defective:
...
2) Design, specifications, workmanship, repair, construction,
renovation, remodeling, grading, compaction,
...
4) Maintenance.

(Doc. 37-1 at 14.)
The Policy contains a “mold, wet or dry rot” exclusion. (Doc. 37-1 at 11.)
That exclusion, however, was deleted and replaced by a “HOMEOWNERS
POLICY – ULTIMATE ENDORESEMENT MONTANA” and “LIMITED
FUNGI, WET OR DRY ROT, OR BACTERIA COVERAGE” endorsement. (Id.
at 39, 48-49.) Ultimately, the Policy provides:
We insure against risk of direct loss to property described in Coverages A, B
and C only if that loss is a physical loss to property. We do not insure,
however, for loss:
...
3. Caused by:
...
d. Mold, fungus or wet rot. However, we do insure for loss caused by mold,
fungus or wet rot that is hidden within the walls or ceilings or beneath the
floors or above the ceilings of a structure if such loss results from the
accidental discharge or overflow of water or steam from within:

14

1) A plumbing, heating, air conditioning or automatic fire protective
sprinkler system or a household appliance on the “residence
premises;”
...
e. Any of the following:
1) Wear and tear, marring or deterioration;
2) Mechanical breakdown, latent defect, inherent vice, or any quality
in property that causes it to damage or destroy itself;
...
f. Constant or repeated seepage or leakage of water or the presence or
condensation of humidity, moisture or vapor, over a period of weeks,
months or years from a plumbing system unless such seepage or leakage of
water or the presence or condensation of humidity, moisture or vapor and the
resulting damage is unknown to the “insureds” and is hidden within the
walls or ceilings or beneath the floors or above the ceilings of a structure.
...
Exceptions to 3.e
Unless the loss is otherwise excluded, we cover loss to property covered
under Coverages A, B or C resulting from an accidental discharge or overflow of water or steam from within a:
...
ii) Plumbing, heating, air conditioning or automatic fire protective
sprinkler system or household appliance on the “residence premises.” This
includes the cost to tear out and replace any part of a building, or other
structure, on the “residence premises,” but only when necessary to repair the
system or appliance. However, such tear out and replacement coverage only
applies to other structures if the water or steam causes actual damage to a
building on the “residence premises.”
(Doc. 37-1 at 39-40, 48-49.)
D.

Faulty Workmanship Exclusion

As noted above, both parties have moved for summary judgment on the
application of the faulty workmanship exclusion. Leep maintains the exclusion
does not apply; Trinity asserts that the exclusion applies to bar Leep’s claim, as a
matter of law.
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1. Leep’s Motion for Partial Summary Judgment, Faulty
Workmanship Exclusion.
Leep contends the faulty workmanship exclusion should not apply because
the scope of work Sprauge undertook was limited to the exterior portions of the
roof. Leep states that Sprauge was not contracted to, and did not, work on the
heating system. He reasons, therefore, that any loss caused by the heating system
should not fall within the policy’s exclusion for faulty workmanship. Leep points
out that the contract he entered with Sprauge provided that it was the homeowner’s
responsibility to “check the exhaust vents for all furnaces and water heaters after
the roofing project is complete.” (Doc. 36 at 41.) Leep also notes that Sprauge’s
final inspection checklist was confined to the exterior of the Property’s roof. (Doc.
36 at 12.)
Trinity counters that Sprauge’s contract with Leep does not change the
implicit requirement in any construction contract that the contractor perform its
work in a reasonable and workmanlike manner. Trinity contends Sprauge’s poor
workmanship caused the loss, and therefore, the faulty workmanship exclusion
precludes coverage.
The Court finds the terms of the contract between Leep and Sprauge do not
control whether the faulty workmanship exclusion applies. Regardless of the
parties’ responsibilities under the contract, the contract simply does not answer the
question of whether Sprauge’s workmanship was faulty. It is conceivable that a
16

contractor could cause incidental damage to a part of a home that the contractor
was not specifically contracted to work on, and any such damage would be
excluded under the policy.
Further, the terms of the Policy do not limit the exclusion to only faulty
workmanship that falls within the scope of work agreed upon between the insured
and a contractor. Rather, the exclusion broadly applies to “any” losses caused by
faulty workmanship. (See Doc. 37-1 at 14.) Therefore, if Sprauge, in the course of
repairing the roof, caused damage to another part of the Property, the exclusion
would be triggered. The Court finds it is possible, based on the facts and
circumstances of this case, that the exclusion may apply. Accordingly, the Court
rejects Leep’s argument that the faulty workmanship exclusion does not apply
based on the contract between Leep and Sprauge.
2. Trinity’s Motion for Summary Judgment, Faulty
Workmanship Exclusion
Although the Court finds the faulty workmanship exclusion may be
applicable, the Court also finds there are disputed issues of material fact regarding
whether Sprauge’s workmanship was, in fact, faulty. When “direct evidence
produced by the moving party conflicts with direct evidence produced by the
nonmoving party, the judge must assume the truth of the evidence set forth by the
nonmoving party with respect to that fact,” and summary judgment must be

