Safeco Insurance Company of America v. DeSantis et al
Filing
7
MEMORANDUM OPINION AND ORDER GRANTING SAFECO'S MOTIONS FOR PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES' MOTION FOR PARTIAL SUMMARY JUDGMENT: It is ORDERED that Safeco's 6 Motion for Partial Summary Judgment and DE#16 in 1:13cv245 are granted and DeSantises' DE# 10 motion for partial summary judgment in 1:13cv245 is denied. Signed by District Judge Irene M. Keeley on 8/6/14. (cnd)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
SAFECO INSURANCE
COMPANY OF AMERICA,
Plaintiff,
v.
//
CIVIL ACTION NO. 1:13CV226
(Judge Keeley)
//
CIVIL ACTION NO. 1:13CV245
(Judge Keeley)
ROBERT DESANTIS
and DIXIE DESANTIS,
Defendants.
and
ROBERT DESANTIS
and DIXIE DESANTIS,
Plaintiffs,
v.
SAFECO INSURANCE
COMPANY OF AMERICA,
Defendant.
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT [CASE NO. 1:13CV226, DKT. NO. 6]
[CASE NO. 1:13CV245, DKT. NO. 16] AND DENYING
THE DESANTISES’ MOTION FOR PARTIAL SUMMARY JUDGMENT
[CASE NO. 1:13CV245, DKT. NO. 10]
_________________________________________________________
Pending before the Court are two actions related to the same
homeowner’s
insureds,
insurance
Robert
policy
and
(the
Dixie
“Homeowners
DeSantis
Policy”).
(collectively,
The
the
“DeSantises”), allege breach of contract and bad faith arising from
a coverage dispute under the Homeowners Policy.
The insurer,
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
Safeco Insurance Company (“Safeco”), seeks a declaration that it
owes no duty to defend or indemnify the DeSantises.
The parties
have filed cross-motions for summary judgment on the questions of
coverage and Safeco’s duty to defend under the Homeowners Policy.
For the following reasons, the Court GRANTS Safeco’s motions, and
DENIES the DeSantises’ motion.
I. BACKGROUND
In 1987, the DeSantises purchased a home located at 1193
Milton Street, Morgantown, West Virginia (the “Residence”), where
they lived for approximately twenty-five years. Safeco insured the
Residence under the Homeowners Policy with an effective coverage
period of June 6, 2011 to June 6, 2012.
The Homeowners Policy obligated Safeco to pay up to the policy
limits and provide a defense “[i]f a claim is made or a suit is
brought against any insured for damages because of bodily injury or
property damage caused by an occurrence to which this coverage
applies.”
(Case No. 1:13CV226, Dkt. No. 1-1 at 19).
Under the
Homeowners
Policy,
including
“occurrence”
means
“an
accident,
exposure to conditions which results in: (1) bodily injury; or (2)
property damage; during the policy period.”
2
Id. at 29.
However,
SAFECO INS. CO. V. DESANTIS, ET AL.
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MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
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“[r]epeated or continuous exposure to the same general conditions
is considered to be one occurrence.”
Id.
Under the Homeowners
Policy, “property damage” means “physical damage to or destruction
of tangible property, including loss of use of this property.” Id.
at 25.
“Bodily injury” means “bodily harm, sickness or disease,
including required care, loss of services and death resulting
therefrom.”
Id. at 23.
In 2012, the DeSantises hired J.R. Hall & Associates, Inc.
(“Hall”) to list the Residence for sale.
The listing described
several pertinent details of the Residence, including a concrete
block foundation.
On February 2, 2012, the DeSantises, with the
assistance of Hall, completed a property disclosure statement in
which they represented that:
•
they were unaware of any past, present, or potential
water or sewage problems;
•
they were unaware of any substandard material used in
construction which is causing water problems or repairs;
•
the minor erosion on the pool deck was stabilized and had
not moved in more than five years;
•
they were unaware of any other material or immaterial
information that should be disclosed; and
3
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1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
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•
they disclosed all material and immaterial latent and
visible defects of which they were aware to buyers and
potential buyers.
