Dennis E. Teufel, Plaintiff/Appellant/Cross-Appellee,
American Family Mutual Insurance Company, a foreign corporation; Kerry
Hanson, an Arizona resident, Defendants/Appellees/Cross-Appellants.
from the Superior Court in Maricopa County The Honorable
Karen A. Mullins, Judge No. CV2014-005493
Decision of the Court of Appeals Division One 1 CA-CV 15-0736
Filed May 9, 2017
COUNSEL: Michael J. Raymond (argued), Raymond, Greer &
McCarthy, P.C., Scottsdale; Steven S. Guy, The Guy Law Firm,
P.L.L.C., Scottsdale, Attorneys for Dennis E. Teufel
M. Allen (argued), Arman R. Nafisi, Tyson & Mendes, LLP,
Phoenix, Attorneys for American Family Insurance Company and
Kerry V. Hanson
JUSTICE TIMMER authored the opinion of the Court, in which
CHIEF JUSTICE BALES, VICE CHIEF JUSTICE BRUTINEL, and
JUSTICES PELANDER, BOLICK, GOULD, and LOPEZ joined.
Homeowner's policies that insure against personal
liability generally require the insurer to defend the insured
against claims that fall within the policy's coverage. We
here decide whether a policy exclusion for personal liability
"under any contract or agreement" relieves an
insurer of defending its insured, an alleged builder-vendor,
against a claim for negligent excavation brought by the home
buyer. We hold that the exclusion does not apply to relieve
the insurer of its duty to defend because the negligence
claim arises from the common law duty to construct the home
as a reasonable builder would.
Dennis Teufel hired Carmel Homes Design Group to build a
mountainside home on a vacant lot in Paradise Valley (the
"Longlook Property"). He had previously
"dabbled in real estate" and "invested money
from time to time in a loose partnership [with Carmel Homes
Design Group]." Teufel intended to reside at the
Longlook Property, and at the start of construction he
purchased a homeowner's policy from American Family
Mutual Insurance Company ("American Family"), which
insured against personal liability.
Teufel changed his mind about living at the Longlook
Property. Thus, in May 2011, after construction was
completed, he sold that property to Cetotor, Inc.
("Cetotor"), and the homeowner's policy
coverage ended. The real estate purchase contract governing
this sale is not in the record.
Teufel purchased a home in Scottsdale (the "82nd Place
Property"), moved in, and bought a new homeowner's
policy from American Family. This policy also provided
personal liability coverage and obligated American Family to
defend Teufel against claims seeking "compensatory
damages for which any insured is legally liable" because
of "bodily injury or property damage caused by an
occurrence." The policy defined "occurrence"
as "an accident . . . which results during the policy
period, in . . . bodily injury . . . or . . . property
damage." The policy was effective from January 2012
through January 2013.
Rockslides occurred on the Longlook Property in November 2011
and August 2012, allegedly as the result of improper
excavation during construction, which damaged the property.
In November 2012, Cetotor sued Teufel, alleging he was a
builder-vendor and asserting breach of contract, negligence,
and fraud-based claims.
Teufel tendered defense of Cetotor's complaint to
American Family under the Longlook Property and the 82nd
Place Property policies. American Family declined the tender
of defense on the grounds there was no coverage under either
Teufel sued American Family and its agent, seeking damages
and declaratory relief. The superior court granted summary
judgment in favor of American Family. The court found that
Cetotor's property damage occurred outside the Longlook
Property policy period so no "occurrence" triggered
coverage under that policy. Although the court found that the
property damage from the August 2012 rockslide was an
"occurrence" during the 82nd Place Property policy
period, and the policy's "business pursuits"
exclusion did not apply, it ruled there was no ...