TRAVELERS INS. CO. v. VOLENTINE

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Docket Number

No. 8624.

Attorney(S)

Michael Stevens, Atchley, Russell, Waldrop Hlavinka, Texarkana, for appellant. Sherman A. Kusin, Harkness, Friedman, Kusin Hooper, Texarkana, for appellee.

Judges

CORNELIUS, Chief Judge.

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Smart Summary

Factual and Procedural Background

This case concerns the interpretation of a garage liability insurance policy issued by Travelers Insurance Company to Kelsey Volentine, a garage owner. Volentine performed a "valve job" on Bobby Garrard's automobile. Garrard subsequently sued Volentine, alleging that defective performance of the valve repair caused a valve keeper to fail, resulting in the destruction of the entire engine. Both Volentine and Travelers filed motions for summary judgment; the trial court granted Volentine’s motion. Travelers appealed, arguing that the policy did not cover the damages claimed and that it had no duty to defend Volentine in Garrard's lawsuit.

Legal Issues Presented

Whether the damages claimed by Garrard were caused by an "occurrence" or accident under the insurance policy, thereby triggering coverage.
Whether the policy exclusion for property damage to "work performed" by the insured bars coverage for the damages claimed.
Whether the insurer had a duty to defend Volentine in the underlying suit based on the allegations in Garrard’s petition.

Arguments of the Parties

Appellant's (Travelers Insurance Company) Arguments

The policy covers only damages caused by an "occurrence," defined as an accident, and Garrard’s damages were not caused by an accident.
The policy exclusion (k) precludes coverage for property damage to work performed by the insured or materials furnished in connection with that work, thus excluding coverage for Garrard’s claim.
The trial court erred in relying on exclusion (a) to find coverage, as that exclusion does not grant or extend coverage but limits contractual liability exclusions.

Appellee's (Kelsey Volentine) Arguments

The destruction of the engine due to malfunction of the repaired valve was an unexpected and unintended accident, thus constituting an "occurrence" under the policy.
The exclusion (k) applies only to damage to the work performed itself, not to damage to other property caused by defective work. The engine as a whole is "other property," distinct from the valve repair which was Volentine’s work product.
Based on the allegations in Garrard’s petition, the insurer had a duty to defend since the claim included damages beyond the defective valve repair itself.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Employers Casualty Company v. Brown-McKee, Inc., 430 S.W.2d 21 (Tex.Civ.App. Tyler 1968)	Definition of "accident" as an unexpected, unforeseen, or undesigned happening.	Supported the court’s interpretation that the destruction of the engine was an accident under the policy.
Bundy Tubing Company v. Royal Indemnity Company, 298 F.2d 151 (6th Cir. 1962)	Exclusion for damage to work performed does not exclude coverage for damage to other property caused by defective work.	Analogized the case to hold that damage to the engine beyond the valve repair is covered.
Hauenstein v. St. Paul-Mercury Indemnity Company, 242 Minn. 354, 65 N.W.2d 122 (S.Ct. 1954)	Distinction between damage to defective work itself and damage to other property caused by the defective work.	Supported coverage for damage beyond the defective work product.
Womack v. Employers Mutual Liability Ins. Co. of Wisconsin, 233 Miss. 110, 101 So.2d 107 (S.Ct. 1958)	Consideration of whether defective performance constitutes an accident.	Referenced in discussion of what constitutes an accident under the policy.
Haugan v. Home Indemnity Company, 197 N.W.2d 18 (S.Ct.S.D. 1972)	Clarification that exclusion (a) does not grant coverage but limits contractual liability exclusions.	Supported the court’s rejection of the trial court’s reliance on exclusion (a) for coverage.
Hartford Accident Indemnity Co. v. Olson Bros., Inc., 187 Neb. 179, 188 N.W.2d 699 (S.Ct. 1971)	Interpretation of exclusion for damage to work performed.	Supported the distinction between damage to the work product and damage to other property.
Engine Service, Inc. v. Reliance Insurance Company, 487 P.2d 474 (Wyo. 1971)	Held no coverage when only damage to the work performed was claimed.	Distinguished from the present case where damage extended beyond the valve repair.
Bryan Const. Co. v. Employers' Surplus Lines Ins. Co., 110 N.J. Super. 181, 264 A.2d 752 (S.Ct. 1970)	Application of exclusion for damage to work performed.	Supported the court’s interpretation of coverage.
Dakota Block Co. v. Western Casualty Surety Co., 81 S.D. 213, 132 N.W.2d 826 (S.Ct. 1965)	Interpretation of policy exclusions related to work performed.	Supported the distinction between damage to work product and other property.
Kendall Plumbing Co. v. St. Paul Mercury Ins. Co., 189 Kan. 528, 370 P.2d 396 (S.Ct. 1962)	Construction of exclusion clauses in liability policies.	Supported the court’s interpretation of exclusion (k).
Volf v. Ocean Accident Guarantee Corporation, 50 Cal.2d 373, 325 P.2d 987 (S.Ct. 1958)	Distinction between damage to defective work and damage to other property.	Supported the court’s reasoning on coverage scope.
Franks v. Guillotte, 248 So.2d 626 (La.Ct.App. 1971)	No coverage when only defective work itself is claimed to be damaged.	Distinguished as involving defective work on entire engine, unlike the present case.
Vobill Homes, Inc. v. Hartford Accident Indemnity Co., 179 So.2d 496 (La.Ct.App. 1965)	Interpretation of exclusions relating to work performed.	Supported the general principle applied by the court.
Heyward v. American Casualty Co. of Reading, Pa., 129 F. Supp. 4 (E.D.S.C. 1955)	Interpretation of liability insurance coverage for defective work.	Supported the court’s distinction between damage to work product and other property.