Searching for a home to purchase, Jesse and Cara Halldin
(collectively, the “Halldins”) visited the Residence on March 25,
2012, in the company of their real estate agent, Robin Hill of ERA
Properties, as well as Dixie DeSantis.
As the Halldins later
explained, the Residence was full of the DeSantises’ personal
possessions, which made it difficult to view the floors and walls.
The Halldins, however, did inquire about what material had been
used to construct the foundation and were told it was concrete
block.
On March 27, 2012, the Halldins signed a contract to purchase
the Residence for $212,500.
The contract required the DeSantises
to provide the Halldins with a property disclosure statement as a
“representation of the condition of the Property, to the knowledge
of the SELLER.” Further, the Halldins furnished repair requests to
the DeSantises, describing in particular “[o]ld water damage in the
basement” and “roof sheathing [that] was separating at the seams.”
In response, the DeSantises stated the following: “Not sure what
the small discolored area in the basement was from, no old or new
4
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MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
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leaks known. . . .
The roof is less than 10 years old and has
never leaked in 30 years.”
In reliance on these representations
and
purchased
others,
the
Halldins
the
Residence
and
took
possession of it on May 25, 2012.
Shortly after moving in, the Halldins observed a host of
defects, including water stains, leaks, insect infestation, warping
of floors and walls, and subsidence of the pool and deck.
they
discovered
that
the
foundation
of
the
Further,
Residence
was
constructed of plywood and wood frame, not concrete block as Hall
and the DeSantises had represented.
As a consequence of these discoveries, on January 14, 2013,
the Halldins sued the DeSantises and Hall in the Circuit Court of
Monongalia County, West Virginia.
Their complaint asserted causes
of action for fraud (against Hall and the DeSantises), breach of
contract (against the DeSantises), breach of duty by a real estate
broker (against Hall), and civil conspiracy (against Hall and the
DeSantises). Among other things, their complaint alleged that Hall
and the DeSantises “knowingly and intentionally made, adopted,
and/or ratified statements and representations [about the defects]
that they knew to be false,” and “worked in concert to accomplish
[selling the Residence] through unlawful means.”
5
On February 20,
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
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2013, Hall filed a cross-claim against the DeSantises, seeking
contribution and indemnification “[t]o the extent that any fault is
found . . . for their pro tanto share.”1
On February 1, 2013, the DeSantises submitted the Halldin and
Hall actions to Safeco with a demand for defense and payment under
their Homeowners Policy.
On February 26, 2013, Safeco declined
coverage and refused to defend the DeSantises in the actions.
Thereafter, on October 4, 2013, the DeSantises sued Safeco in
Monongalia County Circuit Court for alleged breach of contract and
bad faith.
Days later, Safeco filed this declaratory judgment
action regarding its duty to defend and indemnify the DeSantises,
and subsequently also removed the DeSantises’ amended complaint.
On November 14, 2013, this Court granted the parties’ motions to
consolidate
the
cases
and
stay
discovery
regarding
the
non-
declaratory judgment claims.
At this juncture, both parties have filed motions seeking
judgment as to the coverage question and Safeco’s duty to defend.
They agree that, “if the Court grants [Safeco’s] Motion for Summary
1
The underlying state case is scheduled for trial early next year.
6
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MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
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PARTIAL SUMMARY JUDGMENT
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Judgment, such a decision would resolve all claims in this action.”
(Case No. 1:13CV245, Dkt. No. 9 at 1).
II. STANDARD OF REVIEW
Summary
documents,
judgment
is
appropriate
electronically
declarations,
stored
stipulations
.
.
where
the
information,
.,
admissions,
“depositions,
affidavits
or
interrogatory
answers, or other materials” show 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), (c)(1)(A).
When ruling on
a motion for summary judgment, the Court reviews all the evidence
“in the light most favorable” to the nonmoving party.
Providence
Square Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846, 850 (4th Cir.
2000).
The Court must avoid weighing the evidence or determining
the truth and limit its inquiry solely to a determination of
whether genuine issues of triable fact exist.
Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 249 (1986).
The moving party bears the initial burden of informing the
Court
of
the
basis
for
the
motion
nonexistence of genuine issues of fact.
477 U.S. 317, 323 (1986).
and
of
establishing
the
Celotex Corp. v. Catrett,
Once the moving party has made the
necessary showing, the nonmoving party “must set forth specific
7
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MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
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facts showing that there is a genuine issue for trial.”
Anderson,
477 U.S. at 256 (internal quotation marks and citation omitted).
The “mere existence of a scintilla of evidence” favoring the
nonmoving party will not prevent the entry of summary judgment; the
evidence
must
be
such
that
a
rational
reasonably find for the nonmoving party.
trier
of
fact
could
Id. at 248–52.
III. LEGAL ANALYSIS
In discussing the issues raised by the parties in their
briefs,
the
Court
first
finds
it
necessary
to
examine
the
definition of “occurrence” under West Virginia law to determine
whether an occurrence has triggered coverage. If it has, the Court
must next determine whether that occurrence caused property damage.
A.
Occurrence
Liability
coverage
under
the
Homeowners
Policy
is
only
triggered when an occurrence causes bodily injury or property
damage to a third party who sues the insured.
Logically, then,
coverage necessarily depends on the existence of an occurrence.
The Homeowners Policy’s definitions equate an “occurrence” to an
“accident.”
Thus, liability coverage extends to property damage
and
injuries
bodily
caused
by
8
accidents.
But
because
the
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
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Homeowners Policy does not define “accident,” it is necessary to
look to the definition provided by West Virginia law.
In
1997,
the
West
Virginia
Supreme
Court
of
Appeals
interpreted a commercial general liability (“CGL”) policy that
provided coverage for “those sums the insured becomes legally
obligated to pay as damages because of ‘bodily injury’ or ‘property
damage’ which is caused by an ‘occurrence.’”
State Bancorp, Inc.
v. United States Fidelity & Guaranty Ins. Co., 483 S.E.2d 228, 234
(W. Va. 1997).
In that case, the underlying complaint against the
insured alleged the tort of outrage, as well as breach of contract,
civil conspiracy, and also violation of state banking laws.
Id.
Although the CGL policy equated an “occurrence” to an “accident,”
it did not define the term.
Id.
In an effort to craft a definition of “accident,” the court
appropriated the following from a Washington state case:
An ‘accident’ generally means an unusual, unexpected and
unforeseen event. . . . An accident is never present
when a deliberate act is performed unless some additional
unexpected, independent and unforeseen happening occurs
which produces the damage. . . . To be an accident, both
the means and the result must be unforeseen, involuntary,
unexpected, and unusual.
Id. (citing Harrison Plumbing & Heating, Inc. v. New Hampshire Ins.
Grp., 681 P.2d 875, 878 (Wash. Ct. App. 1984)).
9
It explained that
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
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“the definition of an ‘occurrence’ does not include actions which
are
intended
by
the
insured.”
Id.
(emphasis
in
original).
Accordingly, it easily determined that all the allegations were
“entirely foreign to the risk insured against in [the CGL policy].”
State Bancorp, 483 S.E.2d at 235.
that
the
allegations
in
the
Finally, the court concluded
underlying
complaint
were
“not
reasonably susceptible of an interpretation that the claims are
covered under [the CGL policy].”
Id. at 236.
Eight years later, in Columbia Casualty Co. v. Westfield Ins.
Co., 617 S.E.2d 797, 799-801 (W. Va. 2005), West Virginia’s highest
court was again called upon to interpret the meaning of “accident”
vis-a-vis “occurrence” within a CGL policy.
In that case, the
relevant CGL policy provided coverage to a county commission for an
“occurrence,”
which
was
defined
as
“an
accident,
including
continuous or repeated exposure to substantially the same general
harmful conditions.”
Id. at 799.
After two inmates committed
suicide in the county jail, the question arose whether the CGL
insurer was liable for a portion of the damages and expenses paid
by the co-insurer in defending and settling wrongful death lawsuits
brought by the deceased inmates’ estates.
