{ "id": 8471703, "name": "HARLEYSVILLE MUTUAL INSURANCE COMPANY, Plaintiff v. BERKLEY INSURANCE COMPANY OF THE CAROLINAS, Defendant", "name_abbreviation": "Harleysville Mutual Insurance v. Berkley Insurance Co.", "decision_date": "2005-04-05", "docket_number": "No. COA04-1010", "first_page": "556", "last_page": "564", "citations": [ { "type": "official", "cite": "169 N.C. App. 556" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "340 S.E.2d 374", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1986, "pin_cites": [ { "page": "377" } ], "opinion_index": 0 }, { "cite": "315 N.C. 688", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4720126 ], "year": 1986, "pin_cites": [ { "page": "691" } ], "opinion_index": 0, "case_paths": [ "/nc/315/0688-01" ] }, { "cite": "337 S.E.2d 162", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1985, "pin_cites": [ { "page": "163" }, { "page": "163", "parenthetical": "citations omitted" } ], "opinion_index": 0 }, { "cite": "78 N.C. App. 483", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8522206 ], "weight": 2, "year": 1985, "pin_cites": [ { "page": "484" }, { "page": "484" } ], "opinion_index": 0, "case_paths": [ "/nc-app/78/0483-01" ] }, { "cite": "594 S.E.2d 61", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 6, "year": 2004, "pin_cites": [ { "page": "63" }, { "page": "64" }, { "page": "64" }, { "page": "64" }, { "page": "63" } ], "opinion_index": 0 }, { "cite": "163 N.C. App. 601", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8919985 ], "year": 2004, "pin_cites": [ { "page": "604" } ], "opinion_index": 0, "case_paths": [ "/nc-app/163/0601-01" ] }, { "cite": "409 S.E.2d 692", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1991, "pin_cites": [ { "page": "695" } ], "opinion_index": 0 }, { "cite": "104 N.C. App. 312", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8521555 ], "year": 1991, "pin_cites": [ { "page": "317" } ], "opinion_index": 0, "case_paths": [ "/nc-app/104/0312-01" ] }, { "cite": "151 L. Ed. 2d 261", "category": "reporters:federal", "reporter": "L. Ed. 2d", "year": 2001, "opinion_index": 0 }, { "cite": "534 U.S. 950", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 9174244, 9174024, 9174012, 9174221, 9174076, 9174063, 9174000, 9174159, 9174195, 9174299, 9174108, 9174269, 9174143 ], "year": 2001, "opinion_index": 0, "case_paths": [ "/us/534/0950-11", "/us/534/0950-03", "/us/534/0950-02", "/us/534/0950-10", "/us/534/0950-05", "/us/534/0950-04", "/us/534/0950-01", "/us/534/0950-08", "/us/534/0950-09", "/us/534/0950-13", "/us/534/0950-06", "/us/534/0950-12", "/us/534/0950-07" ] }, { "cite": "546 S.E.2d 401", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2000, "opinion_index": 0 }, { "cite": "353 N.C. 262", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 135914, 135661, 135986, 135704, 135806 ], "year": 2000, "opinion_index": 0, "case_paths": [ "/nc/353/0262-04", "/nc/353/0262-02", "/nc/353/0262-05", "/nc/353/0262-03", "/nc/353/0262-01" ] }, { "cite": "534 S.E.2d 660", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2000, "pin_cites": [ { "page": "664" } ], "opinion_index": 0 }, { "cite": "139 N.C. App. 778", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 9497849 ], "year": 2000, "pin_cites": [ { "page": "784" } ], "opinion_index": 0, "case_paths": [ "/nc-app/139/0778-01" ] }, { "cite": "524 S.E.2d 558", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 4, "year": 2000, "pin_cites": [ { "page": "565" }, { "page": "564" } ], "opinion_index": 0 }, { "cite": "351 N.C. 293", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 1155833 ], "weight": 3, "year": 2000, "pin_cites": [ { "page": "303" } ], "opinion_index": 0, "case_paths": [ "/nc/351/0293-01" ] }, { "cite": "504 S.E.2d 574", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1998, "pin_cites": [ { "page": "578" } ], "opinion_index": 0 }, { "cite": "130 N.C. App. 729", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11470258 ], "weight": 2, "year": 1998, "pin_cites": [ { "page": "735" } ], "opinion_index": 0, "case_paths": [ "/nc-app/130/0729-01" ] } ], "analysis": { "cardinality": 737, "char_count": 18331, "ocr_confidence": 0.759, "pagerank": { "raw": 6.756354612211578e-08, "percentile": 0.40908273030589815 }, "sha256": "29fd50278db530b935c6f214483d7f2057e5ebcaa32533a8e10d8d00dbf2c30d", "simhash": "1:0975c6466d67c697", "word_count": 2900 }, "last_updated": "2023-07-14T22:06:54.593382+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges CALABRIA and GEER concur." ], "parties": [ "HARLEYSVILLE MUTUAL INSURANCE COMPANY, Plaintiff v. BERKLEY INSURANCE COMPANY OF THE CAROLINAS, Defendant" ], "opinions": [ { "text": "TIMMONS-GOODSON, Judge.