May 24, 2022 – A policy exclusion designed to cut off liability for property damage caused by the insured’s own work applied to interior damages caused by raising a house.

In Wiegert v. TM Carpentry, LLC, 2020AP1833 (May 4, 2022), the Court of Appeals District II held that the exclusion applied because the scope of the work included raising the entire house; it didn’t matter that individual components were not mentioned.

A Heavy Lift

In October 2014, Terry and Deborah Wiegert hired Stone Creek Builders, LLC to complete a project on their two-story house in Sheboygan.

The project involved increasing the floor-to-ceiling height of the basement by removing the floor, excavating several inches of dirt, and pouring a new basement floor. TM Carpentry, LLC, the company originally hired by the Wiegerts, had abandoned the project.

Between October 27 and October 29, 2014, Stone Creek cut holes in the foundation. On October 29, Stone Creek raised the house several feet above the foundation.

The company poured the new, deeper portions of the foundation between November 5 and November 19, 2014. On November 18 or 19, Stone Creek lowered the house onto the new foundation.

Cracked Walls

Soon after Stone Creek raised the house on Oct. 29, 2014, Mrs. Wiegert noticed cracks in the walls.

The Wiegerts also spotted gaps between the baseboard and molding in one room and noticed that the wood floors on the first and second floor were uneven. After the house was lowered, the Wiegerts saw additional cracks in the walls.

During the time that Stone Creek worked on the Wiegerts house, it was insured under two policies.

One, issued by Acuity, ran from Nov. 7, 2013 to Nov. 7, 2014. The other, issued by Auto-Owners Insurance, ran from Nov. 7, 2014 to Nov. 7, 2015.

The Acuity policy contains a coverage exclusion for damage to “[t]hat particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the property damage arises out those operations.”

Summary Judgment for Insurer

In June 2015, the Wiegerts sued TM Carpentry, Stone Creek, and both company’s insurers in Sheboygan County Circuit Court for damage done to the house during the renovation.

Acuity was not a party to the lawsuit but filed a motion to intervene. Acuity also filed a motion asking the court to bifurcate the issue of the merits of the Wiegerts’ claim from the insurance coverage issues.

The circuit court granted both motions but allowed the parties to engage in discovery regarding the insurance coverage issues during the stay.

The circuit court granted Acuity’s motion for summary judgment, ruling 1) that the property damage exclusion precluded coverage for the Wiegerts’ claims and 2) much of the damage to the house was detected by the Wiegerts after the Acuity policy had expired.

Stone Creek appealed.

‘Smallest Component of the Building’

Writing for a three-judge panel, Judge Lisa Neubauer noted the Wisconsin Supreme Court has held that the purpose of exclusions like the one in the Acuity policy was to cut off liability for “‘property damage to the insured’s own work or product.’”

While the supreme court hadn’t interpreted the exact inclusion contained in the Acuity policy, Neubauer pointed out that the court of appeals had.

“We focused on the phrase ‘that particular part’ and … determined that it limited the exclusion’s reach to ‘those parts of a building on which the defective work was performed, which is determined based on the scope of the construction agreement,” Judge Neubauer wrote.

The phrase “that particular part,” Neubauer explained, “was intended to narrow our focus to the smallest component of the building on which the insured’s work was performed.”

Scope Included Whole House

The scope of the work that Stone Creek agreed to perform for the Wiegerts included the entire house, Judge Neubauer explained.

“Although certain line items in Stone Creek’s contract specified work on components of the house, Stone Creek’s contact clearly specified work—raising and lowering—to be performed on the entire structure,” Neubauer wrote.

That meant that for purposes of the policy exclusion, “[t]hat particularly part” of the Wiegerts property on which Stone Creek was working was the whole house, Judge Neubauer explained.

Consequently, any money damages awarded against Stone Creek for damage to the house that occurred before Nov. 7, 2014 would fall squarely within the terms of the policy exclusion, Neubauer noted.

Stone Creek Arguments Unavailing

Stone Creek argued that it needed more discovery to determine the smallest component of its work with the potential to have damaged the house.

But even though smaller components of Stone Creek’s work could have played a role in the alleged damages, “the damage would not have occurred unless Stone Creek implemented the decision by actually raising the house,” Judge Neubauer wrote.

Stone Creek also argued that the cracks in the walls may have been caused by the installation of the new concrete, and therefore it was the concrete that was the smallest component of its work.

In that case, Stone Creek argued, the policy exclusion would apply only to damages awarded for work done on the foundation.

But Judge Neubauer pointed out that that argument ignored that 1) the Acuity policy expired on Nov. 7, 2014, 2) work on the foundation hadn’t ended by that date, and 3) Stone Creek didn’t lower the house onto the new foundation until Nov. 18, 2014 at the earliest.

Motion Not Ripe?

The court of appeals also turned aside Stone Creek’s argument that Acuity’s motion for summary judgment wasn’t ripe for a decision because the stay on the merits prevented the parties from uncovering material facts regarding liability, causation and damages.

But “the undisputed facts show that any ‘property damage’ that occurred during Acuity’s policy period necessarily resulted from Stone Creek’s deficient performance in raising the house off its foundation,” Judge Neubauer wrote.