10
Id. at 798.
In other
SAFECO INS. CO. V. DESANTIS, ET AL.
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PARTIAL SUMMARY JUDGMENT
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words, did the suicides constitute “occurrences” within the meaning
of the CGL policy?
Id.
The Supreme Court held that they did.
“[I]n determining
whether under a liability insurance policy an occurrence was or was
not an ‘accident’ . . . [,] primary consideration, relevance, and
weight should ordinarily be given to the perspective or standpoint
of the insured whose coverage under the policy is at issue.”
at 801.
Id.
Applying the rule, the court concluded that, from the
county commission’s standpoint, the inmates’ deaths were accidents
and thus occurrences within the meaning of the CGL policy.
Importantly,
in
urging
that
a
suicide
is
an
Id.
inherently
deliberate act, the insurer that had declined coverage relied
heavily on State Bancorp’s holding, citing, in particular, the
court’s statement that “[a]n accident is never present when a
deliberate act is performed.”
Id. at 800.
In Columbia Casualty,
however, the court distinguished its holding in State Bancorp as
follows:
[I]t must be remembered that the gravamen of the
complaints in the underlying cases is that the suicidal
acts were proximately caused by the negligent conduct of
the sheriff and commission in breaching their duties in
managing the jail.
This allegedly negligent and
proximately causative conduct removes the deaths from the
ambit of the quoted definition of “accident” from State
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Bancorp - because the sheriff’s and commission’s
negligence were (allegedly) “additional unexpected,
independent . . . happening[s]” that “produce[d] the
damage.”
Columbia Casualty, 617 S.E.2d at 801 n.6 (citing State Bancorp, 483
S.E.2d at 234) (emphasis in original).
This explanation emphasized two critical distinctions in the
underlying
allegations
in
Columbia
Casualty
-
negligence
and
causation - that, in the court’s view, supported its conclusion
that the suicides were accidents and therefore covered under the
CGL policy.2
In the court’s view, these allegations differed from
those in State Bancorp, which did not include negligence and
causation, thereby foreclosing coverage, as well as any duty to
defend.
B.
Id. at 800-01.
The Halldins’ Complaint
In this case, the Halldins assert three causes of action
against the DeSantises.
First, they allege that the DeSantises
2
Columbia Casualty also reinforces an important point from State
Bancorp, namely, that, “[t]o be an accident, both the means and the
result must be unforeseen, involuntary, unexpected, and unusual.” 483
S.E.2d at 234 (emphasis added). Nevertheless, the cases suggest that the
“means,” or causative conduct, is analyzed under the traditional tort
rubric of negligent-intentional conduct, while the “result,” or alleged
harm, is viewed from the perspective of the insured to determine whether
it was unforeseen or unexpected.
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committed
fraud
when
they
“knowingly
and
intentionally
made,
adopted, and/or ratified statements and representations that they
knew to be false.”
As the West Virginia Supreme Court of Appeals
has stated, “[a]ctual fraud is intentional.”
Stanley v. Sewell
Coal Co., 285 S.E.2d 679, 683 (W. Va. 1981) (cited by Heslep v.
Americans for African Adoption, Inc., No. 1:11CV56, 2013 WL 937574,
*6 (N.D.W. Va., Mar. 11, 2013)).
In their other two causes of action against the DeSantises,
the Halldins allege that the DeSantises breached the contract of
sale, and engaged in a civil conspiracy.
In State Bancorp, the
Supreme Court of Appeals expressly rejected the argument that
either allegation could amount to an “accident” or “occurrence”
within the meaning of a liability policy.
483 S.E.2d at 234-36
(finding that “the breach of contract allegation in the Tymans’
complaint is entirely foreign to the risk insured against,” and
“the tort of civil conspiracy . . . make[s] allegations entirely
foreign to the risk insured against”).
Further support for Safeco’s argument that liability coverage
under its Homeowners Policy does not extend to the Halldins’ claims
against the DeSantises is found in the decision of the West
Virginia Supreme Court of Appeals in Aluise v. Nationwide Mut. Fire
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Ins. Co., 625 S.E.2d 260 (W. Va. 2005).