17

denied. T.W. Elec. Serv., Inc. v. Pacific Electric Contractors Ass’n, 809 F.2d 626,
631 (9th Cir. 1987).
Trinity argues there is no genuine issue of material fact that Sprauge
disconnected the furnace vent pipe, and that Sprauge’s disconnecting the vent pipe
was the efficient proximate cause of the loss. Trinity cites to statements Leep
made to four people that he believed Sprague disconnected the furnace vent pipe.
(Docs. 43-2 at ¶ 5; 43-4 at ¶ 5; 43-5 at ¶ 5; and 43-6 at ¶ 6.) Trinity also states
three individuals who inspected the Property (the HVAC technician Roberts, the
field adjuster Lynn, and the engineer Curry) all opined the vent pipe became
disconnected during Sprauge’s roofing work (Docs. 43-4 at ¶ 8; 43-5 at ¶ 7; and
43-6 at ¶ 9). Trinity also points to Leep’s statement that Jack Sprauge admitted to
Leep that the pipe was most likely disconnected during the roofing construction.
(Doc. 43-1 at 4.)
Sprauge contests Trinity’s assertions, and argues there are several material
disputed facts regarding how the furnace vent pipe became disconnected. Sprauge
cites to the affidavits of its owners and its discovery responses, which state
Sprauge did not disconnect the furnace vent pipe or replace the furnace vent and
flashing, but instead only replaced a vent cap on the outside of the roof. (Doc. 53-1
at 7-8, 11; Doc. 53-3 at ¶¶ 7-9, 17; Doc. 53-4 at ¶¶ 7-8, 10.) Sprauge states neither
it, nor its subcontractor entered Leep’s home to do the roofing work, and points out
18

that the disconnected vent piping was located inside the attic space. (Doc. 53-2;
Doc 53-3 at ¶¶ 10, 12; Doc. 53-3 at ¶ 7). In this regard, Sprauge contends Trinity
makes inaccurate assumptions about the meaning of the phrase “through-the-rooftubes” that appeared on a materials invoice. Sprauge submits Trinity incorrectly
assumes from this entry that the repair work included “replacing three through-theroof tubes.” (Doc. 43 at ¶ 7.) Sprauge asserts the three “through-the-roof-tubes”
are caulking tubes, and not vent piping. (Doc. 53-3 at ¶ 7; Doc. 53-4 at ¶6.)
Sprauge further disputes the opinions of the HVAC technician Roberts, the
field adjuster Lynn, and the engineer Curry, that Sprauge disconnected the vent
pipe. Sprauge asserts there is inadequate foundation for their opinions, and that
their opinions on that point are largely based on statements and assumptions made
by Leep, who is not a roofing expert. (Doc. 43-4 at ¶ 5; Doc. 43-5 at ¶ 5; Doc. 436 at ¶ 6; Doc. 53-3 at ¶ 17; Doc. 53-4 at ¶ 10.)
Sprauge also counters these opinions with those of its owners, who state that
in the history of the company, this was the first time a complaint had been made
that an internal vent pipe was disconnected by external replacement of a vent cap.
(Doc. 53-3 at ¶¶ 13; Doc. 53-4 at ¶ 9.) They further opine that the vent pipe could
only have become disconnected if it were improperly secured. (Doc. 53-3 at ¶ 7,
16; Doc. 53-4 at ¶ 12.)

