2013-0568, Cogswell Farm Condominium Association v. Tower Group, Inc. & a.

Superior Court (McHugh, J.) finding that two exclus ions in the insurance Cogswell Farm Condominium Association (Cogswell), appeals an order of the BASSETT, J. In this declaratory judgment proceeding, the petitioner,

Connor on the brief and orally), for respondent Acadia Insurance Company. Primmer Piper Eggleston & Cramer, PC, of Manchester (Doreen F.

brief), for respondent Tower Group, Inc. Downs Rachlin Martin PLLC, of Lebanon (Katherine M. Strickland on the

on the brief), for the p etitioner. the brief and orally), and Scott & Scott, P.A., of Londonderry (Michael J. Scott McDowell & Osburn, P.A., of Manchester (Gordon A. Rehnborg, Jr. on

No. 2013 - 568 Rockingham

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh. us. Opinions are available on the Internet by 9:00 to press. Errors may be reported by E - mail at the following address: editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concor d, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as 2

maintained that, although the exclusions contained with in part J of each of the “occurrence” under the policies, thereby triggering coverage. Cogswell also Following the hearing, Cogswell argu ed that its claims amounted to an

amount of damage that occur red prior to the expiration of each polic y. undetected for years and acknowledged that he was unable to discern the of the condominium units. The consultant observed that the damage went caused “almost immediate[]” water damage to the exterior and interior finishes consultant opined regarding “numerous defects in the weather ba rrier” that consultant hired by Cogswell. As noted by th e trial court in its order, the The only witness to testify at the evidentiary hearing was a construction

negligence claim could proceed. ordered that an evidentiary hearing be held to determine whet her the the condominium units occu rred during the policy periods and, therefore, court concluded that uncertainty existed regarding whether property damage to claims against Lemery, but denied the motion as to the negligence claim. The regarding coverage for Cogswell’s breach of contract and negligent supervision The trial court entered summary judgment in favor of the respondents Cogswell ’s claims against Lemery did not trigger coverage under their policies. The respondents filed motions for summary judgment, arguing that

judgment action. Tower’s policy. Cogswell later added Acadia as a party to the declaratory seeking a decla ration that its claims against Lemery were covered under In p. 2 2011, Cogswell filed a petition for declaratory judgment against Tower,

constructed and resulted in damage to the units due to water leaks. water/ice shield, flashing, siding, and vapor barrier – were defectively asserted that the “weather ba rrier” components of the units – including the contract, and negligent supervision in the construction of the units. Cogswell In p. 2 2009, Cogswell sued Lemery and others, alleging negligence, breach of

No vember p. 2 2003. In 2001, Lemery began selling the units to third parties. issued Lemery an identical policy, w ith coverage from August 2002 until insurance policy, providing coverage from March 2000 to August 2002. Tower petitioner association. Acadia issued Lemery a commercial general liability Atkinson. The owners of the condominium units are now members of the construction and development of 24 residential condominium units in Between June 2000 and November 2003, Lemery was responsible for the The trial court found, or the record supports, the following facts.

re mand. lawsuit against Lemery Building Company, Inc. (Lemery). We reverse and Insurance Company (Acadia), preclude coverage in the petitioner’s underlying policies issued by the respondents, Tower Group, Inc. (Tower) and Acadia p. 3 3

affidavits and other evidence, and all inferences properly drawn from t hem, in “In reviewing a trial court’s summary judgment ruling, we consider the

Cogswell followed. successful in the underlying litigation [against Lemery].” This appeal by defend or an “obligation [to pay] any damages to [Cogswell] if [Cogswell] is Accordingly, the court concluded that neither Tower nor Acadia had a duty to determined that exclusions J(1) and J(6) both applied and excluded coverage. exclusions applied presented a question of law for it to decide, and it the policy periods. The court agreed that the issue of whether the two order allowing the jury to determine whether property damage occurred during In ruling up on the motions, t he trial court vacated the portion of its prior