Like the instant case,
Aluise specifically addressed whether a homeowner’s policy covered
liability for the claims of a home buyer against the seller arising
from
alleged
statement.
misrepresentations
Id. at 263-64.
in
the
property
disclosure
The homeowner’s policy in Aluise also
covered “damages which the insured is legally obligated to pay due
to an occurrence.”
Id. at 267.
“Occurrence” was defined as
“bodily injury or property damage resulting from an accident,
including continuous or repeated exposure to the same general
conditions.”
Id.
In Aluise, the court adopted the insurer’s argument that the
insured-seller’s alleged failure to disclose structural and water
seepage problems in the home was not an occurrence.
Id. at 268.
[W]e now hold that, absent policy language to the
contrary, a homeowner’s policy defining “occurrence” as
“bodily injury or property damage resulting from an
accident” does not provide coverage for an insured
homeowner who is sued by a home buyer for economic losses
caused because the insured negligently or intentionally
failed to disclose defects in the home. . . . The [home
buyer] sought damages for economic losses they sustained
as a result of the negligent or intentional failure of
the [insured-seller] to disclose defects in the home at
the time of the sale. The claims asserted by the Aluises
simply do not trigger an occurrence as defined under the
policy.
As one court appropriately noted, “[t]o find
coverage existed in this case would be to find that based
on an act of sale, a homeowner’s insurer becomes a
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warrantor of the condition of the insured property. This
is not the type of coverage which is contemplated by . .
. homeowner’s policies[.]”
Id. at 269 (quoting Lawyer v. Kountz, 716 So.2d 493, 498 (La. Ct.
App. 1998)).
Notably,
the
holding
in
Aluise
erases
the
negligent-
intentional distinction when the underlying allegations concern a
seller’s misrepresentations to a buyer. Id. (holding that there is
no coverage regardless of whether the insured “negligently or
intentionally” failed to disclose defects). Therefore, because the
Halldins’ complaint against the DeSantises alleges no occurrence,
under West Virginia law, the DeSantises have no colorable claim for
coverage under the terms of the Homeowners Policy.3
Alternatively,
coverage
for
the
Halldins’
complaint
is
excluded under Section II.2.a(3) of the Homeowners Policy, which
excludes coverage for:
(3)
liability
agreement
arising out of any written or
for the sale or transfer of
3
oral
real
The Homeowners Policy also provides “up to $500 per occurrence
for property damage to property of others caused by any other insured.”
(Case No. 1:13CV226, Dkt. No. 1-1 at 23)(emphasis in original). But even
if the DeSantises caused property damage to what would become the
Halldins’ Residence, coverage under this provision is unavailable because
the damage did not flow from an “occurrence.”
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property, including but not limited to liability
for:
(a)
known or
defects;
unknown
property
or
structural
(b)
known or
heating,
systems;
(c)
known or unknown soil conditions or drainage
problems; or
(d)
concealment or misrepresentation of any known
defects.
hidden defects in the plumbing,
air
conditioning
or electrical
(Case No. 1:13CV226, Dkt. No. 1-1 at 22).
It goes without saying that, but for the contract of sale for
the Residence, the Halldins could not allege fraud, breach of
contract, or civil conspiracy against the DeSantises.
Accord
Guideone Elite Ins. Co. v. Old Cutler Presbyterian Church, Inc.,
420 F.3d 1317, 1327-28 (11th Cir. 2005) (employing a “but for”
causation test in the context of a policy exclusion using the
phrase “arising out of”); Fed. Ins. Co. v. Tri-State Ins. Co., 157
F.3d 800, 804 (10th Cir. 1998) (explaining that the phrase “arising
out of” “requires some causal connection to the injuries suffered,
but does not require proximate cause in the legal sense”) (emphasis
added).
Therefore, any coverage of the Halldins’ claims is barred
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PARTIAL SUMMARY JUDGMENT
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by
the
coverage
exclusion
found
in
Section
II.2.a(3)
of
the
Homeowners Policy.4
C.