19

Sprauge also disputes Trinity’s assertion that Jack Sprauge “agreed the
furnace piping was most likely pulled apart during the roof construction.” (Doc.
43 at ¶ 12.) Sprauge cites its discovery responses indicating it did not replace any
vent piping, and also Jack Sprauge’s opinion that based on his experience and
training, “Sprauge did not cause the vent piping to become disconnected.” (Doc.
53-3 at ¶ 17.)
The Court notes there are also disputed facts regarding whether Sprague was
negligent for failing to discover the disconnected vent. Trinity cites the opinion of
HVAC technician Roberts to argue a reasonable roofer working with the furnace
vent piping should have known he or she disconnected the vent. (Doc. 43-4 at ¶
8.). Whereas, Leep submitted a declaration from roofer Dane A. Bradford, who
opined even if the furnace vent had become disconnected during the re-roofing
project, the roofer would not necessarily know it from an exterior inspection of the
roof. (Doc. 51 at ¶ 7.) Sprauge has submitted a declaration from its owner that
states Sprauge’s work did not entail entering Leep’s home, and that it is not
Sprauge’s practice to inspect internal vents or piping. (Doc. 53-3 at ¶ 10, 14.)
In light of the above, there are clearly disputed facts regarding the scope of
Sprauge’s work, whether Sprauge was responsible for disconnecting the vent pipe,
and whether a reasonable roofer would have known the vent had been
disconnected. These issues of fact are material to the parties’ claims and defenses,
20

and are properly supported by the affidavits of Sprague’s owners, and Sprague’s
verified responses to discovery in this action. The Court, therefore, finds these
issues of fact preclude a finding on summary judgment that Sprauge’s work was
completed in faulty or unworkmanlike manner, or its’ work was the proximate
cause of the vent becoming disconnected. 4
In sum, the Court rejects Leep’s argument that the faulty workmanship
exclusion does not apply, and likewise rejects Trinity’s argument that it is
undisputed Sprauge’s workmanship was faulty. Whether Sprauge’s workmanship
was faulty is an issue of fact, which precludes summary judgment on the faulty
workmanship exclusion.
E.

Ensuing Loss Provision

Even assuming, however, that the faulty workmanship exclusion applies, the Court
finds there is coverage under the ensuing loss exception in the policy. The Policy
does not define the term “ensuing loss.” The parties have also not cited, and the

4

Because Trinity argued the primary efficient cause of the loss was Sprauge’s
workmanship, Trinity opted not to argue that any additional exclusions, such as the
inadequate maintenance exclusion, bar coverage. (Doc. 42 at 14, n.1.) In Leep’s
consolidated response and reply brief, he contends his home was well-maintained
and the inadequate maintenance exclusion also does not bar coverage. (Doc. 48 at
4-5.) Trinity does not contest Leep’s argument, other than to indicate in an
unsupported footnote, that it “specifically disputes” Leep’s contentions regarding
maintenance. (Doc. 57 at 6, n.1.) Nevertheless, as discussed below, even if the
inadequate maintenance exclusion applies, the loss would be covered under the
ensuing loss provision.
21

Court has not found any Montana case law interpreting ensuing loss provisions in
insurance policies. Several other state and federal courts have considered similar
ensuing loss provisions, however, and two primary lines of authority have
emerged.
On the one hand, several courts have interpreted the provision broadly to
provide coverage for losses to property that occur as a consequence of an excluded
event, as long as the ensuing loss is otherwise covered by the policy. See e.g.
Bartram, LLC v. Landmark Am. Ins. Co., 864 F.Supp.2d 1229 (N.D. Fla. 2012);
Vision One, LLC v. Philadelphia Indem. Ins. Co., 174 Wash.2d 501 (2012); Arnold
v. Cincinnati Ins. Co., 276 Wis.2d 762 (2004); Selective Way Ins. Co. v. Nat’l Fire
Ins. Co. of Hartford, 988 F.Supp.2d 530 (2013); Eckstein v. Cincinnati Ins. Co.,
469 F.Supp.2d 444 (W.D. Ky. 2007).
In Bartram, for example, an apartment complex suffered damage from water
intrusion that occurred because of faulty workmanship in the construction of the
apartments. Bartram, 864 F.Supp.2d at 1233. The apartment complex was insured
under a policy that contained a faulty workmanship exclusion, and an ensuing loss
provision. Id. at 1232. The Court determined that the cost to repair the faulty
workmanship itself was excluded. Id. at 1235. However, the loss occurring
subsequent to, and as a result of the faulty workmanship was covered “regardless
of whether the loss was naturally set in motion by excluded cause of loss.” Id.
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Similarly, in Arnold the court considered whether there was coverage under
an ensuing loss provision for water damage caused by rain that had leaked through
windows after the window caulking had been damaged by a contractor. Arnold,
276 Wis.2d at 786. The court concluded the ensuing loss provision, which was
identical to the one in this case, provided coverage. The court stated that an
“ensuing loss is a loss that is not directly caused by faulty workmanship or faulty
materials, but nonetheless follows as a ‘chance, likely, or necessary consequence’
of the loss caused by faulty workmanship or faulty materials,” and “must result
from a cause in addition to the excluded one.” Id. at 779. The court concluded
there was “no basis in the policy language for limiting the cause of an ensuing loss
to a ‘separate and independent peril.’” Id.
On the other hand, several courts have interpreted the provision more
narrowly, and have found ensuing loss provisions do not provide coverage for
losses that result directly and proximately from the excluded peril. Those courts
generally require that there be a separate and independent cause of the loss for
coverage to apply. See e.g. TMW Enterprises, Inc. v. Federal Ins. Co., 619 F.3d
574 (6th Cir. 2010); Friedberg v. Chubb & Son, Inc., 691 F.3d 948 (8th Cir. 2012);
Sapiro v. Encompass Ins., 221 F.R.D. 513 (N.D. Cal. 2004); Acme Galvanizing Co.

