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Columbia Insurance Group, Inc. v. Cenark Project Management Services, Inc.

Supreme Court of Arkansas

April 28, 2016

COLUMBIA INSURANCE GROUP, INC., AND COLUMBIA MUTUAL INSURANCE CO., INC. PETITIONERS
v.
CENARK PROJECT MANAGEMENT SERVICES, INC.; ARKANSAS INFRASTRUCTURE, INC., DAVID BARRON; MICHAEL COLLINGS; JANICE COLLINGS, KIM COLLINGS; DEBRA COLLINGS; KENNETH WINBERG; MARIANNE WINBERG; GUY COLLINGS; CATHERINE COLLINGS; WILLIAM MILES; KAY MILES; AND K. GEORGE COLLINGS RESPONDENTS

CERTIFIED QUESTIONS OF LAW FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF ARKANSAS, WESTERN DIVISION

Waddell, Cole & Jones, PLLC, by: Paul Waddell and Nathan A. Read, for petitioners.

Morgan Law Firm, P.A., by: M. Edward Morgan, for respondents Arkansas Infrastructure, Inc., and David Barron.

Richard Mays Law Firm, PLLC, by: Richard H. Mays, for Collings respondents.

The Overton Firm, LLC, by: J. Don Overton, Counsel for Amicus Curiae Home Builders Association of Greater Little Rock, Arkansas Home Builders Association, and National Association of Homer Builders.

COURTNEY HUDSON GOODSON, Associate Justice

The present case involves two questions of law certified to us by the United States District Court for the Eastern District of Arkansas, Western Division, in accordance with Arkansas Supreme Court Rule 6-8. The certified questions arise from a complaint for declaratory judgment filed in the federal court by petitioners Columbia Insurance Group, Inc., and Columbia Mutual Insurance Co. (Columbia) to determine its obligations under the Commercial General Liability Insurance Policy (CGL policy) issued to its insureds, respondents Arkansas Infrastructure, Inc. and David Barron (All).[1] Specifically, Columbia sought a determination that it had no duty to defend or to indemnify AII with respect to claims brought against AII in state court by respondents Michael Collings, Janice Collings, Kim Collings, Debra Collings, Kenneth Winberg, Marianne Winberg, Guy Collings, Catherine Collings, William Miles, Kay Miles, and K. George Collings (Home Owners). On October 29, 2015, we accepted certification of the following questions of law:

(1) Whether faulty workmanship resulting in property damage to the work or work product of a third party (as opposed to the work or work product of the insured) constitutes an "occurrence?"
(2) If such faulty workmanship constitutes an "occurrence, " and an action is brought in contract for property damage to the work or work product of a third person, does any exclusion in the policy bar coverage for this property damage?

Columbia Ins. Grp., Inc. v. CENARK Project Mgmt. Servs., Inc., 2015 Ark. 396.

We reaffirm this court's previous position that a CGL policy does not extend basic coverage for a claim of breach of contract. Because there is no coverage, we consider the certified questions to be moot.[2]

The Home Owners in this case are related to one another by either blood or marriage. In contemplation of retirement, they acquired seven lots on which to construct six homes in the Platinum Peaks Estates Subdivision on Greers Ferry Lake in Van Buren County, Arkansas. The Home Owners retained CENARK Project Management Services, Inc. (CENARK), an engineering firm, to design the building pads for each of the residences that were to be built on the lots. The Home Owners subsequently entered into a contract with AII in 2005 to construct the pads. According to the contract, the project entailed "earthwork to produce home building sites, road access, rock buttress slope stabilizations, site drainage, site utilities, subsurface drains and storm drainage, gabion retaining walls, base, paving, [and] curbing." The contract contained a provision stating that AII agreed to perform the work in accordance with the plans, specifications, and drawings developed by CENARK. By separate agreement with the Home Owners, CENARK agreed to oversee the work of AII in constructing the building pads.

In June 2012, the Home Owners filed a complaint against AII in the Circuit Court of Van Buren County for breach of contract, [3] asserting that AII had failed to construct the pads in accordance with the engineering plans and specifications designed by CENARK.[4] The Home Owners' complaint contained the following allegations:

Commencing on or about April, 2011, plaintiffs began to discover cracks and/or separation in the foundations, patios, and other structures in their homes that were constructed by them upon their respective lots. As the cracks and separation continued and worsened, plaintiffs conducted an investigation and excavation of areas around and under their foundations, and discovered in March 2012, that:
(i) the fill material under the foundations was not of the quality and quantity specified in the engineer's plans and specifications;
(ii) that certain critical drains had not been installed in the foundation pads by AII during construction as required by the engineer's plans and specifications;
(iii) that gabion walls and buttress walls were not constructed in accordance with the engineer's plans and specifications; and
(iv) that other aspects of the engineer's plans and specifications were not followed by AII during development and construction of the foundation pads.

The Home Owners also alleged that Barron had admitted that AII had failed to follow the plans, specifications, and drawings developed by CENARK during the performance of the contract. Further, they asserted that "[i]n the failure to follow the engineer's plans, specifications, and drawings in the construction of the foundation pad, drainage systems, buttresses and gabion walls, knowing that such components would be covered by foundation, fill dirt and soils, AII actively attempted to conceal its failure to follow such plans and specifications, and committed fraud upon the plaintiffs." The Home Owners sought "damages in the loss of the contract price paid to AII and CENARK, plus ...


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