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Addison Insurance Co. v. Mep Co.

Court of Appeals of Iowa

November 6, 2019

ADDISON INSURANCE COMPANY, Plaintiff-Appellee,
v.
MEP CO., Defendant-Appellant.

          Appeal from the Iowa District Court for Lee (North) County, John G. Linn, Judge.

         A defendant appeals the district court's declaratory judgment in favor of the plaintiff.

          Jeffrey A. Stone and Robert S. Hatala of Simmons Perrine Moyer Bergman, PLC, Cedar Rapids, for appellant.

          Matthew G. Novak and Stephanie L. Hinz of Pickens, Barnes & Abernathy, Cedar Rapids, for appellee.

          Considered by Vaitheswaran, P.J., Doyle, J., and Vogel, S.J. [*]

          Vaitheswaran, Presiding Judge.

         Green Bay Levee Drainage District contracted with MEP Co. to reshape the levee. As part of the bid process before the contract was awarded, board members took MEP Co.'s owner Mike Pieper to "the various locations" from which dirt could be moved to complete the project. After MEP Co.'s bid was accepted, the company moved dirt from individual landowners' private property, rather than the authorized sites. Federal litigation ensued.

         MEP Co. had a commercial general liability (CGL) policy with Addison Insurance Company. Addison sued MEP Co. for a judgment declaring that its policy provided no coverage for MEP Co.'s expenses in the federal litigation. Following trial, the district court found in favor of Addison, concluding, "[t]he commercial general liability insurance policy . . . affords no coverage."

         On appeal, MEP Co. raises several arguments in support of reversal. First among them is a contention that "the insuring agreement provides coverage for occurrences resulting in property damage." This issue is the only one we find it necessary to address.

         We begin with the policy language. The insuring agreement provides coverage for "those sums that the insured becomes legally obligated to pay as damages because of . . . 'property damage.'" The agreement further obligates the insurer "to defend the insured against any 'suit' seeking those damages." However, the insurer "will have no duty to defend the insured against any 'suit' seeking damages for . . . 'property damage' to which this insurance does not apply." The insurance "applies to . . . 'property damage' only if . . . [t]he . . . 'property damage' is caused by an 'occurrence.'" The insuring agreement defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

         The supreme court interpreted the identical definition of "occurrence" in National Surety Corp. v. Westlake Investments, LLC, 880 N.W.2d 724, 735 (Iowa 2016). The court held, "An intentional act resulting in property damage the insured did not expect or intend qualifies as an accident amounting to an occurrence as defined in a modern standard-form CGL policy so long as the insured did not expect and intend both the act itself and the resulting property damage." Westlake, 880 N.W.2d at 736; cf. Pursell Constr., Inc. v. Hawkeye-Security Ins. Co., 596 N.W.2d 67, 71 (Iowa 1999) (holding "defective workmanship standing alone . . . is not an occurrence under a CGL policy"); Yegge v. Integrity Mut. Ins. Co., 534 N.W.2d 100, 103 n.3 (Iowa 1995) (noting policy defined "occurrence" as "an accident including continuous or repeated exposure to substantially the same general harmful conditions"); Hudson Hardware Plumbing & Heating, Inc. v. AMCO Ins. Co., No. 15-1677, 2016 WL 5930779, at *6 (Iowa Ct. App. Oct. 12, 2016) (characterizing Westlake as "a bit of a game changer").

         Applying Westlake, the district court made the following pertinent findings:

Analyzing whether MEP Co.'s actions in intentionally removing dirt from unauthorized sites qualifies as an accident under the CGL policy boils down to a determination by the Court of whether [MEP Co.] did not expect and intend both the act of removing the dirt and the resulting property damage. Pieper claims he intentionally removed dirt from the [individual property owners'] sites but he did not expect or intend resulting property damage because he believed it was permissible to remove dirt within the 150-foot easement the [d]istrict had over the levee. MEP Co. claims Pieper did not intend to harm the property owned by [private landholders]; therefore, the removal of the dirt was an accident.
The Court rejects Pieper's assertion. First and foremost, Pieper's testimony on this issue lacks credibility. Pieper knew the location of the explicitly authorized borrow sites. He attended the meeting at which [a board member and engineer] were also present. The location of the authorized borrow sites was carefully described, and Pieper even marked the locations on a map. [A board member, engineer, and Pieper] physically visited these sites. Pieper cannot dispute the fact that he had specific knowledge of the location of the explicitly authorized borrow ...

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