\nHarleysville Mutual Insurance Company (\u201cplaintiff\u2019) appeals the trial court order granting summary judgment in favor of Berkley Insurance Company of the Carolinas (\u201cdefendant\u201d). Because we conclude that defendant was neither required to extend liability coverage nor defend a suit, we affirm the trial court order.\nThe facts and procedural history pertinent to the instant appeal are as follows: On 11 April 1993, RGS Builders, Inc. (\u201cRGS\u201d) entered into a contract with Mr. and Mrs. K.C. Desai (collectively, \u201cthe Desais\u201d), whereby RGS was to serve as contractor during the construction of the Desais\u2019 residence. Construction of the residence was completed in 1994, and the Desais were issued a certificate of occupancy on 15 December 1994. The residence included an exterior insulation finish system (\u201cEIFS\u201d) commonly known as \u201csynthetic stucco.\u201d\nIn May 1996, the Desais\u2019 residence was inspected by Prime South Construction (\u201cPrime South\u201d). Prime South found that portions of the residence contained medium and high moisture levels that should be further investigated by the Desais. As a result of Prime South\u2019s investigation, and in an effort to correct the water intrusion, RGS subsequently performed repairs to the residence. In May 1997, the Desais hired B.B. & Associates (\u201cB.B.\u201d) to conduct another inspection of their residence. In a report dated 4 June 1997, B.B. recommended that the Desais \u201c[s]eai all penetrations through the stucco system, including but not limited to receptacles, light fixtures, vents, [and] pipes[,]\u201d as well as \u201c[c]ontinue to seal and maintain jamb/sill connection of windows.\u201d B.B. noted that \u201c[t]he kick outs do not have sealant where the flashing meets the stucco system[,]\u201d and B.B. instructed the Desais to correct this problem.\nOn 6 April 2000, Criterium-McClancy Engineers (\u201cMcClancy Engineers\u201d) performed a third inspection of the residence. In a report dated 5 May 2000, McClancy Engineers summarized its findings as follows:\nWe observed numerous examples of improper installation details of the EIFS cladding and violations of applicable building codes.\nIn addition, we measured elevated moisture levels in many areas, which we attribute to the improper installation of the system.\nBecause of the widespread incidence of improper installation details, the evidence of generally elevated moisture levels and the potential for further moisture penetration and subsequent structural damages, we conclude the overall installation is defective. Because of technical problems associated with the critical construction details, we do not believe the system can be repaired and we recommend that the EIFS synthetic stucco surface be removed and replaced.\nOn 16 May 2000, the Desais filed a complaint against RGS, alleging negligence, negligent misrepresentation, breach of implied warranty, breach of contract, and unfair and deceptive trade practices with respect to the installation of the synthetic stucco. RGS subsequently forwarded the complaint to both plaintiff and defendant as potential insurers. Plaintiff had previously provided RGS with commercial general liability coverage, and, by virtue of a policy effective 1 May 1997, defendant was currently providing commercial general liability coverage to RGS. Plaintiff agreed to aid in RGS\u2019s defense and to provide RGS with insurance coverage. By way of a letter dated 21 June 2000, defendant declined to provide RGS with insurance coverage related to the suit, stating that the property damage and the Desais\u2019 discovery of it occurred prior to 1 May 1997, the date defendant\u2019s coverage of RGS began.\nOn 15 August 2001, plaintiff sent a letter to defendant asking defendant to reconsider its position on the suit in light of the allegations of the Desais\u2019 complaint and this Court\u2019s decision in Bruce-Terminex Co. v. Zurich Ins. Co., 130 N.C. App. 729, 504 S.E.2d 574 (1998). In response, defendant sent plaintiff a letter dated 4 September 2001, in which defendant again declined to provide RGS with insurance coverage related to the suit, citing the language of its policy with RGS as well as the Supreme Court\u2019s decision in Gaston County Dyeing Machine Co. v. Northfield, Ins. Co., 351 N.C. 293, 524 S.E.2d 558 (2000). Plaintiff and defendant exchanged similar correspondence in February 2002, with defendant continuing to maintain its position of denying RGS coverage related to the suit.