J.A. St. & Assocs. v. Bitco Gen. Ins. Corp.

J.A. STREET & ASSOCIATES, INC., Defendant and Third-Party Plaintiff Below, Petitioner, v. BITCO GENERAL INSURANCE CORPORATION, Plaintiff Below, Respondent and Cross-Petitioner,andLIBERTY MUTUAL AGENCY MARKETS (NOW THE OHIO CASUALTY INSURANCE COMPANY),ZURICH AMERICAN INSURANCE COMPANY OF ILLINOIS, SCOTTSDALE INSURANCE COMPANY, andTHE CINCINNATI INSURANCE COMPANY, Third-Party Defendants below, Respondents and Cross-Petitioners,andTHE PRINCETON EXCESS AND SURPLUS LINES INSURANCE COMPANY, Third-Party Defendant below, Respondent.

No. 17-0079

STATE OF WEST VIRGINIA SUPREME COURT OF APPEALS

May 1, 2019

(Cabell County 08-C-623)

MEMORANDUM DECISION

The petitioner, J.A. Street & Associates, Inc. ("Street"), appeals from six separate summary judgment orders entered by the Circuit Court of Cabell County on December 30, 2016, in a declaratory judgment action regarding insurance coverage.¹ Concluding that there was no duty to defend or indemnify Street, the circuit court granted summary judgment to each of the six respondent insurance companies: Bitco General Insurance Corporation (formerly Bituminous Casualty Corporation, referred to herein as "Bitco"); The Ohio Casualty Insurance Company (formerly Liberty Mutual Agency, referred to herein as "Ohio Casualty"); Zurich American Insurance Company of Illinois ("Zurich"); Scottsdale Insurance Company ("Scottsdale"); The Princeton Excess and Surplus Lines Insurance Company ("Princeton"); and The CincinnatiInsurance Company ("Cincinnati").² The respondents argue in support of the circuit court's orders. Furthermore, respondents Bitco, Ohio Casualty, Zurich, Scottsdale, and Cincinnati assert cross-assignments of error contending there are additional grounds, not relied upon by the circuit court, that also support summary judgment in their favor.³

The parties' assignments of error pertain to whether policies of commercial general liability ("CGL") insurance, as well as policies that were written as umbrella and excess coverage to the CGL insurance, apply to breach of contract claims brought by a commercial property developer against its general contractor. Having considered the parties' written and oral arguments, we conclude that under the applicable and existing Tennessee law, the respondent insurance companies are entitled to summary judgment. Accordingly, we affirm. Furthermore, we find that this matter is appropriate for disposition in a memorandum decision pursuant to Rule 21 of the Rules of Appellate Procedure.

I. Facts and Procedural Background

Petitioner Street is a construction company headquartered in Tennessee that served as the general contractor on a seventy-eight acre commercial shopping center development in Cabell County, West Virginia, named Merritt Creek Farm. Street and its subcontractors performed work at Merritt Creek Farm pursuant to written construction contracts that Street entered into with the property's developer, Thundering Herd Development, L.L.C. ("Thundering Herd"). Thundering Herd has sued Street asserting that it breached the construction contracts, and Street seeks a defense and coverage from the respondent insurance companies pursuant to insurance policies that Street purchased in Tennessee. The instant appeal concerns whether the insurance policies provide coverage. However, to understand the coverage dispute, it is necessary to first examine the underlying breach of contract lawsuit.

A. Lawsuit over Merritt Creek Farm

On June 5, 2001, Thundering Herd entered into four written contracts with Street to hire Street as the general contractor for the Merritt Creek Farm development. In those contracts, Street agreed to, inter alia, oversee the site preparation for the development and oversee the construction of many of the buildings.⁴ The written agreements provide that Street "covenants . . . that all the Work shall be performed in a good and workmanlike manner[,]" and that Street "shall provide competent supervision of all phases of the Work and shall cause the Work to be performed with ahigh degree of expertise and workmanship, so as to provide Owner with Improvements constructed for the general and specific uses to which the Improvements will be put."

Sometime prior to the events described herein, Thundering Herd retained an engineering firm, S&ME, Inc., which conducted geotechnical exploration and provided advice regarding land preparation for the Merritt Creek Farm site. Thundering Herd also reached an agreement with the Target Corporation for a parcel of land and "pad" to be prepared at Merritt Creek Farm, after which this parcel would be conveyed to the Target Corporation for Target to construct a store on the pad.

