Court rules insurance company must provide defense

CHARLESTON – An insurance company will have to provide a defense and coverage to one of the defendants in a Greenbrier County home construction lawsuit after the state’s high court declared the policy created a duty.

Justice Robin Jean Davis wrote the opinion of the unanimous Court, filed June 18.

In July 2004, Lisbeth L. Cherrington entered into a contract with The Pinnacle Group, Inc. for the construction of a home in Greenbrier County. The contract also included landscaping and interior furnishings.

During the construction of the home, Cherrington believed that she was being charged for items that should have been included in the price of the house and also that she was being overcharged for other items. Additionally, she felt like there were various defects in the house when it was completed.

Cherrington filed a lawsuit in 2006 and a 2007 amended complaint added Anthony Mamone, Jr., a Pinnacle agent who purportedly also did work on the home on his own behalf. She alleged Pinnacle was negligent in altering the design, pouring and finishing the concrete floor, finishing and painting the house, and placing and securing the foundation. She claimed other damages, as well, including emotional distress.

Both Pinnacle and Mamone had policies of insurance from Erie Insurance Property and Casualty Company during the time of the home construction. Pinnacle had a commercial general liability policy and Mamone had homeowners insurance as well as a personal catastrophe policy, known as an “umbrella policy,” in effect.

After Cherrington’s filing of the lawsuit, both Pinnacle and Mamone requested Erie to provide coverage and a defense in accordance with their respective polices. Erie denied both coverage and a duty to defend on the policies.

In response to Erie’s declination of defense and coverage, Pinnacle and Mamone filed a third-party complaint against Erie seeking a declaration of the coverage provided by their policies of insurance. The circuit court ultimately found that Cherrington had failed to state a claim for damages that would be covered by any of the insurance policies issued to Pinnacle or Mamone.

The circuit court also determined that Cherrington had not established that an “occurrence” or “accident” had caused any of the damages she alleged. Faulty workmanship, it said, is not sufficient to give rise to an “occurrence.”

Even if the Pinnacle’s CGL policy did provide coverage, the court said, coverage would be barred by the policy’s exclusions.

Finally, the circuit court said that Erie had no duty to provide either of the defendant’s with a defense in the lawsuit. Pinnacle and Mamone, joined by Cherrington, appealed to the state Supreme Court.

“Before this Court,” Davis wrote, “the Petitioners assign as error the circuit court’s rulings that (1) there was no property damage caused by an occurrence under Pinnacle’s CGL policy; (2) the CGL policy’s exclusions for ‘your work’ and ‘impaired property or property not physically injured’ precluded coverage; and (3) Mr. Mamone’s homeowners and umbrella insurance policies, which cover acts of the insured as a salesman, did not provide coverage.

“Furthermore, the Petitioners argue that the circuit court refused to interpret the policies consistently with the reasonable expectations of Pinnacle and Mr. Mamone."

After acknowledging inconsistencies in the application of the law regarding the definition of “occurrence’ in general liability insurance policies in the past and an analysis of other courts’ handling of the issue, the court decided on the first assignment of error.

“[W]e therefore hold that defective workmanship causing bodily injury or property damage is an ‘occurrence’ under a policy of commercial general liability insurance," Davis wrote.

"Applying this holding to the facts of the case sub judice, we conclude that the circuit court erred by concluding that there had been no ‘occurrence’ so as to trigger coverage under Pinnacle’s CGL policy. Thus, we reverse the circuit court’s ruling in this regard."

Regarding the second assignment of error, the court reversed the portion of the circuit court’s order which had specifically stated that Exclusion N, regarding recalled products, would have precluded coverage, had coverage been triggered.

The court agreed with the circuit court that both Mamone’s homeowners and umbrella insurance policies did not provide coverage.

“For the foregoing reasons, the December 6, 2011, order of the Circuit Court of Greenbrier County is hereby affirmed as to its findings that Mr. Mamone’s policies of homeowners insurance and umbrella insurance do not provide coverage under the facts of this case," the opinion says.

“However, that portion of the circuit court’s order ruling that Pinnacle’s policy of CGL insurance also does not provide coverage under these facts is hereby reversed, and this case is remanded for further proceedings consistent with this opinion.”