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INSURANCE LAW ALERT
 
Property Damage Occurred at Time of Purchase and Installation - Not When Damages Made Manifest
 
In Kretsinger Real Estate Co. et al. v. Amerisure Ins. Co., American Central Transport Inc. (ACT) planned to build a parking lot in Clay County, Missouri.  Kretsinger and ACT hired Triad Construction to construct the parking lot.  Triad subcontracted with City Cement to supply labor and material.  City Cement purchased concrete from Fordyce Concrete.  Construction was completed in February 2007.  In May 2008, Kretsinger and ACT became aware that the parking lot was beginning to crumble, crack and deteriorate. 
 
Kretsinger and ACT filed suit against Triad and City Cement asserting various claims.  Following a bench trial  in 2013, the court entered judgment in favor of Kretsinger and ACT and against Triad on the negligent supervision and breach of contract counts and in favor of Triad against Kretsinger and ACT on the negligence in design, negligent misrepresentation and breach of professional contract counts.
 
The court found that the concrete that City Cement purchased from Fordyce was defective at the time it was purchased and installed.  The court also found that the deterioration of the concrete was not reparable and the only viable option was removal and replacement of the concrete.  The court awarded Kretsinger and ACT a total of over $3.3 million dollars in damages, plus over $2 million dollars in prejudgment interest.
 
In 2014, Kretsinger and ACT (collectively, Judgment Creditors) filed a petition for equitable garnishment under Section 379.200, RSMo against Triad and its CGL insurer, Amerisure.  A bench trial followed.        
               
The trial court entered judgment in 2015 in favor of Amerisure and against Judgment Creditors.  The trial court concluded that Judgment Creditors did not meet their burden of establishing coverage under the policies and also that Amerisure did meet its burden to establish that the “your product” exclusion applied to defeat coverage.  The trial court concluded that the Judgment Creditors failed to offer substantial evidence of property damage within the policy period or that the damages awarded constituted an “occurrence” covered by the policies of insurance and lastly, that the claims of Judgment Creditors are barred by the “your product” policy exclusion. The court first set out the elements of the burden of proof on an equitable garnishment claim.  
 
The Missouri Court of Appeals Western District held that the insurance policies applied to “property damage” only if it occurred during the policy period, and that the policy defined that term which included in the definition that property damage is physical injury to tangible property, including loss of use, which “shall be deemed to occur at the time of the physical injury that caused it” or loss of use of tangible property not physically injured which is deemed to occur “at the time of the occurrence that caused it.”  The Judgment Creditors asserted the property damage occurred in June 2008 when the crumbling, cracking and deterioration manifested itself, not in March 2007 when the defective concrete was installed.  However, the appellate court found that for an event to be a covered occurrence, the time of first actual damage must be within the effective dates of the policy.  In the case of progressive damage, coverage issues are determined at the time the initial property damage occurs, even if the damage is not apparent until later. 
 
The court found that Judgment Creditors were injured in fact on March 1, 2007, when City Cement finished installing the defective concrete.  Even Judgment Creditors’ expert testified in the underlying case that once the defective concrete was installed in March 2007, the only repair would have been to remove and replace the concrete.  Because Amerisure’s policy did not commence until August 1, 2007, the court correctly concluded that there was no “property damage” within any Amerisure policy period.  The court also found that the Insured’s expert was in all relevant aspects nothing more than corroborative of testimony offered by Judgment Creditors' expert.  Both experts ultimately concluded that the concrete was defective at the time of installation and was irreparable short of removal and replacement. 
 
The trial court’s judgment in favor of Amerisure Insurance was affirmed on appeal.

If you have any questions regarding this case or any other insurance law issues, please contact one of our Insurance Law attorneys at 816.931.2700.
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Kent M. Bevan
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