Court's Reasoning and Analysis

The court first addressed whether the damages were caused by an "occurrence" or accident under the policy. It rejected Travelers' argument that the damages were not accidental, interpreting "accident" as an unexpected or unintended event. The destruction of the engine due to the malfunctioning valve was considered an accident within the policy’s meaning.

Next, the court analyzed exclusion (k), which excludes coverage for property damage to the work performed by the insured. The court distinguished between damage to the defective work itself and damage to other property caused by the defective work. It found that the petition alleged damage only to the valves as Volentine’s work product, while the engine as a whole constituted other property. Therefore, damages to the engine beyond the valves were covered.

The court rejected the trial court’s reliance on exclusion (a) to find coverage, clarifying that exclusion (a) does not grant coverage but merely limits the exclusion of contractual liability for breach of implied warranties.

Finally, the court held that Travelers had a duty to defend Volentine because Garrard’s petition alleged claims potentially covered by the policy. The insurer’s duty to defend exists until claims can be confined to those clearly excluded.

Holding and Implications

The judgment of the trial court is affirmed.

The court’s decision confirms that the insurer, Travelers, had an obligation to defend Volentine in the underlying suit because the damages alleged included covered claims under the policy. The ruling clarifies the interpretation of "occurrence" and the scope of exclusions relating to damage to work performed versus damage to other property. No new precedent was established beyond affirming established principles as applied to the facts of this case.

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TRAVELERS INSURANCE COMPANY, Appellant, v. Kelsey VOLENTINE, d/b/a Volentine Automoti

CORNELIUS, Chief Judge.

This case involves the interpretation of a garage liability insurance policy. Kelsey Volentine, a garage owner and the insured under the policy, sought a declaratory judgment that the insurer, Travelers Insurance Company, was obligated to defend him in a lawsuit brought by Bobby Garrard. Volentine had performed a "valve job" on Garrard's automobile, and Garrard sued Volentine claiming that by reason of defective performance of the work a valve keeper failed to function, resulting in the destruction of the entire engine. Both Volentine and Travelers filed motions for summary judgment, and the motion of Volentine was granted. Travelers brings this appeal, contending that the policy afforded no coverage for the damages sought by Garrard, and consequently it had no obligation to defend Garrard's suit.

The insurance policy contained the following provision:

"I. Garage Liability

Coverage G-Bodily Injury Liability

Coverage H-Property Damage Liability

The company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of

Coverage G. Bodily injury or

Coverage H. Property damage

to which this insurance applies, caused by an Occurrence and arising out of Garage operations, including only the Automobile hazard for which insurance is afforded as indicated in the declarations, and the company shall have the right and duty to defend any suit against the Insured seeking damages on account of such Bodily injury or Property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements."

"`occurrence' means an accident, including continuous or repeated exposure to conditions, which results in Bodily injury or Property damage neither expected nor intended from the standpoint of the Insured ;"

First, Travelers argues that the general coverage provisions of the policy exclude Garrard's claim because his damages were not caused by an accident, and the policy provides coverage only for liability due to an "occurrence," which the policy defines as an accident. We cannot agree. The term accident, as used in a policy of this type, means an unexpected, unforeseen or undesigned happening or consequence from either a known or unknown cause. Employers Casualty Company v. Brown-McKee, Inc., 430 S.W.2d 21 (Tex.Civ.App. Tyler 1968, writ ref'd n. r. e.); Bundy Tubing Company v. Royal Indemnity Company, 298 F.2d 151 (6th Cir. 1962); Hauenstein v. St. Paul-Mercury Indemnity Company, 242 Minn. 354, 65 N.W.2d 122 (S.Ct. 1954). Although the allegedly defective Performance of the work itself might or might not be considered an accident (see Womack v. Employers Mutual Liability Ins. Co. of Wisconsin, 233 Miss. 110, 101 So.2d 107 (S.Ct. 1958)), yet the destruction of the entire engine as a result of the malfunction of one of the repaired valves was certainly unexpected and unintended, and constituted an accident within the meaning of the policy provisions.