Hall’s Cross-Claim
In addition to claims against the DeSantises, the Halldins’
complaint includes several claims against Hall, including one for
professional negligence.5
Hall, in turn, has filed a cross-claim
against the DeSantises for contribution and indemnification for any
potential liability resulting from the Halldins’ claims against it.
4
The West Virginia Supreme Court of Appeals has rejected the
finding of coverage “based on an act of sale” because such a finding
would transform the insurer into “the warrantor of the condition of the
insured property.” Aluise, 625 S.E.2d at 269 (internal quotation marks
and citation omitted). According to the Supreme Court, “[t]his is not
the type of coverage which is contemplated by . . . homeowner’s
policies[.]” Id. (internal quotation marks and citation omitted).
5
In the Halldins’ complaint, the cause of action against Hall is
characterized as “breach of duty by real estate broker.”
Hall, of
course, was the DeSantises’ broker, but nevertheless might be liable in
negligence to the Halldins. Under West Virginia law, “[a] vendor’s real
estate broker may be liable to a purchaser if the broker makes material
misrepresentations with regard to the fitness or habitability of
residential property or fails to disclose defects or conditions in the
property that substantially affect its value or habitability, of which
the broker is aware or reasonably should be aware, but the purchaser is
unaware and would not discover by a reasonably diligent inspection.”
Syl. Pt. 1, Teter v. Old Colony Co., 441 S.E.2d 728, 730 (W. Va. 1994).
Although the Halldins allege this duty and its breach, they further
allege that Hall owed them several other duties that West Virginia courts
have not explicitly recognized as existing between a seller’s real estate
broker and the buyer. Indeed, “the question of whether a duty exists is
a question of law for the court to resolve.” E. Steel Constructors, Inc.
v. City of Salem, 549 S.E.2d 266, 271 (W. Va. 2001).
This Court,
however, has not been asked to resolve that question in this case.
17
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
The West Virginia Supreme Court of Appeals has held that the
“right of contribution before judgment is derivative in the sense
that it may be brought by a joint tortfeasor on any theory of
liability that could have been asserted by the injured plaintiff.”
Syl. Pt. 4, Bd. of Educ. v. Zando, Martin & Milstead, Inc., 390
S.E.2d 796, 799 (W. Va. 1990).
Based on this premise,
the
DeSantises suggest that Hall is “likely seeking contribution and/or
indemnification from the DeSantis Defendants for their pro tanto
share of liability under a negligence theory.” The Court therefore
must determine
whether
Hall’s
alleged
professional negligence
caused any property damage.
Aluise acknowledged the virtual unanimity among jurisdictions
that “‘damages flowing from misrepresentation and/or fraud have no
basis [as] property damage.’”
625 S.E.2d at 268 (quoting State
Farm Fire & Cas. Co. v. Brewer, 914 F. Supp. 140, 142 (S.D. Miss.
1996)) (alteration in original). Aluise found the Eighth Circuit’s
decision in St. Paul Fire & Marine Ins. Co. v. Lippincott, 287 F.3d
703 (8th Cir. 2002) to be particularly representative.
In Lippincott, home buyers had sued the sellers for, among
other things, negligent misrepresentation. Lippincott, 287 F.3d at
705.
Specifically,
the
buyers
18
alleged
that the
sellers
had
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
“negligently
concealed
structural
damage
to
[the]
house”
by
“patch[ing] a structural crack with spackling, cover[ing] a crack
with carpet, and then fill[ing] a room with boxes, making it
difficult to discover the cracks.”
awarded the
home
buyers $47,900
diminution in value.
Id. at 704-05.
for
repairs
and
The jury
$27,100
for
Id. at 705.
The sellers’ insurer brought a declaratory judgment action to
determine whether the “basic insurance policy” and the “personal
umbrella policy” covered the award of damages.
court granted summary judgment to the insurer.
Id.
The district
Id. On appeal, the
Eighth Circuit affirmed, explaining that the only issue was whether
the award of damages was a recovery for “property damage” under the
insurance
policies.
Id.
