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Leep v. Trinity Universal Insurance Co.

United States District Court, D. Montana, Billings Division

June 6, 2017

LANDY C. LEEP, Plaintiff,
SPRAUGE CONSTRUCTION ROOFING, LLC, a Montana Limited Liability Company, Third-Party Defendant.


          TIMOTHY J. CAVAN, United States Magistrate Judge

         Plaintiff Landy C. Leep (“Leep”) filed this action against Defendant/Third-Party Plaintiff Trinity Universal Insurance Company (“Trinity”), seeking declaratory judgment that a homeowner's insurance policy issued by Trinity provides coverage for certain losses to Leep's residence. (Doc. 19.) Trinity filed a Third Party Complaint against Third-Party Defendant Sprauge Construction Roofing, LLC (“Sprauge”) for indemnity. (Doc. 13.)

         Presently before the Court are Leep's Motion for Partial Summary Judgment, and Trinity's Cross-Motion for Partial Summary Judgment. (Docs. 33, 41.) The motions are fully briefed and ripe for the Court's review. Having considered the parties' submissions, the Court finds Leep's Motion for Partial Summary Judgment should be GRANTED, and Trinity's Cross Motion for Partial Summary Judgment should be DENIED.

         I. BACKGROUND

         A. Factual Background[1]

         Leep owns a home located at 2532 North Shore Place, Billings, Montana (the “Property”). (Doc. 35 at ¶ 2.) Leep purchased a homeowner's policy from Trinity numbered DG 306868 (the “Policy”). (Id. at ¶ 3.) While Leep was insured by Trinity, the Property sustained damage as a result of a hail storm that occurred on May 18, 2014. (Id. at ¶ 14.)

         Leep contracted with Sprauge to repair the hail damage. (Id. at ¶ 15.) Sprauge started the repair work on August 11, 2015, and completed the work between August 12, 2015 and August 18, 2015. (Doc. 53 at ¶ 8.) Sprauge's repair work included tearing off and replacing roof lining and shingles. (Id. at ¶ 7.) The parties dispute whether the work included replacing vent piping. (Compare Doc. 43 at ¶ 7 and Doc. 53 at ¶ 7.) Trinity contends Sprauge's work included “replacing three through-the-roof tubes and replacing furnace vent and flashing.” (Doc. 43 at ¶ 7.) Trinity points out that the roofing materials delivered to Leep's Property on August 11, 2016, included three “through the roof tubes.” (Doc. 35 at ¶ 17.) Sprauge contends it only replaced a vent cap, and the “through the roof tubes, ” were caulking tubes. (Doc. 53 at ¶¶ 7, 11, 15.) Sprauge states it did not replace any vent piping or “vents.” (Id.)

         The Terms & Conditions of the contract executed between Leep and Sprauge stated “[i]t is the responsibility of the owner to check the exhaust vents for all furnaces and water heaters after the roofing project is complete.” (Doc. 35 at ¶ 21.) Leep admitted that he did not “check the exhaust vents for all furnaces and water heaters” after Sprauge's installation of the new roof. (Doc. 65 at ¶ 26.)

         On January 17, 2016, Leep's house guest noticed water dripping from a bathroom fan on the main level of the Property. Leep subsequently inspected the second story of the Property and noticed moisture emanating from the ceiling. Leep contacted a representative of Sprauge, Jack Sprauge, and set up an appointment with him to visit the Property on January 19, 2016. (Doc. 65 at ¶8; Doc. 53 at ¶ 9.)

         On January 18, 2016, Leep located the Property's attic access, and discovered the furnace vent piping was disconnected, and the furnace exhaust was venting into the attic. (Doc. 65 at ¶ 9.) The furnace vent pipe should have exited the Property through an exterior roof vent. (Id. at ¶ 10.)

         On January 19, 2016, Jack Sprauge met Leep at the Property at 8:00 a.m., and they inspected the attic. (Id. at ¶ 11.) That same day, Leep also met with Tom L. Roberts (“Roberts”), an HVAC service technician from Comfort Heating & Air Conditioning, to examine the disconnected furnace vent pipe. (Id. at ¶ 12.) During the service appointment, Leep advised Roberts that Sprauge had recently replaced the roof, and Leep stated his belief that the furnace vent pipe became disconnected during the roofing construction. (Id. at ¶ 12.) Roberts observed the disconnected furnace pipe, and also noticed one of the straps securing the furnace vent piping to the attic ceiling joists was broken in half. (Id. at ¶ 13.) Roberts opined that the furnace vent pipe became disconnected during the roofing construction and replacement of the furnace roof vent and flashing. (Doc. 49 at ¶ 15.)