Cogswell also asserted that exclusions J(1) and J(6) were inapplicable. exclusions apply in this case,” a jury should decide such factual issues. [J] (6),” but argued that, because “factual issues exist concerning whether these court could “determine as a matter of law the meaning of exclu sions [J] (1) and occurred during the policy periods. In response, Cogswell conceded that the the trial court’s decision to allow a jury to determine whether property damage law, the exclusions precluded coverage. In its motion, Tower also challenged of law for the court – rather than the jury – to decide, and that, as a matter of interpretation and application of exclusions J(1) and J(6) presented questions The respondents then filed motions for reconsideration, arguing that the

J(6), reserving that determination for the jury as well. The court further declined to rule on the applicability of exclusions J(1) and would decide whether any property damage occurred during the policy periods. insurance policies, thus triggering coverage. The court also ruled that a jury by [Cogswell], if proven, would in fact constitute an occurrence” under the the consultant as being “highly credible” and ruled that “the negligence alleged motions for summary judgment on the negligence cla im. The court c redit ed The trial court issued supplemental orders denying the respondents’

because ‘ [Lemery’s] work’ was incorrectly performed on it.” particular part of any property that must be restored, repaired or replaced occup[ies].” Exclusion J(6) excludes co verage for property damage to “[t] hat coverage for “property damage” to property that Lemery “own[s], rent[s], or the policies, J(1) and J(6), preclude d coverage. Exclusion J(1) excludes court determined that coverage was triggered, two exclusi ons contained within trigger coverage under their policies. They al so argued that, even if the trial In response, the respondents again argued that Cogswell’s claims did not

resulted from water infiltration.” the otherwise nondefective ‘exterior and interior finishes’ . . . which di rectly barriers, the exclusions did “not exclude coverage for the resulting damage to policies precluded coverage for damage to the defectively constructed weather p. 4 4

policies. which units had been sold by Lem ery but continued to be covered under the during two different time periods, on remand, the t rial court must determine Because the units were sold at different times and the policies were in effect J(1) operate d as a n exclusion to bar coverage for each unit after it was sold. N either do we: we conclude that the trial court erred in ruling that exclusion policies were in effect. Notably, the respondents do not disagree with Cogswell. sustained by t h e units after they had been sold by Lemery and while the argues that c overage was not excluded under exclusion J(1) for damage s it s sale of the units to third parties beginning in 2001. However, Cogswell damage that occurred while Lemery owned the condominium units – prior to Cogswell concedes that ex clusion J(1) excludes coverage for property

The term “you” refers to the insured, Lemery. property” or “[l] oss of use of tangible property that is not physically injured.” “[p] hysical injury to tangible property, including all resulting los s of use of that [p]roperty you own, rent, or occupy.” “Property damage” is defin ed as either times. Exclusion J(1) excludes coverage for “‘[p] roperty damage’ to . . . determining that exclusion J(1) operated to bar coverage for all the units at all On appeal, Cogswell first conte nds that the trial court erred in

interpretations of the language.” (quotation omitted)). reasonable disagreement between contracting parties leads to at least two Dover Indoor Climbing Gym, 158 N.H. 628, 630 (2009) (“Ambiguity exists if Great Am. Dining, 16 p. 4 4 N.H. at 616 (quotation omitted); see C olony Ins. Co. v. the policy contains an ambiguity and will be construed against the insurer.” reasonable interpretation is possible, and an interpretation provides coverage, proving that the exclusion applies.” Rivera, 163 N.H. at 606. “If more than one “The insurer assertin g an exclusion of coverage bears the burden of

whole.” Id. at 616 (quotation omitted). “This is an objective standard.” Id. position of the insured based on more than a casual reading of the policy as a we construe the terms of the policy as would a reasonable person in the look to the plain and ordinary meaning of the policy’s words in context, “and Am. Dining v. Phil a delphia Indem. Ins. Co., 16 p. 4 4 N.H. 612, 617 (2013). We first decide.” Rivera, 163 N.H. at 606. “We review questions of law de novo.” Great interpretation of insurance policy language is a question of law for this court to which party brings the petition.” Id.; see RSA 491:22 - a (2010). “The insurance policy, the burden of proof is always on the insurer, regardless of “In a declaratory judgment action to determine the coverage of an

application of the law to the facts de novo.” Id. entitled to judgm ent as a matter of law.” Id. “We review the trial court’s where no genuine issue of material fact is present, and the moving party is Ins. Co., 163 N.H. 603, 606 (2012). “Summary judgment may be granted only the light most favorable to the non - moving party.” Rivera v. Liberty Mut. Fire p. 5 5