The
basic
insurance
policy
defined
“property damage” as “damage to someone else’s property or its loss
or destruction and the loss of its use.”
defined
it
as
“damage
to
‘tangible
Id.
The umbrella policy
property
destruction’ and ‘the loss of its use.’”
or
its
loss
or
Id.
According to the Eight Circuit’s application of Missouri law,
the $75,000 judgment covered “the intangible losses incurred when
the [home buyers] relied to their economic detriment upon the
[sellers’] misrepresentations,” and was “pecuniary in nature and []
19
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
not
property
policies.”
damage
within
the
meaning
of
the
[]
insurance
Id. at 706.
Here, the Halldins’ complaint alleges that, as a real estate
agency, Hall should have known of the defects in the Residence and
should have known that the DeSantises’ representations were false.6
By failing to properly advise the Halldins in this regard, Hall
allegedly breached its duty, resulting in “economic loss in the
amount of the full purchase price of the home, financing expenses,
moving expenses, repair expenses, legal expenses incurred in the
sale, annoyance, and other economic and non-economic damages.”
Under Aluise, such economic losses fall outside the purview of
“property damage” in the context of a liability policy. 625 S.E.2d
at 270.
The DeSantises, however, argue that a more recent decision of
the West Virginia Supreme Court of Appeals, Cherrington v. Erie
Ins. Prop. & Cas. Co., 745 S.E.2d 508 (W. Va. 2013), stands for the
proposition that economic losses can be considered property damage
in the context of the Homeowners Policy.
6
The Halldins also allege that, under an agency theory, the
DeSantises are liable for the negligence of Hall.
Again, however,
coverage for any derivative liability in negligence is dependent on
coverage for Hall’s alleged negligence.
20
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
In Cherrington, a home buyer entered into a contract with a
home builder for the construction of her home.
Id. at 513.
After
the home was completed, the buyer discovered numerous defects with
the construction of the home, including an uneven concrete floor,
a leaking roof, wood components that touched the soil, settlement,
and cracks in the walls.
Id.
After she sued the builder for
negligent construction, the builder filed a declaratory judgment
action seeking coverage under its CGL policy.
Id. at 513-14.
Following clear state law precedent, the circuit court granted
summary judgment to the builder’s insurer after determining that
the home buyer had alleged neither an occurrence nor property
damage.
Id. at 514.
On appeal, the West Virginia Supreme Court of
Appeals overruled its prior decisions7 and held that defective
workmanship did constitute an “occurrence” under the builder’s CGL
policy, and the alleged defects in construction were “property
damage.”
745 S.E.2d at 521-22.
7
In Syl. Pt. 6, the Cherrington court overruled Syl. Pt. 3, Webster
Cnty. Solid Wast Auth. v. Brackenrich & Assocs., Inc., 617 S.E.2d 851
(2005); Syl. Pt. 2, Corder v. William W. Smith Excavating Co., 556 S.E.2d
77 (2001); Syl. Pt. 2, Erie Ins. Prop. & Cas. Co. v. Pioneer Home
Improvement, Inc., 526 S.E.2d 28 (1999); and Syl. Pt. 2, McGann v. Hobbs
Lumber Co., 145 S.E.2d 476 (1965).
21
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
While
not
disputing
that
Aluise
remains
good
law,
the
DeSantises contend that the instant case fits more neatly into the
analysis in Cherrington.
Their argument, however, is unpersuasive
for several reasons. Cherrington interpreted the language of a CGL
policy as it applied to construction-related issues; like Aluise,
this case involves a homeowner’s policy in the context of a real
estate transaction involving an existing home.
Tellingly, the
court in Cherrington never referenced Aluise when it expressly
overruled a “trilogy” of cases holding that CGL policies did not
provide coverage for defective workmanship.
Id. at 521.
Furthermore, Cherrington applied the holding from Columbia
Casualty to determine that, from the standpoint of the insuredbuilder,
“the
damages
incurred
by
the
[buyer]
during
the
construction and completion of her home, or the actions giving rise
thereto, were not within the contemplation of the [builder] when it
hired the subcontractors alleged to have performed most of the
defective work.”
