4. The inclusion in a standard commercial
general liability policy of language that excludes coverage for professional
liability is specifically designed to shift the risk of liability for claims
arising in connection with the performance of professional services away from
the insurance carrier and onto the professional.
5. It is well settled law in West Virginia that ambiguous terms in insurance contracts are to be strictly construed against the insurance company and in favor of the insured. Syl. Pt. 4, Nat'l Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W.Va. 734, 356 S.E.2d 488 (1987), overruled on other grounds by Potesta v. U.S. Fidelity & Guar. Co., 202 W.Va. 308, 504 S.E.2d 135 (1998).
6. An insurer wishing to avoid liability on a policy purporting to give general or comprehensive coverage must make exclusionary clauses conspicuous, plain, and clear, placing them in such fashion as to make obvious their relationship to other policy terms, and must bring such provisions to the attention of the insured. Syl. Pt. 10, Nat'l Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W.Va. 734, 356 S.E.2d 488 (1987), overruled on other grounds by Potesta v. U.S. Fidelity & Guar. Co., 202 W.Va. 308, 504 S.E.2d 135 (1998).
7. Where the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended. Syllabus, Keffer v. Prudential Ins. Co., 153 W.Va. 813, 172 S.E.2d 714 (1970).
Appellants Webster County Solid Waste Authority (the Authority) and Kanawha Stone Company, Inc. (Kanawha Stone) appeal from adverse decisions (See footnote 1) issued by the Circuit Court of Webster County in connection with a declaratory judgment ruling sought by Appellee Nationwide Mutual Fire Insurance Company (Nationwide) to determine whether there was insurance coverage available under a commercial general liability policy. The Nationwide policy at issue was purchased by Appellee Brackenrich & Associates, Inc. (Brackenrich), an engineering firm hired by the Authority to design and supervise the construction of certain upgrades to the Webster County landfill. When the landfill failed to work as designed, the Authority brought suit against both Brackenrich and the contractor, Kanawha Stone, wherein it asserted causes of action grounded in contract, implied and express warranties, negligence, and nuisance. After examining the coverage afforded by the commercial general liability policy, the circuit court determined that the requisite occurrence necessary to trigger coverage under the policy was nonexistent and ruled there was no available coverage in connection with the allegations asserted in the complaint filed by the Authority or in the counterclaim filed by Kanawha Stone. Upon our
review of the record before us, we reach the same decision as the circuit court and, accordingly, affirm.
operations hazard includes all bodily injury and property
damage occurring away from premises you own or rent and arising out of your
product or your work except:
(1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned.
. . . . c. This hazard does not include bodily injury or property damage arising out of:
(1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle created by the loading or unloading of it;
(2) The existence of tools, uninstalled equipment or abandoned or unused materials; or
(3) Products or operations for which the classification in this Coverage Part or in our manual of rules includes products or completed operations. (emphasis supplied)
The circuit court rejected the Authority's argument for coverage under the products-completed operations hazard provision by reasoning that this policy language cannot be invoked until there is first shown to have been an occurrence under the policy by which coverage is triggered. See Corder v. William W. Smith Excavating Co., 210 W.Va. 110, 556 S.E.2d 77 (2001) (Before any coverage can be found to exist under the 'products- completed operations hazard,' or any other portion of the commercial general liability policy, an 'occurrence' within the policy definition of that term must be determined to have occurred.). Id. at 114, 556 S.E.2d at 81 (footnote omitted). The term occurrence is defined under the Nationwide policy at issue as an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
In determining whether there was an occurrence
within the meaning of the policy, the trial court looked to this Court's decision
in Corder where we addressed the availability of coverage under a commercial
general liability policy for loss of use caused by a sewer line failure. Although
the trial court in Corder ruled that the faulty workmanship nature of
damages asserted in the complaint took the claims outside the coverage typically
provided by a commercial general liability policy, we found the record deficient
on appeal as to the cause of the sewer pipe's failure. Id. at117, 556
S.E.2d at 84. Consequently, we found it necessary to remand for the purpose of
determining whether a separate act or event or happening occurred at some
point in time that led to the failure of the pipe or whether the pipe's alleged
failure is tied to the original acts of repair performed by . . . [the contractor]. Ibid.
Our discussion in Corder concerning the nature of the risks that commercial general liability policies are intended to cover has specific import to this case:
products hazard and completed operations provisions are not intended to cover
damage to the insured's products or work project out of which an accident arises.
The risk intended to be insured is the possibility that the goods, products or
work of the insured, once relinquished or completed, will cause bodily injury
or damage to property other than to the product or completed work itself, and
for which the insured may be found liable. The insured, as a source of goods
or services, may be liable as a matter of contract law to make good on products
or work which is defective or otherwise unsuitable because it is lacking in some
capacity. This may even extend to an obligation to completely replace or rebuild
the deficient product or work. This liability, however, is not what the coverages
in question are designed to protect against. The coverage is for tort liability
for physical damages to others and not for contractual liability of the insured
for economic loss because the product or completed work is not that for which
the damaged person bargained.