Street hired subcontractors to prepare the site, including to grade the land and install fill material. In early September 2001, Street's subcontractors completed the site preparation and pad for the planned Target store. On or about September 21, 2001, a slope that was constructed at the rear of the proposed Target site failed, causing a landslide, damage to the pad, and damage to adjacent property owned by a third party. As a result, Thundering Herd reportedly incurred $721,875.18 in additional costs to repair this slope, reconstruct the Target site, and compensate the neighbor for the damage to the adjacent property.⁵ Street oversaw these repairs.

In September 2001, subcontractors hired by Street began site preparation and fill placement in a different area in the Merritt Creek Farm development known as "Shops A." Construction of the pad for Shops A was finished on January 9, 2002. Construction of the foundation of Shops A began on March 12, 2002, and the building itself was substantially completed in June 2002. In the fall of 2002, the walls at Shops A began cracking due to settlement. In a report dated February 24, 2003, S&ME discussed the problems at Shops A and made recommendations for corrective action. As a result, remedial action was taken during the fall of 2003; Street arranged for the installation of pilings under the foundation and grout injection under the slab, as well as repairs of damage to the building.

Because of the land movement and resulting damage at Merritt Creek Farm, in June 2003 Thundering Herd filed suit against S&ME in the Circuit Court of Cabell County asserting claims of negligence, breach of contract, breach of warranty, and indemnity.

Construction of much of the Merritt Creek Farm shopping center was completed in 2004.⁶ On December 5, 2005, an attorney representing Thundering Herd wrote a letter to Street advising of slope movement and resulting damage to improvements in another section of Merritt Creek Farm referred to as "Shops C," which includes an A.C. Moore and other stores. Construction ofShops C had been completed in December 2002. Street and its subcontractors had not constructed the A.C. Moore building, but they performed the site preparation. The December 2005 letter notified Street that it might be responsible for the cost to repair Shops C. Subsequently, on February 22, 2007, a company named Bizzak, Inc. advised Street of land settlement at yet another part of the shopping center referred to as the "Office Depot Site."

On December 11, 2007, Thundering Herd⁷ amended its complaint to add Street as an additional defendant (referred to herein as the "Amended Complaint"). Thundering Herd alleged that Street failed to comply with its obligations in the construction contracts, resulting in harm to the Merritt Creek Farm development from landslides, sloughing, land movement, and settling. In addition to seeking damages for the Target site and Shops A, with its Amended Complaint Thundering Herd also sought compensation for damages to the A.C. Moore store area, the Office Depot store area, and to storm and sanitary systems throughout the development.

It is notable that all four of Thundering Herd's claims against Street in the Amended Complaint are based entirely upon the construction contracts they signed. Indeed, the circuit court concluded that the statute of limitations for bringing tort claims had already expired when Thundering Herd added Street as a defendant. Thundering Herd's first cause of action against Street is labeled "Breach of Contract, Target Store Area[.]" In this count, Thundering Herd alleges that "[p]ursuant to the written agreement between" Thundering Herd and Street, "Street had the obligation to discharge its responsibilities under the agreement in a competent manner" but "[a]cting individually and by and through its subcontractors, J.A. Street failed to comply with the requirements of the written agreement, thereby resulting in a breach of the terms of said agreement." The Amended Complaint goes on to provide that "[a]s a direct and proximate result of the breach of the agreement, [Thundering Herd] has suffered damages from the land movement and slide that occurred on the Target store site" and "Street is liable to [Thundering Herd] for the damages incurred as a result of the breach of the agreement."

Thundering Herd's second cause of action against Street is titled "Breach of Contract, Remainder of Development[.]" For this claim, Thundering Herd alleges that "[p]ursuant to the written agreements between" them, "Street had the obligation to discharge its responsibilities under the agreements in a competent manner" but "[a]cting individually and by and through its subcontractors, J.A. Street failed to comply with the requirements of the written agreements, thereby resulting in a breach of the terms of said agreements." The Amended Complaint further provides that "[a]s a direct and proximate result of the breach of the agreements," Thundering Herd has "suffered substantial damages to various areas of the site" and "Street is liable to [Thundering Herd] . . . for the damages incurred as a result of the breach of the agreement." The harm to the site is identified as "unanticipated land movement and settlement, sloughing and slides."

The third cause of action against Street...