Summary
stating "[t]here can be little doubt that the real property on which the [misplaced] house encroaches sustained damage, and we are of the view that there was corresponding damage to plaintiffs' real property because of the encroachment."
Summary of this case from Mt. Hawley Insurance Co. v. Steve Roberts Custom BuildersOpinion
May 4, 1995
Appeal from the Supreme Court, Greene County (Connor, J.).
At issue on this appeal is whether a commercial general liability policy issued to a contractor provides coverage for a claim against the contractor based upon allegations that the contractor was negligent in failing to build a house entirely on the owner's lot. We agree with Supreme Court that the policy provides coverage and, therefore, we affirm the order.
It is undisputed that plaintiffs hired defendant to construct a house on their property in Greene County and that the house was built partly on an adjoining lot, which has since been acquired by plaintiffs. Plaintiffs commenced this action to recover damages, alleging, inter alia, that defendant was negligent in failing to exercise due care in determining the location to build the house. Defendant requested that its insurer defend and indemnify in the action pursuant to a commercial general liability policy. The insurer disclaimed, and defendant commenced a third-party action against the insurer claiming coverage under the policy. The insurer appeals from Supreme Court's denial of its motion for summary judgment on the issue of coverage.
The policy at issue provides coverage in the event of bodily injury or property damage caused by an occurrence. The policy does not define occurrence. To the extent that the policy is ambiguous, resolution of the ambiguity, as in any case involving the interpretation of a contract, is a question of law for the court if the equivocality at issue can and should be resolved on the basis of the agreement alone, without reference to extrinsic evidence (see, Hudson-Port Ewen Assocs. v Chien Kuo, 165 A.D.2d 301, 303, affd 78 N.Y.2d 944). There is no claim that reference to extrinsic evidence is necessary here and, therefore, Supreme Court correctly ruled on the issue as one of law.
It is also the general rule that when there is ambiguity as to existence of coverage, doubt must be resolved in favor of the insured and against the insurer (see, Handelsman v Sea Ins. Co., 85 N.Y.2d 96, 101). Thus, an insurer must demonstrate not only that its interpretation is reasonable, but that it is the only fair interpretation (see, Cetta v Robinson, 145 A.D.2d 820, 822). Based upon these principles we reject the insurer's arguments that its insured's error in building a house in the wrong place is not an occurrence and that an exclusion for damages to the insured's work product is applicable.
An occurrence for liability insurance purposes is often defined as an accident (see, e.g., Board of Educ. v Continental Ins. Co., 198 A.D.2d 816), which does not include intentional results (see, e.g., Ward v Security Mut. Ins. Co., 192 A.D.2d 1000, lv denied 82 N.Y.2d 655). The insurer contends that defendant intended to build the house where it is and, therefore, there can be no coverage for such an intentional act. In construing the term occurrence in liability policies the courts have looked to the injury, not the act which produced the injury (see, McGroarty v Great Am. Ins. Co., 36 N.Y.2d 358). "Resulting damage can be unintended even though the act leading to the damage was intentional" (Continental Cas. Co. v Rapid-American Co., 80 N.Y.2d 640, 649 [citations omitted]). Defendant may have intended to build the house where it is, but there is nothing in the record to suggest that defendant intended to build the house outside the boundary lines of plaintiffs' property. The damages to the neighboring lot and to plaintiffs' property clearly were not intended by defendant.
The insurer relies on People v Helinski ( 203 A.D.2d 659, lv denied 84 N.Y.2d 804), but that case is distinguishable on its facts. The insured therein intentionally entered upon a parcel of land and built earthen berms and created large potholes for which the plaintiff sought damages. The insured therein did not mistakenly enter onto the parcel of land. He did so intentionally, under a claim of title by adverse possession. Here, in contrast, defendant did not intentionally build on the neighboring parcel under a claim of title. The placement of the house partially on the neighboring parcel was the unintended result of defendant's intentional act, which is sufficient to establish that the result was accidental for insurance coverage purposes (see, Miller v Continental Ins. Co., 40 N.Y.2d 675; see also, General Acc. Ins. Co. v Manchester, 116 A.D.2d 790).
The insurer also relies on Fuller Co. v United States Fid. Guar. Co. ( 200 A.D.2d 255, lv denied 84 N.Y.2d 806), where the court found no occurrence resulting in property damage in a case involving a defective work product. The court explained that the liability policy "does not insure against faulty workmanship in the work product itself but rather faulty workmanship in the work product which creates a legal liability by causing bodily injury or property damage to something other than the work product" (supra, at 259). Plaintiffs do not claim that the house itself is defective, but rather they claim damage to real property as a result of the improper placement of the house on the property line. There can be little doubt that the real property on which the house encroaches sustained damage, and we are of the view that there was corresponding damage to plaintiffs' real property because of the encroachment. We conclude, therefore, that plaintiffs' complaint alleges an occurrence resulting in property damage within the meaning of the insurance policy at issue. Inasmuch as plaintiffs seek to recover for actual damage to their real property caused by defendant's negligent placement of the house on the property line, we conclude that the work product and loss of use exclusions relied upon by the insurer are inapplicable. The insurer failed to demonstrate its entitlement to judgment in its favor as a matter of law and, therefore, Supreme Court's order should be affirmed.
Cardona, P.J., Crew III, White and Yesawich Jr., JJ., concur. Ordered that the order is affirmed, with costs.