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Teufel v. American Family Mutual Insurance Co.

Supreme Court of Arizona

June 14, 2018

Dennis E. Teufel, Plaintiff/Appellant/Cross-Appellee,
v.
American Family Mutual Insurance Company, a foreign corporation; Kerry
v.
Hanson, an Arizona resident, Defendants/Appellees/Cross-Appellants.

          Appeal from the Superior Court in Maricopa County The Honorable Karen A. Mullins, Judge No. CV2014-005493

         Memorandum 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

          Lynn 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.

          TIMMER JUSTICE

          OPINION

         ¶1 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.

         BACKGROUND

         ¶2 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.

         ¶3 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.

         ¶4 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.

         ¶5 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.

         ¶6 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 policy.

         ¶7 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 ...


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