         On January 19, 2016, Leep reported a water damage claim to Trinity claims representative, Laura Shamhart (“Shamhart”). (Doc. 65 at ¶ 14.) Leep identified the date of loss as August 1, 2015. (Id.) When Leep reported his claim to Shamhart, he indicated the Property's furnace vent pipe was disconnected from the exterior vent and the furnace exhaust had been venting into the attic space. (Id. at 15.) He stated Sprauge had replaced the roof in August 2015, and also communicated his belief that Sprague did not properly connect the new roof vent to the attic. (Id.; Doc. 49 at ¶ 17.)

         On January 21, 2016, Trinity sent field adjuster, Thomas J. Lynn (“Lynn”) of Insurance Claim Adjusters, Inc. to inspect the Property. (Doc. 65 at ¶ 16.) During the inspection, Leep again communicated to Lynn his belief that Sprauge had detached the Property's furnace vent pipe. (Id. at ¶ 17.) Lynn observed moisture damage at the Property, including a large amount of mold in the attic area and wet insulation which was in need of replacement. Lynn completed a loss report on January 25, 2016, opining the damage appeared to have occurred over an extended period of time, and that it was caused by the detached furnace vent pipe. (Id. at 18.) Lynn opined that Sprauge's detaching the furnace vent pipe caused moisture and/or water damage to the Property. (Doc. 53 at ¶ 21.)

         On January 29, 2016, Trinity mailed a letter to Leep, stating in part: “[Leep] indicated during [Trinity's] inspection that [Leep] believe[s] the cause of this damage [i.e., water and or moisture damage] is related to the roofing contractor's failure to properly install the furnace vent and cap when the roof was replaced in August of 2015.” (Doc. 65 at ¶ 19.) Trinity then requested the opportunity to further investigate the claim, including having an engineering inspection of the Property conducted. (Id.)

         On February 2, 2016, professional engineer, Scott A. Curry (“Curry”) of EFI Global Inc. conducted a site visit and engineering investigation at the Property. During the site visit, Curry interviewed Leep and his contractors, Steven Hanlin and Rusty of SERVEPRO and Bob Pentecost of Bob Pentecost Construction. (Doc. 65 at ¶ 20.) Leep communicated to Curry his belief that Sprauge disconnected the furnace vent pipe during the roofing work. (Id. at ¶ 21.) At the time of Curry's visit, the furnace vent pipe had been reconnected. (Id. at ¶ 22.)

         Curry completed an engineering report on February 6, 2016. (Doc. 53 at ¶ 26.) Curry opined that the attic and a significant portion of the residence interior was wetted from a furnace vent that was disconnected in the attic. (Id.) Curry also opined that Sprauge's disconnecting the furnace vent pipe in the late summer of 2015 is consistent with the nature and extent of water and/or moisture damage to the Property. (Id.)

         Contrary to these opinions and Leeps statements, Sprauge asserts it did not replace any vent piping or vents; it disputes that it detached or disconnected the furnace vent piping; and disputes that its' work caused any of the damage to Leep's home. (Doc. 53 at ¶¶ 7, 11-15, 17, 19, 21, 24, 25, 27.)

         Trinity sent Leep a letter on February 22, 2016 denying his claim. (Doc. 65 at ¶ 23; Doc. 37-6.) The letter advised that the Property sustained damage as “the result of improperly installed roof vent flashing and furnace vent flu, ” which was excluded from coverage under the exclusions for faulty, inadequate or defective design, specifications, workmanship, repair, construction, renovation or remodeling, and faulty, inadequate or defective materials used in repair, construction or renovation. (Doc. 37-6 at 2.[2]) Trinity also cited to limitations in coverage for mold, fungus and wet or dry rot. (Id. at 5-6.)