\nOn 7 June 2002, the Desais settled their suit against RGS for the sum of $87,500.00. On 13 June 2002, the Desais dismissed their claim against RGS with prejudice. Plaintiff subsequently made payment on behalf of RGS in the full amount of settlement, and, on 24 January 2003, plaintiff filed a declaratory judgment complaint against defendant. In its complaint, plaintiff alleged that defendant\u2019s insurance policy with RGS was triggered by the Desais\u2019 suit, and that therefore, plaintiff was entitled to payment from defendant for the settlement amount as well as any costs and expenses related to the settlement. On 13 March 2003, defendant filed an answer denying the allegations of plaintiff\u2019s complaint. Both parties subsequently moved the trial court for summary judgment in their favor. On 29 March 2004, the trial court granted summary judgment in favor of defendant, concluding that defendant \u201cprovides no coverage and owes no duty to defend the claim against RGS Builders,\u201d and that plaintiff is entitled to recover nothing from defendant. Plaintiff appeals.\nThe issue on appeal is whether the trial court erred by granting summary judgment in favor of defendant. Plaintiff argues that defendant was required to extend coverage to RGS because the Desais discovered the damage to their residence while defendant was insuring RGS. We disagree.\nWhen reviewing a motion for summary judgment, this Court considers whether \u201c(1) the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact; and (2) the moving party is entitled to judgment as a matter of law.\u201d Gaunt v. Pittaway, 139 N.C. App. 778, 784, 534 S.E.2d 660, 664, disc. review denied and appeal dismissed, 353 N.C. 262, 546 S.E.2d 401 (2000), cert. denied, 534 U.S. 950, 151 L. Ed. 2d 261 (2001); see N.C. Gen. Stat. \u00a7 1A-1, Rule 56(c) (2003).\nIn Gaston County Dyeing Machine Co. v. Northfield Ins. Co., 351 N.C. 293, 524 S.E.2d 558 (2000), our Supreme Court overruled this Court\u2019s opinion in West American Insurance Co. v. Tufco Flooring East, which held that \u201cfor insurance purposes, property damage \u2018occurs\u2019 when it is manifested or discovered.\u201d 104 N.C. App. 312, 317, 409 S.E.2d 692, 695 (1991). In Gaston County, the Court concluded that, for the purposes of determining insurance liability, there is no \u201cbright-line rule\u201d that property damage occurs at the time of manifestation or upon the date of discovery. 351 N.C. at 303, 524 S.E.2d at 565. Instead, the Court held, \u201cwhere the date of the injury-in-fact can be known with certainty, the insurance policy or policies on the risk on that date are triggered.\u201d Id. at 303, 524 S.E.2d at 564. Following Gaston County, this Court has held that if we \u201ccan determine when the injury-in-f\u00e1ct occurred, the insurance policy available at the time of the injury controls.\u201d Hutchinson v. Nationwide Mut. Fire Ins. Co., 163 N.C. App. 601, 604, 594 S.E.2d 61, 63 (2004). Therefore, \u201ceven in situations where damage continues over time, if the court can determine when the defect occurred from which all subsequent damages flow, the court must use the date of the defect and trigger the coverage applicable on that date.\u201d Id. at 605, 594 S.E.2d at 64.\nIn Hutchinson, the plaintiffs sought damages arising from the continual entry of water into a retaining wall built by the contractor. The plaintiffs argued that, as the contractor\u2019s current insurer, the defendant was responsible for damages which, although resulting from the negligent construction of the wall, were discovered after the wall\u2019s construction and while the defendant\u2019s policy was in effect. The defendant denied coverage for the claim, contending that because the alleged negligent construction occurred while the defendant was not insuring the contractor, the defendant\u2019s insurance policy was not triggered. The trial court agreed with the defendant and granted summary judgment in its favor. On appeal, we agreed with the plaintiffs\u2019 theory of the injury, but we noted that \u201cthe evidence is clear that the damage to [the] plaintiffs\u2019 retaining wall occurred outside of the period in which [the] defendant insured [the contractor].\u201d Id. at 605, 594 S.E.2d at 64. Accordingly, we held that \u201c[w]ithout any additional information suggesting that the damage was caused during the three days of coverage prior to discovery, we affirm the trial court\u2019s order granting summary judgment to defendant.\u201d Id. at 605-06, 594 S.E.2d at 64.\nIn the instant case, the Desais\u2019 damages arose from the continual entry of moisture into their residence through the synthetic stucco. Plaintiff contends that the source of the property damage, RGS\u2019s negligent installation of the synthetic stucco, was not \u201cdetermined with certainty\u201d until 5 May 2000, the date in which McClancy Engineers provided its report to the Desais. Thus, plaintiff asserts, because RGS was insured by defendant on the date of discovery, defendant was required to extend general commercial liability coverage to RGS and to defend the suit. We cannot agree.