23

v. Fireman’s Fund Ins. Co., 221 Cal.App.3d 170 (1990); Prudential Prop. & Cas.
Ins. Co. v. Lillard-Roberts, 2002 WL 31495830 (D. Or. June 18, 2002).5
In Sapiro, for example, negligent workmanship during a remodel caused
water damage to the plaintiff’s home. Sapiro, 221 F.R.D. at 521. The court
rejected the plaintiff’s argument that there was coverage under an ensuing loss
provision. The court held that an ensuing loss is “a loss ‘separate’ and
‘independent’ from [an] original peril.” Id. at 522. Therefore, the court found
there was no coverage because the plaintiff’s losses were directly attributable to
the initial negligent contracting. Id.
Likewise, in TMW Enterprises, the Court held an ensuing loss provision did
not provide coverage for water damage to a condominium building that occurred
because the walls were improperly constructed. TMW Enterprises, 619 F.3d at
579-580. The court reasoned that if damage occurs “natural[ly] and continuous[ly]
from the faulty workmanship, “unbroken by any new, independent cause,’ the
exclusion applies and the ensuing loss provision does not. . . . But if, on the other
hand, the later-in-time loss flows from a non-foreseeable and non-excluded cause,

5

Trinity contends the weight of authority from cases within this circuit requires a
finding that an ensuing loss be an independent and separate loss from the original
excluded peril in order for coverage to apply. (Doc. 57 at 9-10.) However, in the
cases Trinity relies on, the courts were interpreting ensuing loss provisions under
the laws of other jurisdictions, namely California and Oregon. Therefore, while
the case law certainly should be considered, it is not controlling in this case, where
the Court must apply Montana law.
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it is covered.” Id. at 579. The court concluded that the defective wall construction
in that case “naturally and foreseeably leads to water infiltration,” and therefore
determined the loss was not covered as an ensuing loss. Id.
In the present case, application of Montana’s rules of construction of
insurance contracts favors the broader interpretation of the ensuing loss provision.
Under Montana law, any ambiguities in an insurance contract are construed against
the insurer. Revelation Indus., Inc. v. St. Paul Fire & Marine Ins. Co., 350 Mont.
184, 198-99 (2009). In addition, exclusions from coverage are “narrowly and
strictly construed because they are contrary to the fundamental protective purpose
of an insurance policy.” Id. (citing Wellcome v. Home Ins. Co., 257 Mont. 354,
356-57 (1993)). In interpreting insurance contracts courts also must give terms and
words in the contract their usual meaning and construe them using common sense.
Id. “It is well established that in construing and analyzing the terms of an
insurance policy we look first to the policy’s plain language. In doing so we apply
the ‘common sense meaning as viewed from the perspective of a reasonable
consumer of insurance products.’” Monroe v. Cogswell Agency, 356 Mont. 417,
421 (2007) (citing Stutzman v. Safeco Ins. Co. of America, 284 Mont. 372 (1997).
In interpreting the ordinary meaning of “ensuing loss,” the dictionary defines
ensuing as “to take place afterward or as a result,” Merriam-Webster, n.d. Web. 17
May 2017, “to follow in order; come afterward, especially in immediate
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succession,” or “to follow as a consequence; result.” Dictionary.com, Web 17
May 2017.
Applying the ordinary, common sense meaning of the policy language here,
a reasonable consumer of insurance products would understand that the faulty
workmanship exclusion would exclude from coverage damage to property caused
by faulty workmanship. But the consumer would also reasonably understand the
ensuing loss provision to provide coverage for any otherwise covered loss that took
place afterward or as a consequence or result of the faulty workmanship. Contrary
to the cases which interpret the exclusion more narrowly, the average consumer,
untrained in the law, would not naturally engage in a proximate cause analysis of
this language, and attempt to determine whether a loss was a direct and natural
consequence of faulty workmanship, or whether it resulted from a separate,
intervening cause.
Moreover, there is nothing in the Policy’s plain language to indicate that the
loss must be separate and independent from the faulty workmanship. If an insurer
wants to narrowly limit the ensuing loss provision to separate and independent
causes, it may do so by drafting policy language to expressly exclude all losses that
have resulted directly and proximately from the excluded peril.
Under other provisions of the present Policy, for example, the Policy
language makes clear that Trinity would not pay for losses caused either directly or
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indirectly from other excluded perils. Under Section I.1. of the Policy, Trinity
excludes coverage for losses caused by other perils, such as earth movement,
power failure, and nuclear hazard. Unlike the faulty workmanship exclusion,
however, those exclusions apply to loss “caused directly or indirectly” from any of
the listed perils, “regardless of any other cause or event contributing concurrently
or in any sequence to the loss.” (Doc. 3701 at 13.) Trinity could have included
similar language for the faulty workmanship exclusion under Section I.2. of the
Policy, but instead expressly limited the application of that exclusion by the
inclusion of the ensuing loss provision.
Courts which have criticized the broader interpretation of ensuing loss
provisions have reasoned such a construction would “create a virtual if not
complete, exclusion of the exclusion.” TMW Enterprises, Inc. v. Federal
Insurance Co., 619 F.3d 574, 576 (6th Cir. 2010). But the exclusion would still
apply to exclude the cost of remedying the faulty workmanship. Granted, in this
case the cost of remedying the disconnected furnace venting is undoubtedly a
comparatively minor component of the overall loss. That would not always be the
case, however, since the amount of excluded loss would depend entirely on the
nature and extent of the repairs required to correct the faulty workmanship. If, for
example, the entire roof had been improperly installed in this case, and remediation