2011); Century Indem. Co. v. Golden Hills Bldrs., p. 5 561 S.E.2d 355, 358 - 59 (S.C. e.g., Lafayette Ins. Co. v. Peerboom, 813 F. Supp. 2d 823, 829 - 35 (S.D. Miss. were inapplicable in factual scenarios similar to that in the present case. See, interpreted exclusions identical to exclusion J(6) and held that the exclusions argument, the respondents cite decisions in other jurisdictions that have and Cas. Co., 100 P.3d 521, 525 (Colo. App. 2004). In support of this business risks associated with faulty work. See McGowan v. State Farm Fire policies are not intended to serve as performance bonds or to insure typical undermine the purpose of commercial general liability policies because those respondents assert that Cogswell’s interpretation of exclusion J(6) would including da mage to work on the units that was not defective. The ap plies to preclude coverage for all damage caused by Lemery’s defective work, general contractor responsible for the construction of the units, exclusion J(6) The respondents counter by arguing that, because Lemery was the

Mid - Continent Cas. Co., p. 5 557 F.3d at 215.

result of defective work by the insured on other parts of the property. subject of only nondefective work by the insured and were damaged as a does not bar coverage for damage to parts of a property that were the themselves the subject of defective work by the insu red; the exclusion bars coverage only for property damage to parts of a property that were

issue in this case and concluded that the exclusion: ( p. 5 5th Cir. 2009), in which the court reviewed an exclusion identical to the one at primarily upon Mid - Continent Cas. Co. v. JHP Development, Inc., 557 F.3d 207 the defectively constructed weather barriers.” In so arguing, Cogswell relies coverage is claimed is the damage to the non - defective work that was caused by defective weather barriers in the units.” Rather, “[t] he damage for which obligated to provide coverage for the costs associated with repairing the Cogswell “is not contending that the two [respondent] insurance companies are Cogswell maintains that “[e] xclusion J(6) is simply inapplicable” because

on the same project.” person or organization other than another contractor or subcontractor working “that part of the work done at a job site has been put to its intended use by any “all of the work called for in [Lemery’s] contract has been completed” or when operations hazard,’” which encompasses property damage that occurs when J( p. 6 6) “does not apply to ‘property damage’ included in the ‘products - completed furnished in connection with such work or operations.” However, exclusion [Lemery] or on [Lemery’s] behalf” and any “[m]aterials, parts or equipment it.” The term “your work” refers to any “[w]ork or operations performed by restored, repaired or replaced because ‘your work’ was incorrectly performed on property damage to “[t] hat particular part of any proper ty that must be exclusion J(6) applied to bar coverage. Exclusion J(6) precludes co verage for Cogswell next argues that the trial court erred in determining that 6

1989). 829 - 35; Jet Line Services v. American Emp. Ins., 537 N.E.2d 107, 111 (Mass. this exclusion in this manner. See, e.g., Lafayette Ins. Co., 813 F. Supp. 2d at parts of the condominium units. As noted above, s ome courts have interpreted Lemery’s defective work, including damage to the non - defectively constructed this reading would, therefore, preclude coverage for all damage resulting from product caused by the insured’s defective work. Applied to the present case, construed broadly to exclude coverage for all damage to the insured’s work be reasonably read as the respondents suggest, in which the exclusion is Here, exclusion J( p. 6 6) can be interpr eted in two ways. The exclusion can

upon the general purpose of a certain type of insurance policy. insurance policy language,” Great Am. Dining, 1 p. 6 64 N.H. at 616, rather than Hampshire, whether coverage exists “begins with an examination of the whether ambiguity exists.”). This is especially so given tha t, in New in an insurance policy. . . is a factor that we will consider in determining 666, 673 (Mont. 2009) (“[A] split in authority over the interpretation of language of exclusion J(6) unreasonable. See Giacomelli v. Scottsdale Ins. Co., 2 21 P.3d assertion that those decisions necessarily render an alternative interpretation commercial general liability policies, we disagree with the respondents ’ courts have premised their conclusions upon the general purpose behind Although we recognize that the South Carolina Supreme Court and other

