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Double Aa Builders, Ltd. v. Preferred Contractors Insurance Co., LLC

Court of Appeals of Arizona, First Division

December 30, 2016

DOUBLE AA BUILDERS, LTD., an Arizona corporation, Plaintiff/Appellee,
v.
PREFERRED CONTRACTORS INSURANCE COMPANY, LLC, a Montana company, Defendant/Appellant.

         Appeal from the Superior Court in Maricopa County No. CV2013-001403 The Honorable Lori Horn Bustamante, Judge

         REVERSED AND REMANDED

          Holden Willits PLC, Phoenix By Michael J. Holden, Barry A. Willits, R. Stewart Halstead, Nelson A. F. Mixon Counsel for Plaintiff/Appellee

          Broening Oberg Woods & Wilson PC, Phoenix By Robert T. Sullivan, Alicyn M. Freeman, Kevin R. Myer Counsel for Defendant/Appellant

          Judge Peter B. Swann delivered the opinion of the court, in which Presiding Judge Andrew W. Gould and Judge Patricia A. Orozco joined.

          OPINION

          SWANN, Judge:

         ¶1This is an appeal from the entry of summary judgment in favor of a general contractor that sought recovery from its subcontractor's insurer (under which it was named as an "Additional Insured") for the cost of replacing the subcontractor's faulty work. The superior court held that coverage existed and entered summary judgment in favor of the contractor. We reverse and remand for entry of summary judgment in favor of the insurer. We hold that coverage was unavailable under the policy's "your work" exclusion, and that the "subcontractor exception" to that exclusion does not apply.

         FACTS AND PROCEDURAL HISTORY

         ¶2In 2007, Harkins Theatres hired Double AA Builders, Ltd., to serve as general contractor for the construction of a theater complex. Double AA subcontracted with Anchor Roofing, Inc., to install a Built-Up Roofing ("BUR") system. At the time Anchor performed its work, it was the "Named Insured" under a series of materially identical general commercial liability policies issued by Preferred Contractors Insurance Company, LLC. Double AA, which was itself insured by Westfield Insurance Company, was added to Anchor's Preferred policies as an "Additional Insured."

         ¶3After the theater project was completed, the BUR began to leak, causing damage to work installed by other subcontractors and causing Harkins to lose business. Harkins asked Double AA to replace the BUR. Double AA did so and filed an action in the superior court seeking indemnification from Westfield, Anchor, and Preferred on the theory that Anchor had not properly installed the BUR. Significantly, Double AA sought to recover only the cost of replacing the BUR, and not the cost of the damage to other property.

         ¶4Double AA settled with Westfield and obtained a default judgment against Anchor. Preferred and Double AA filed cross-motions for summary judgment on the question whether Double AA's cost of replacing the BUR was a covered loss under the relevant policy. The court denied Preferred's motion and granted Double AA's, concluding that coverage was triggered by an "occurrence" and "property damage, " and that a "subcontractor exception" clause removed the claim from the policy's "your work" exclusion provision. The court further concluded that the property damage had begun to manifest before the applicable policy expired and that Double AA's replacement efforts constituted compensable preventative measures.

         ¶5The court entered an appealable judgment on liability, and Preferred timely appeals.

         DISCUSSION

         ¶6We review summary judgment rulings, and the interpretation of insurance policies, de novo. First Am. Title Ins. Co. v. Action Acquisitions, LLC,218 Ariz. 394, 397, ΒΆ 8 (2008); ...


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