Cockerham v. Am. Family Mut. Ins. Co.
561 S.W.3d 862 (2018)
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Rule of Law:
An insurance policy's 'resulting loss' clause, which serves as an exception to a faulty construction exclusion, provides coverage for ensuing physical damage to other property, even when that damage is a direct result of the excluded faulty workmanship.
Facts:
- Robert and Stacia Cockerham hired Schalk Construction, LLC to build an observatory addition to their residence.
- The project required the construction of a special telescope support system.
- The Cockerhams contracted separately with Helitech to install the support system's piers, and Schalk engaged a subcontractor to pour concrete over the piers.
- The subcontractor poured the concrete incorrectly, which was a form of faulty construction.
- This incorrect pour caused physical damage to the telescope support system's piers, its pole, and the foundation of the Cockerhams' residence.
- The Cockerhams filed a claim with their homeowner's insurance provider, American Family Mutual Insurance Company, to cover the cost of the physical damage and their loss of use of the observatory.
- American Family denied the claim, asserting that the damages were excluded under the policy's faulty construction provision.
Procedural Posture:
- In April 2015, the Cockerhams sued American Family in the Circuit Court of St. Louis County (trial court) for breach of contract and vexatious refusal to pay.
- American Family answered, arguing that the losses were excluded under the policy.
- The Cockerhams and American Family filed cross-motions for summary judgment.
- The trial court denied the Cockerhams' motion and granted American Family's motion for summary judgment, finding no coverage.
- The Cockerhams (appellants) appealed the trial court's judgment to the Missouri Court of Appeals, Eastern District (intermediate appellate court).
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Issue:
Does a homeowner's insurance policy, which excludes losses caused by faulty construction but covers 'any resulting loss,' provide coverage for physical damage to property that is the direct result of faulty construction?
Opinions:
Majority - James M. Dowd, Judge
Yes. The homeowner's insurance policy does provide coverage for the physical damage. Although the policy contains an exclusion for losses caused by faulty construction, it also includes an exception for 'any resulting loss.' To give meaning to both provisions and prevent the exclusion from rendering the exception useless, the court must distinguish between the excluded cause and the covered result. Here, the excluded 'loss' is the faulty act of construction itself—the bad concrete pour and the cost to redo it. The physical damage to the piers, pole, and foundation is a separate 'resulting loss' that springs from that faulty act and is therefore covered by the exception. However, the court found no coverage for 'loss of use' because the policy only covered such losses if the residence became uninhabitable, which it did not.
Analysis:
This decision clarifies the interpretation of 'resulting loss' clauses commonly found in property insurance policies. It establishes that courts should separate the excluded act of faulty workmanship from the ensuing physical damage it causes to other property. By defining the 'resulting loss' as the subsequent physical damage, the ruling prevents broad faulty construction exclusions from nullifying coverage that policyholders reasonably expect for property damage. This creates a precedent that strengthens policyholder protections and requires insurers to cover consequential property damage, even when the initial cause is an excluded event like a contractor's error.