Second, Travelers urges that coverage was specifically denied by the policy exclusions. Among those exclusions is the following:

"This insurance does not apply, under the Garage Liability Coverages:

(k) to Property damage to work performed by or on behalf of the Named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith;"

Travelers contends that exclusion (k) denies coverage for all damages Due to work performed by the insured, or materials, parts or equipment furnished in connection therewith. But the language of the exclusion does not refer to damages Due to work performed; it refers to damages To the work performed. Similar and even identical policy provisions have on many occasions been construed by the courts, and it has been uniformly held that a liability policy containing such an exclusion does not insure the policyholder against liability to repair or replace his own defective work or product, but it does provide coverage for the insured's liability for damages to other property resulting from the defective condition of the work, even though injury to the work product itself is excluded. Haugan v. Home Indemnity Company, 197 N.W.2d 18 (S.Ct.S.D. 1972); Hartford Accident Indemnity Co. v. Olson Bros., Inc., 187 Neb. 179, 188 N.W.2d 699 (S.Ct. 1971); Engine Service, Inc. v. Reliance Insurance Company, Wyo., 487 P.2d 474 (1971); Bryan Const. Co. v. Employers' Surplus Lines Ins. Co., 110 N.J. Super. 181, 264 A.2d 752 (S.Ct. 1970); Dakota Block Co. v. Western Casualty Surety Co., 81 S.D. 213, 132 N.W.2d 826 (S.Ct. 1965); Bundy Tubing Company v. Royal Indemnity Company, supra; Kendall Plumbing Co. v. St. Paul Mercury Ins. Co., 189 Kan. 528, 370 P.2d 396 (S.Ct. 1962); Volf v. Ocean Accident Guarantee Corporation, 50 Cal.2d 373, 325 P.2d 987 (S.Ct. 1958); Hauenstein v. St. Paul-Mercury Indemnity Company, supra; Franks v. Guillotte, 248 So.2d 626 (La.Ct.App. 1971); Vobill Homes, Inc. v. Hartford Accident Indemnity Co., 179 So.2d 496 (La.Ct.App. 1965); Heyward v. American Casualty Co. of Reading, Pa., 129 F. Supp. 4 (E.D.S.C. 1955). The decisive question then becomes: What was Volentine's work product? The entire engine, or merely the valve repair?

Travelers' obligation to defend Volentine in Garrard's suit must be judged by the allegations of the petition. Nowhere in that petition is it alleged that Volentine performed work on any part of the engine except the valves. Thus, judged by the allegations of the petition, it appears that Volentine's work or work product was the repair of the valves only, and that other parts of the automobile engine would constitute "other property" under the rule of interpretation which applies to exclusion (k). To the extent those other parts were damaged or destroyed and Volentine is liable therefor, the policy affords coverage. We have been unable to find an exact parallel in the reported cases, but several are analogous and instructive. For example, in Bundy Tubing Company v. Royal Indemnity Company, supra, the insured furnished tubing which was embedded in a concrete floor as part of a heating system. The tubing was defective and had to be removed by tearing out the concrete floor and pouring a new one. The court held that, although the cost of replacing the defective tubing was not covered by the policy, the liability of the insured for the cost of tearing out and replacing the concrete floor was covered. And in Hauenstein v. St. Paul-Mercury Indemnity Company, supra, defective plaster was placed on a building and later had to be removed. The court held that the cost of the plaster itself was excluded from coverage, but that damage to the building as a result of the presence of the defective plaster thereon was within the coverage provided by the policy. Two other cases, by reason of their distinguishing characteristics, are also enlightening. In Franks v. Guillotte, supra, the garage owner overhauled a truck engine. When the overhaul had to be redone because of defective work, the court held there was no coverage under the policy because the insured was simply repairing or replacing his own defective work. And in Engine Service, Inc. v. Reliance Insurance Company, supra, the garage owner rebuilt a heavy motor for an oil field truck. Because of defective performance of the work, the engine had to again be rebuilt. When the truck owner sought to recover the cost of the second rebuilding job, it was held that the repairman's garage liability policy did not afford coverage because the only damage claimed was to the work performed by the insured. In both of those cases the repairmen had performed work on the entire engine not, as here, merely upon the valves or other components.

The trial judge found that coverage was also afforded by virtue of exclusion (a) which provided that the policy would not apply:

"(a) to liability assumed by the Insured under any contract or agreement except an Incidental contract; but this exclusion does not apply to a warranty of fitness or quality of the Named insured's products or a warranty that work performed by or on behalf of the Named insured will be done in a workmanlike manner;"

In that finding we believe the trial court erred. Exclusion (a) does not grant or extend coverage. It simply removes breach of implied warranty of fitness, quality or workmanship from the specific exclusion relating to contractual liability. Haugan v. Home Indemnity Company, supra.

The petition of Garrard against Volentine sets forth a claim of possible coverage provided by the insurance policy, and it was the obligation of Travelers to defend the suit, at least until it could confine the claims to a recovery that the policy did not cover. Bundy Tubing Company v. Royal Indemnity Company, supra.

The judgment of the trial court is affirmed.