DOUBLE AA BUILDERS, LTD., an Arizona corporation, Plaintiff/Appellee,
PREFERRED CONTRACTORS INSURANCE COMPANY, LLC, a Montana company, Defendant/Appellant.
from the Superior Court in Maricopa County No. CV2013-001403
The Honorable Lori Horn Bustamante, Judge
Willits PLC, Phoenix By Michael J. Holden, Barry A. Willits,
R. Stewart Halstead, Nelson A. F. Mixon Counsel for
Broening Oberg Woods & Wilson PC, Phoenix By Robert T.
Sullivan, Alicyn M. Freeman, Kevin R. Myer Counsel for
Peter B. Swann delivered the opinion of the court, in which
Presiding Judge Andrew W. Gould and Judge Patricia A. Orozco
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.
AND PROCEDURAL HISTORY
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."
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.
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
court entered an appealable judgment on liability, and
Preferred timely appeals.
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, ¶ 8