210 W.Va. at 115, 556 S.E.2d at 82 (quoting Erie Ins. Prop. & Cas. Co. v. Pioneer Home Improvement, Inc., 206 W.Va. 506, 511, 526 S.E.2d 28, 33 (1999) and emphasis supplied).
Based on this clarification of the risks intended to be covered by commercial general liability policies, this Court held in syllabus point two of Corder: Commercial general liability policies are not designed to cover poor workmanship. Poor workmanship, standing alone, does not constitute an 'occurrence' under the standard policy definition of this term as an 'accident including continuous or repeated exposure to substantially the same general harmful conditions.' 210 W.Va. at 111, 556 S.E.2d at 78, syl. pt. 2. Applying this ruling from Corder to the case sub judice, the trial court examined the allegations asserted by the Authority, and concluded: All of Plaintiff Webster's causes of action . . . are based upon allegations of faulty workmanship, whether charged to Defendant Brackenrich in its design, engineering, and inspection of the landfill, or to Defendant Kanawha Stone in its construction thereof, and our Supreme Court has made it clear that faulty workmanship cannot qualify as an 'occurrence.' Given the faulty workmanship nature of the claims asserted by the Authority against Brackenrich, the trial court reasoned that this Court's rulings compelled a finding that coverage was not available under the terms of the Nationwide commercial general liability policy.
While conced[ing] that 'faulty workmanship' resulting in damage to the work itself is clearly excluded from the scope of insurance coverage provided under a traditional CGL [commercial general liability] policy, the Authority circuitously attempts to find coverage by arguing against the applicability of policy exclusionary language that concerns professional negligence. Specifically, the Authority suggests that the allegations in the complaint which center on the negligence of Brackenrich in performing its contractual duties are matters of ordinary negligence, rather than acts of professional negligence. (See footnote 7) Contending that the professional liability exclusion is inapplicable based on its position that the alleged acts of negligence do not entirely come within the delineated professional services for which Brackenrich was hired, (See footnote 8) the Authority maintains there is coverage under the policy.
Despite its attempts to locate coverage under the commercial general liability policy, the Authority never squarely deals with the fundamental issue that the trial court correctly identified. Absent an occurrence, as that term is defined under the policy, there can be no coverage under the policy at issue, or any other commercial general liability policy. In trying to circumvent the rulings of Corder and Erie regarding the lack of coverage under commercial general liability policies for negligence claims arising from faulty workmanship, the Authority cites the fact that the policy provides coverage for property damage. Because the policy definition of property damage includes loss of use of tangible property that is not physically injured, the Authority argues that there has to be coverage based on its demand for loss of use damages. In predicating its coverage argument on the type of damages it seeks, the Authority overlooks the fact that the issue of damages is not relevant until an occurrence can first be demonstrated. The policy definition of property damage, which requires that such damage be caused by an occurrence, underscores this point. The policy provides that coverage applies to 'bodily injury' and 'property damage' only if: (1) [t]he 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory'. . . . Simply put, the Authority's reliance on the definition of property damage as a means of demonstrating coverage is unavailing as that definition, like the policy in general, requires the existence of an occurrence before any legal duty arises with regard to providing coverage.
In its attempt to identify an occurrence that triggered Nationwide's duty to provide coverage under this policy, the Authority lists the following: (1) Brackenrich's negligent inspection of the landfill and leachate treatment system construction; (2) Brackenrich's negligent testing of materials used in the landfill and leachate treatment system construction; and (3) Brackenrich's negligent quality assurance of the landfill and leachate treatment system construction. Critically, each item that the Authority relies upon to establish an occurrence is an act of alleged professional negligence. Arguing that those acts of negligence were accidental, the Authority maintains that those delineated acts qualify as occurrences under the policy definition of that term. This argument, which casts coverage in terms of the negligent acts of Brackenrich, is significantly at odds with the clear line of authority from this Court recognizing the validity of professional liability exclusionary language that exempts faulty or negligent service or workmanship claims from the coverages provided by a commercial general liability policy. See State Auto. Mut. Ins. Co. v. Alpha Eng'g Servs., Inc., 208 W.Va. 713, 542 S.E.2d 876 (2000) (applying professional services exclusion to deny coverage in connection with claims predicated on provision of negligent surveying, mapping, and engineering services).
Responding to the arguments the Authority asserts in support of coverage, Nationwide contends that the Authority's position reflects a flawed understanding of the nature of the coverages afforded by a commercial general liability policy. This type of policy, as this Court explained in Erie, is designed to insure personal injury or property damage arising out of the finished product or work performed. 206 W.Va. at 511, 526 S.E.2d at 33. Rather than providing coverage for a product or work performance that fails to meet contractual requirements, the commercial general liability policy is specifically designed to insure against the risk of tort liability for physical injury sustained by third parties as a result of the product or work performed or damages sustained by others from the completed product or finished work. Because faulty workmanship claims are essentially contractual in nature, they are outside the risks assumed by a traditional commercial general liability policy. The inclusion in a standard commercial general liability policy of language that excludes coverage for professional liability is specifically designed to shift the risk of liability for claims arising in connection with the performance of professional services away from the insurance carrier and onto the professional. Professionals wishing to insure themselves against the risk of liability in connection with the rendering of their professional services may opt to purchase separate insurance coverage, known as an errors and omissions policy. The professional at issue in this case, Brackenrich, chose not to obtain an errors and omissions policy.