to bar coverage). Supp. 2d at 829 - 35 (concluding, for similar reasons, that the exclusion applied from that work.” Id. at 358 (quotations omitted); see Lafayette Ins. Co., 813 F. work itself, but rather, they generally insure consequential risks that stem should control or manage. . . . [S uch] policies do not insure [an insured’s] consequences of doing business, and which business management can and business risks, i.e., risks that are the normal, frequent, or predictable commercial general liability policies, which are “not intended to insure exclusion. Id. at 359. The court based its decision on the purpose of that coverage for all of the water damage was excluded pursuant to the constructed (the substrate and framing). Id. at 358 - 59. The court concluded damage to the home, including those parts that were not defectively defective work (the exterior stucco) or precluded coverage for all resulting disputed whether the exclusion applied to preclude coverage o nly for the and, like Cogswell and the respondents in the present case, the parties S.E.2d at 35 p. 6 6. The insurance policy contained the exclusion at issue here, constructed substrate and framing of the home.” Century Indem. Co., 561 their home’s stucco exterior “caused moisture damage to the properly Supreme Court, in which homeowners alleged that the defective construction of For example, t he respondents rely upon a decision by the South Carolina

p. 7 717 S.E.2d 589, 594 (S.C. 2011). 2002), overruled on other grounds by Crossmann Communities v. Harleysville, 7

provide coverage because there is no evidence in the re cord of an “occurrence” Finally, the respondents argu e that their insurance policies do not

warrant further discussion. See Vogel v. Vogel, 13 p. 7 7 N.H. 321, 322 (1983). conclude that the argum ents regarding this portion of the court’s order do not germane to the issues in the declaratory judgment action now before us, we underlying case against Lemery. Because the trial court’s observations are not regarding the trial court’s observatio ns relating to proof of damages in the not address this argument. Nor must we address Cogswell’s argument s because we have ruled in Cogswell’s favor in regard to exclusion J(6), we need products - completed operations hazard exception to the exclusion. However, Cogswell further argues that exclusion J(6) does not apply due to the

exclusion J(6). with this decision, determine the extent of damages that are not barred by claims asserted by Cogswell. On remand, the trial court should, consistent determining that exclusion J(6) operated as a complete bar for coverage of the of the defective work. Accordingly, we hold that the trial court erred in that were not defectively constructed by Lemery but were damaged as a result exclusion J(6) does not bar coverage for damage to those portions of the units condominium units, which are alleged to be the weather barriers; however, bars coverage for property damage to the defectively constructed portions of the unambiguous policy language). W e, therefore, conclude that exclusion J(6) insurance companies are free to limit their liability through clear and Preferred Nat’l Ins. Co. v. Docusearch, 149 N.H. p. 7 759, 763 (2003) (noting that ambiguity and will be construed against the i nsurer.” (quotation omitted)); possible, and an interpretation provides coverage, the policy contains an Am. Dining, 164 N.H. at 616 (“If more than one reasonable interpretation is an ambiguity exists that will be construed against the respondents. S ee Great reasonable interpretation, and one o f those interpretations provides coverage, Because we conclude that exclusion J(6) is subject to more tha n one

(concluding the same). performed defective work”); Mid - Continent Cas. Co., 55 p. 7 7 F.3d at 214 - 17 of repairing or replacing distinct component parts on which the insured 30 p. 8 8, 311 (6th Cir. 2010) (deciding that the exclusion “applie[d] only to the cost manner. See, e.g., Fortney & Weygandt v. American Mfrs. Mut. Ins., 595 F.3d w eather barriers. Other courts have interpreted this exclusion in precisely this constructed parts of the condominium units that was caused by the defective weather barriers, but allow coverage for damage to the non - defectively This interpretation would preclude coverage for damage to the defective that we re allegedly defective and those c omponents that we re not defective. would create a distinction between the components of the condominium units which the allegedly defective work was done. Applied here, this interpretation be reasonably read to exclude coverage only for those parts of the property on However, we also agree with Cogswell’s assertion that the exclusion can 8

DALIANIS, C.J.