\nWe note that defendant\u2019s insurance policy with RGS contains the following pertinent provisions:\nA. COVERAGES\n1. Business Liability\na. We will pay those sums that the insured becomes legally obligated to pay as damages because of \u201cbodily injury\u201d [or] \u201cproperty damage\u201d ... to which this insurance applies.\nb. This insurance applies:\n(1) To \u201cbodily injury\u201d and \u201cproperty damage\u201d only if:\n(b) The \u201cbodily injury\u201d or \u201cproperty damage\u201d occurs during the policy period.\nThus, as in Hutchinson, \u201c[u]nder the insurance policy in this case, coverage is triggered by \u2018property damage\u2019 when the property damage is caused by an \u2018occurrence\u2019 and when the property damage occurs within the policy period.\u201d Id. at 604, 594 S.E.2d at 63. Accordingly, \u201c[t]he issue for this Court to determine is whether the property damage occurred within the policy period.\u201d Id.\nThe record in the instant case establishes that defendant was not insuring RGS on the dates the Desais\u2019 residence was constructed, nor was defendant insuring RGS on the dates RGS attempted to repair its previous construction efforts. RGS began construction of the residence in 1993 and completed it in 1994. The repairs took place following Prime South\u2019s inspection of the residence in 1996. Defendant\u2019s policy with RGS began on 1 May 1997, and it was effective until 1 January 2003. In its 5 May 2000 report, McClancy Engineers specifically found that the \u201coverall installation\u201d of the synthetic stucco was defective. The Desais\u2019 complaint against RGS alleged that, as a result of Prime South\u2019s inspection, in May 1996, RGS, \u201cby and through agents or employees, investigated, performed repairs, and told [the Desais] that the source of the water intrusion had been corrected.\u201d The Desais further alleged in their complaint that, when the repairs were later inspected in May 1997, they discovered that \u201cthe repair efforts undertaken by or on behalf of [RGS] in 1996 were inadequate and . . . failed to correct the problem, and from said inspection, [the Desais] discovered the existence of a latent defect associated with the manner in which the property was constructed\u201d by RGS. In light of the foregoing, it is clear that the Desais\u2019 property damage was caused by RGS\u2019s actions or inactions prior to the effective date of its policy with defendant. Therefore, without any additional information suggesting that the damage was caused during the dates of its coverage, we conclude that defendant bears no general commercial liability for the damages caused to the Desais by RGS.\nPlaintiff argues in the alternative that defendant had a general duty to defend the suit against RGS by virtue of the terms of its insurance policy. Plaintiff asserts that the facts of the Desais\u2019 pleadings triggered defendant\u2019s contractual duty to defend. We disagree.\n\u201cThe duty of an insurer to defend its insured is based on the coverage contracted for in the insurance policy.\u201d Mastrom, Inc. v. Continental Casualty Co., 78 N.C. App. 483, 484, 337 S.E.2d 162, 163 (1985). \u201cAn insurer has a duty to defend when the pleadings state facts demonstrating that the alleged injury is covered by the policy.\u201d Bruce-Terminex Co. v. Zurich Ins. Co., 130 N.C. App. 729, 735, 504 S.E.2d 574, 578 (1998). \u201cProvisions of insurance policies are generally to be construed in favor of coverage and against the insurer. This principle applies, however, only when the terms of the policy are ambiguous.\u201d Mastrom, 78 N.C. App. at 484, 337 S.E.2d at 163 (citations omitted).\nIn Waste Management of the Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 691, 340 S.E.2d 374, 377 (1986), our Supreme Court distinguished an insurer\u2019s duty to indemnify an insured from its duty to defend an insured as follows:\nGenerally speaking, the insurer\u2019s duty to defend the insured is broader than its obligation to pay damages incurred by events covered by a particular policy. An insurer\u2019s duty to defend is ordinarily measured by the facts as alleged in the pleadings; its duty to pay is measured by the facts ultimately determined at trial. When the pleadings state facts demonstrating that the alleged injury is covered by the policy, then the insurer has a duty to defend, whether or not the insured is ultimately liable. Conversely, when the pleadings allege facts indicating that the event in question is not covered, and the insurer has no knowledge that the facts are otherwise, then it is not bound to defend.