To suggest, as does the Authority, that the
nature of the work performed by Brackenrich prevents it from being subject to
the faulty workmanship line of cases decided by this Court is simply erroneous.
Moreover, the fact that Brackenrich is not a contractor, but an engineering firm,
does not remove the alleged negligent provision of its services from the analytical
approach employed by this Court in Corder and Erie, as the Authority
contends. Critical to the coverage analysis is the fact that the allegations
at issue in the Authority's complaint are rooted in the negligent or faulty performance
of the work Brackenrich was hired to perform under the Agreement. As we explained
in both Erie and Corder, allegations of poor work performance are
not the types of acts that qualify as an occurrence under a commercial general
liability policy. Consequently, we reach the same conclusion the circuit did
and hold that there has been no demonstration of an occurrence that would trigger
coverage under the Nationwide policy at issue.
Just as the Authority fails to demonstrate the existence of an occurrence under the policy, it similarly fails to prove coverage based on ambiguity. Arguing that this Court found an ambiguity in a commercial general liability policy to exist with regard to the products-completed operations hazard provision in Marcum Trucking Co., Inc. v. U.S. Fidelity and Guaranty Co., 190 W.Va. 267, 438 S.E.2d 59 (1993), the Authority suggests that such an ambiguity is similarly present in this case. The specific ambiguity in Marcum concerned the use of provisional language in the coverage provisions concerning the
products-completed operations hazard pertaining to the loading and unloading of trucks. Applying this Court's holding in syllabus point four of National Mutual Insurance Co. v. McMahon & Sons, Inc., 177 W.Va. 734, 356 S.E.2d 488 (1987), overruled on other grounds by Potesta v. U.S. Fidelity & Guar. Co., 202 W.Va. 308, 504 S.E.2d 135 (1998), that [i]t is well settled law in West Virginia that ambiguous terms in insurance contracts are to be strictly construed against the insurance company and in favor of the insured, we found the ambiguous policy language to require coverage under the facts of Marcum. 190 W.Va. at 271, 438 S.E.2d at 63. No such similar ambiguity exists in the instant case. In its attempt to establish an ambiguity, the Authority points to the purported conflict between classification language on the declarations page of the policy that delineates in categorical fashion Engineers or Architects with reference to products and/or completed operations with later exclusionary language which removes from coverage products or operations for which the classifications in this Coverage Part or in our manual of rules includes products or completed operations.
In essence, the Authority suggests that the existence of the professional liability exclusionary language when compared to the declarations page classification entry creates the necessary ambiguity to require Nationwide to provide coverage. We are not persuaded. We held in syllabus point ten of McMahon & Sons:
insurer wishing to avoid liability on a policy purporting to give general or
comprehensive coverage must
make exclusionary clauses conspicuous, plain, and clear, placing them in such
fashion as to make obvious their relationship to other policy terms, and must
bring such provisions to the attention of the insured.
177 W.Va. at 737, 356 S.E.2d at 491. The record indicates that the individual who purchased the policy from Nationwide, J.D. Brackenrich, never understood the policy at issue to provide Brackenrich with products-completed operations hazard coverage pertinent to its engineering services. Importantly, Brackenrich never requested that Nationwide indemnify or provide a defense for it when the Authority filed a lawsuit against it. This inaction on Brackenrich's part was based on its clear understanding of the types of coverage its commercial general liability policy did and did not pertain to. (See footnote 9) There is no dispute that a premium was never charged for the provision of this type of coverage. Upon our careful review of the policy language at issue, we find no ambiguity to exist that would require a finding of coverage. See McMahon & Sons, 177 W.Va. at 736, 356 S.E.2d at 490, syl. pt. 4.
Simply put, there is no basis upon which to conclude that the exclusionary language at issue was not clear to the insured and did not clearly exempt from coverage averments of professional liability. (See footnote 10) As we held in the syllabus of Keffer v. Prudential Insurance Co., 153 W.Va. 813, 172 S.E.2d 714 (1970): Where the provisions of an insurance policy contract are clear and unambiguous they are not subject to judicial construction or interpretation, but full effect will be given to the plain meaning intended.
While the circuit court never reached the
issue of the validity of the professional liability exclusionary language in
the Nationwide policy, (See
footnote 12) we find no reason not to recognize the language as valid
given that we have upheld this same language in previous cases. (See
footnote 13) See, e.g., Alpha Eng'g Servs., 208 W.Va. at 717,
542 S.E.2d at 880. Finding the professional liability exclusion language to be
valid, we reject the Authority's argument that coverage is available under the
policy based on the inapplicability of the professional liability exclusion.
Based on the foregoing, the decision of the Circuit Court of Webster County is hereby affirmed.