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required the complete tear-off and reinstallation of the roof, the excluded cost
would be much more substantial.
In short, construing the ensuing loss provision in a manner which maintains
the exclusion for faulty workmanship, but provides coverage for a subsequent
covered loss that occurs as a consequence or result of the faulty workmanship, is a
reasonable interpretation of the policy language. It preserves the faulty
workmanship exclusion, and relieves the insurer from the obligation of insuring the
quality of any work performed on the premises, while at the same time provides
coverage for subsequent losses which would otherwise be covered by the policy.
Furthermore, even if the more narrow construction of the ensuing loss
provision is also a reasonable interpretation, the Court would still be required to
construe the Policy against Trinity and in favor of coverage in this case. If the
ensuing loss provision is susceptible to more than one reasonable interpretation, it
is deemed to be ambiguous under Montana law. Mitchell v. State Farm Ins. Co.,
68 P.2d 703, 709 (Mont. 2003) (“An ambiguity exists where the contract, taken as
a whole, is reasonably subject to two different interpretations.”) Under Montana
law, the ambiguity “must be construed in favor of the insured, and in favor of
extending coverage. Id. See also Kesling v. American Family Mut. Ins. Co., 861
F.Supp.2d 1274, 1284 (D. Co. 2012) (noting that because an ensuing loss provision
could rationally be interpreted in more than one way, it was rendered ambiguous,
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and was interpreted as providing coverage); Moda Furniture LLC v. Chicago Title
Land Trust Co., 35 N.E.3d 1139, (Ill. App. Ct. 2015) (same).
Therefore, assuming Sprauge’s workmanship was faulty and caused the
furnace vent to become disconnected, the cost to repair or replace the furnace
venting is not covered under the Policy. However, the loss that followed as a
result, i.e., the damage caused by the intrusion of water vapor from the furnace, is
an ensuing loss. Therefore, the loss is covered, unless another exclusion or
exception applies.
Trinity has not disputed Leep’s arguments that the loss is otherwise covered
under the Policy, and that the limit on liability for “Fungi, Wet or Dry Rot, or
Bacteria Coverage” does not apply. (See Docs. 42; 48 at 7.) Further, upon review
of the Policy, it appears the accidental discharge of water vapor from a heating
system is a covered loss. (See Doc. 37-1 at 39-40, 48-49.) Accordingly, the Court
finds the damage to the Property attributable to the release of excess water vapor
from the furnace is an ensuing loss, and is covered under the Policy. As such, the
Court finds summary judgment should be entered in favor of Leep on the issue of
coverage.
///
///
///
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III.

CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED that Leep’s Motion

for Partial Summary Judgment (Doc. 33) is GRANTED, and Trinity’s Cross
Motion for Partial Summary Judgment (Doc. 41) is DENIED.
IT IS ORDERED.
DATED this 6th day of June, 2017.

_______________________________
TIMOTHY J. CAVAN
United States Magistrate Judge

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