\nWhere the insurer knows or could reasonably ascertain facts that, if proven, would be covered by its policy, the duty to defend is not dismissed because the facts alleged in a third-party complaint appear to be outside coverage, or within a policy exception to coverage. In this event, the insurer\u2019s refusal to defend is at his own peril: if the evidence subsequently presented at trial reveals that the events are covered, the insurer will be responsible for the cost of the defense.\n(citations and footnote omitted).\nIn the instant case, defendant\u2019s insurance policy with RGS provides that defendant \u201cwill have the right and duty to defend any \u2018suit\u2019 seeking those damages\u201d to which the policy applies. As discussed above, under the terms of the insurance policy, defendant\u2019s coverage is triggered by \u201cproperty damage\u201d only when the \u201c \u2018property damage\u2019 occurs during the policy period.\u201d The Desais\u2019 complaint against RGS alleged that the synthetic stucco was \u201cimproperly installed,\u201d that RGS \u201cfailed to adequately supervise the activities of their subcontractors\u201d during the installation of the synthetic stucco, and that RGS \u201cfailed to promptly discover the improper method\u201d by which the synthetic stucco was installed. The Desais\u2019 complaint referenced RGS\u2019s initial acts in constructing their residence as well as RGS\u2019s repairs and assurances following the May 1996 inspection. The complaint alleged no actions or inactions by RGS following 1 May 1997, the effective date of defendant\u2019s policy with RGS. Therefore, in light of the foregoing, we conclude that defendant did not have a general duty under its policy to defend RGS from the Desais\u2019 suit.\nPlaintiff maintains that RGS was provided coverage by defendant by virtue of the \u201cContractors Extension Endorsement\u201d provision contained within its insurance policy. However, we note that although the \u201cContractors Extension Endorsement\u201d provides that defendant will pay those sums \u201cto which this insurance applies\u201d and also places upon defendant a \u201cduty to defend any suit seeking these damages [,]\u201d the endorsement expressly states that defendant has \u201cno duty to defend suits for damages not covered by th[e] policy.\u201d The endorsement further provides that\n[negligent acts, errors, omissions or defects occurring prior to the effective date of the first consecutive errors and omissions policy . . . are excluded if there is other insurance applicable or if \u2022 the \u201cinsured\u201d knew or could have reasonably foreseen that such act, error, omission or defect might be the basis of a claim or suit.\nIn the instant case, as discussed above, RGS\u2019s insurance policy with defendant was effective on 1 May 1997. Prior to that date, RGS had an insurance policy with plaintiff. The Desais\u2019 complaint contained allegations of acts and omissions occurring prior to the effective date of RGS\u2019s insurance policy with defendant and during RGS\u2019s insurance policy with plaintiff. Thus, we conclude that the alleged negligent acts or omissions in the instant case were not covered by the \u201cContractors Extension Endorsement\u201d in RGS\u2019s insurance policy with defendant, and therefore, the \u201cContractors Extension Endorsement\u201d did not require defendant to defend RGS against the Desais\u2019 suit.\nIn light of the foregoing conclusions, we hold that the trial court did not err in ordering summary judgment in favor of defendant. Accordingly, we affirm the trial court\u2019s order.\nAffirmed.\nJudges CALABRIA and GEER concur.", "type": "majority", "author": "TIMMONS-GOODSON, Judge." } ], "attorneys": [ "Pinto Coates Kyre & Brown, P.L.L.C., by David L. Brown and Deborah J. Bowers, for plaintiff-appellant.", "Carruthers & Roth, PA., by Kenneth R. Keller, for defendant-appellee." ], "corrections": "", "head_matter": "HARLEYSVILLE MUTUAL INSURANCE COMPANY, Plaintiff v. BERKLEY INSURANCE COMPANY OF THE CAROLINAS, Defendant\nNo. COA04-1010\n(Filed 5 April 2005)\nInsurance\u2014 liability insurance \u2014 synthetic stucco \u2014 timing of coverage \u2014 acts or omissions before policy date\nThe trial court did not err by ordering summary judgment for defendant in a declaratory judgment action between insurance companies arising from synthetic stucco provided by RGS Builders, which was insured by plaintiff previously and by defendant when the complaint was filed. Any acts or omissions by the insured (RGS) occurred prior to the effective date of defendant\u2019s policy.\nAppeal by plaintiff from order entered 29 March 2004 by Judge Anderson D. Cromer in Guilford County Superior Court. Heard in the Court of Appeals 10 March 2005.\nPinto Coates Kyre & Brown, P.L.L.C., by David L. Brown and Deborah J. Bowers, for plaintiff-appellant.\nCarruthers & Roth, PA., by Kenneth R. Keller, for defendant-appellee." }, "file_name": "0556-01", "first_page_order": 586, "last_page_order": 594 }