Cherrington, 745 S.E.2d at 520.
Here, the
DeSantises are the named insured under the Homeowners Policy.
According to the Halldins’ allegations against Hall in Count Three
of their complaint, the DeSantises transmitted false information
about the Residence to Hall, which “owed the Halldins a duty to
22
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
verify the information given to them by the DeSantis defendants.”
Thus, from the DeSantises’ perspective, any professional negligence
by Hall was entirely foreseeable.
Finally, in Cherrington, a causal connection existed between
the defective workmanship and the alleged damages.
As the court
explained, such a connection was necessary to sustain a claim of
coverage under the terms of the CGL policy:
Ms. Cherrington has sustained “property damage” as a
result of the allegedly defective construction and
completion of her home. As either allegedly defective
work, itself, or as a direct consequence thereof, Ms.
Cherrington has identified [] defects for which she seeks
repair and recompense. . . . Given this extensive list
of damaged items in her home resulting from the allegedly
defective construction and completion work, we find that
Ms. Cherrington has asserted a claim for “‘property
damage’ . . . caused by an occurrence’” under [the
insured-contractor’s] CGL policy.
Id. at 522.
Here, no causal connection exists between Hall’s allegedly
negligent failure to disclose and any property damage to the
Residence.
Although the Halldins describe water stains, leaks,
insect infestation, warping of floors and walls, and subsidence of
the pool and deck, Hall’s negligence certainly did not cause such
property damage. Therefore, absent a causal connection between the
negligence alleged in the Halldins’ complaint and the property
23
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
damage to the Residence, the DeSantises’ reliance on Cherrington is
misplaced.
Alternatively,
Hall’s
cross-claim,
like
the
Halldins’
complaint, falls under a policy exclusion, specifically, Section
II.2.a(2),
which
excludes
contract or agreement.”8
their
derivative
from
coverage
liability
“under
any
As the DeSantises repeatedly point out,
liability
finds
its
basis
in
their
listing
agreement with Hall because, “pursuant to that agreement [] the
Hall Defendants became agents of the DeSantis Defendants, and
engaged in numerous actions which the [Halldins] later claimed
constituted realtor malpractice.” (Case No. 1:13CV245, Dkt. No. 11
at
19).
Because
the
listing
agreement
is
“any
contract
or
agreement” within the language of Section II.2.a(2), liability
derived from it is excluded from coverage.
IV. CONCLUSION
In
sum,
provides no
the
Court
coverage
for
concludes
the
that
claims
8
the
Homeowners
presented
in
Policy
either
the
The two exceptions to this exclusion are written contracts that
directly relate to the ownership, maintenance or use of an insured
location, as well as written contracts where the liability of others is
assumed by the insured prior to an occurrence. Neither exception applies
here.
24
SAFECO INS. CO. V. DESANTIS, ET AL.
1:13CV226, 1:13CV245
MEMORANDUM OPINION AND ORDER GRANTING SAFECO’S MOTIONS FOR
PARTIAL SUMMARY JUDGMENT AND DENYING THE DESANTISES’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
_________________________________________________________________
Halldins’ complaint or Hall’s cross-claim. The Halldins’ claims do
not allege an occurrence, and the professional negligence claim
asserted
against
Hall,
for
which
the
DeSantises
might
incur
derivative liability, lacks a causal connection to any alleged
property damage.
Moreover, the Homeowners Policy’s exclusions bar
coverage in both instances.
“Therefore, [Safeco] has no duty to
defend or indemnify these claims.”
West Virginia Fire & Cas. Co.
v. Stanley, 602 S.E.2d 483, 498 (W. Va. 2004).
For these reasons,
the Court GRANTS Safeco’s motions for partial summary judgment, and
DENIES the DeSantises’ motion for partial summary judgment.
It is so ORDERED.
The Court directs the Clerk to enter a separate judgment order
in
the
above-captioned
cases
and
to transmit
copies
of
Memorandum Opinion and Order to counsel of record.
DATED: August 6, 2014.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
25
this
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