         On March 8, 2016, Leep's attorney sent a letter responding to Trinity's coverage decision. (Doc. 65 at ¶ 24; Doc. 37-8.) Leep's attorney pointed out that the furnace vent flu was not within the scope of work contracted between Leep and Sprauge. (Doc. 37-8). The letter stated “[t]here was not defective repair or renovation because the repair and renovation did not require the roofer to check exhaust vents of all furnaces and water heaters, rather the contract made it the responsibility of the owner to check exhaust vents and water heaters.” (Id. at 2.)

         On April 6, 2016, Trinity sent Leep another letter declining coverage. (Doc. 65 at ¶ 24; Doc. 37-7.) Trinity maintained that there was no coverage due to faulty workmanship, and also stated coverage was excluded due to Leep's failure to maintain the property. (Id.) The letter stated “[t]he efficient proximate cause of the loss was the contractor's improper repair of the roof that caused the vent to become dislodged. The ensuing damage that resulted from the moisture disseminating into the attic space through the dislodged vent is not a separate loss under the policy but would be considered a direct result of the contractor's failure to properly repair the roof.” (Doc. 37-7 at 1.) The letter continued, “our investigation indicates that the roofer's workmanship resulted in the separation of the vent within the attic space and set the other causes of damage in motion. Together with the insured's failure to inspect the pipe, or maintain the property as outlined in the contract with Sprauge, the subsequent accidental discharge of water or steam from within the heating system would not have occurred and cannot be considered a separate loss under the policy.” (Id. at 2.)

         B. Procedural Background

         On April 13, 2016, Leep filed the instant action in the Montana Thirteenth Judicial District Court, Yellowstone County, Montana, seeking a declaration that the Policy provides coverage for his claim. (Doc. 1.) Leep also brought a cause of action for violation of the Consumer Protection Act, Mont. Code Ann. § 30-14-103. (Id.) On May 17, 2016, Trinity removed the case to federal court based on diversity jurisdiction under 28 U.S.C. § 1441(b). (Id.)

         On June 3, 2016, Trinity filed a Third-Party Complaint against Sprauge. (Doc. 13.) Trinity alleges that if the furnace vent became disconnected as alleged by Leep, and/or the moisture entered the attic past the furnace vent roof flashing, Sprauge completed its work in a negligent or unworkmanlike manner. (Id. at ¶ 12.) Therefore, Trinity contends that if the Court finds in Leep's favor on the coverage issue, Trinity is entitled to indemnity and/or contribution from Sprauge. (Id. at ¶¶ 15-22.)

         On June 6, 2016, Leep filed a First Amended Complaint, which removed the Consumer Protection Act claim, and added causes of action for breach of insurance contract and breach of the Montana Unfair Trade Practices Act. (Doc. 19.)

         On March 28, 2017, the Court granted in part, and denied in part Sprauge's motion for judgment on the pleadings. (Doc. 60.) The Court dismissed Trinity's claim for contribution, but permitted Trinity's indemnification claim to go forward. (Id.)

         On October 13, 2016, Leep filed a motion for partial summary judgment on the issue of whether there is insurance coverage for the damage to his home under the Policy. (Doc. 33.) Leep argues the faulty workmanship exclusion does not apply because connecting or ensuring connection of the furnace vent was not within Sprauge's scope of work. Leep further argues, that even if the exclusions for faulty workmanship or maintenance apply, the loss is nevertheless covered under the policy's ensuing loss exception. Finally, Leep asserts that the intrusion of water vapor is an otherwise covered event, and the coverage limits for mold and fungi do not apply.

         On November 17, 2016, Trinity filed a cross-motion for partial summary judgment, seeking a more limited ruling that the faulty workmanship exclusion in the Policy precludes coverage, and requesting dismissal of Plaintiff's claim for breach of contract as a matter of law.[3] (Doc. 41.) Trinity argues Sprauge did not perform its work in a reasonable, workmanlike manner, and therefore, the faulty workmanship exclusion bars coverage. Trinity further argues the ensuing loss provision is not applicable because there was no separate, independent or intervening cause of loss apart from Sprauge's faulty workmanship.

         Sprauge takes no position with regard to Leep's motion for partial summary judgment. (Doc. 40). Sprauge opposes Trinity's motion, however, on grounds that there are material issues of fact regarding how the furnace vent pipe was disconnected. (Doc. 52.)

         II. ANALYSIS

         A. Summary Judgment Standard

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable fact-finder to return a verdict for the nonmoving party. Id.

         The moving party bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the opposing party will have the burden of ...

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