RENDERED; AUGUST 16, 2018
2017-SC-000066-DG
AMERICAN MINING INSURANCE COMPANY APPELLANT
ON REVIEW FROM COURT OF APPEALS v. CASE NO. 2015-CA-000055 OWSLEY CIRCUIT COURT NO. lO-CI-00005
PETERS FARMS, LLC APPELLEE
OPINION OF THE COURT BY JUSTICE CUNNINGHAM
REVERSING AND REMANDING
This is a mineral trespass case involving the interpretation and
application of a mining insurance policy. The central issue is whether an
insured mining company’s unauthorized removal of minerals from the property
of another is an “occurrence” that unintentionally caused “property damage” as
defined by the insured’s Commercial General Liability (“CGL”) policy.
The measure of damages is also at issue. If the mining company’s
removal of the coal was an innocent trespass, then the proper measure of
damages is “the value of the mineral after extraction, less the reasonable
expenses incurred by the trespasser in extracting the mineral.” Harrod
Concrete & Stone Co. v. Crutcher, 458 S.W.3d 290, 296 (Ky. 2015). However, if
the removal was a willful trespass, then the measure of damages is the reasonable market value of the coal, without compensating the trespasser for
removal expenses. Id. While a tortfeasor is liable for willful or innocent
trespass, a tortfeasor’s trespass and conversion, both intentional torts, are not
“accidents,” and are therefore not “occurrences” covered by the CGL policy.
The trial court ruled in favor of the injured property owner, and the
Court of Appeals unanimously affirmed. We granted discretionary review. For
the reasons stated herein, we reverse the ruling of the Court of Appeals.
Factual and Procedural Background
Beginning in 2007, Ikerd Mining, LLC (hereinafter “Ikerd”) removed
20,212 tons of coal from land belonging to Peters Farms, LLC (hereinafter
“Peters”). Of that amount, 19,012 tons were wrongfully mined under Ikerd’s
alleged mistaken belief as to the correct location of Peters’ boundary lines. The
other 1,200 tons were mined by Ikerd knowing that the land thereunder
belonged to Peters, pursuant to a disputed oral lease agreement between Ikerd
and Peters; Peters claimed that the lease was an ongoing negotiation that was
never finalized.
In 2010, Peters sued Ikerd and Ikerd’s insurer, American Mining
Insurance Company, Inc. (hereinafter “AMIC”), for Ikerd’s “willful and wanton
trespass” onto Peters’ property and conversion of coal from it. In response,
AMIC argued that the losses claimed by Peters from Ikerd’s trespassory mining
activities were not an “occurrence,” and thus not covered by the insurance
policy. During the course of litigation, Ikerd became insolvent, leaving AMIC as
the only source for recovery. In 2014, Ikerd, AMIC, and Peters reaehed a partial settlement. By their
agreement, AMIC advanced $15,000 to Peters to preserve the mining permit on
the property. Ikerd also admitted that it had mined the coal without Peters’
consent, but the settlement left open whether Ikerd’s mining was “intentional.”
Peters gave Ikerd a full release in the settlement, reserving its claims against
AMIC for any available insurance coverage under Ikerd’s policy.
The parties agreed to submit two issues to the trial court; (1) whether the
insurance policy covers the damage caused by Ikerd’s actions; and (2) whether
the proper measure of damages is the reasonable royalty rate, which the
parties agreed was $75,000, or the market rate of the coal less extraction costs,
valued at $400,000.
The Owsley Circuit Court conducted a bench trial and concluded that
injuries to Peters’ property were the result of two separate and distinct
mistakes committed by Ikerd. First, an Ikerd employee, Conway Speaks,
offered testimony that the removal of 19,012 tons from Peters’ property
“occurred because of an ‘accident’ and a ‘mistake’ as to the location of the
boundary line.” He claimed that Ikerd only intended to mine coal from
adjacent land belonging to Charles Gross, but mistakenly mined Peters’ land
instead. Second, according to Speaks’ testimony, 1,200 tons of coal were
knowingly removed from Peters’ property, because “Ikerd’s employees
mistakenly believed [Ikerd] had permission from Peters to mine it. In fact,
Peters had never entered into a lease with Ikerd.” The court determined that both of Ikerd’s mistakes in mining Peters’
property were “accidents,” which meant each was an “occurrence” under the
CGL policy. The court also determined that the removal of coal and foliage
from Peters’ property constituted “property damage” that triggered insurance
coverage under the policy.
Further, the court found that additional coverage is provided through an
aggregate limit under the “Products-completed operations hazard” (“PCOH”)
policy located within Section V of the CGL policy. Additionally, the court found
that Peters was capable of extracting coal from the property, and, therefore,
was entitled to $400,000 for the net market value of the coal based upon
Bowman v. Hibbard, 257 S.W.2d 550, 552 (Ky. 1952).i
On appeal, the Court of Appeals affirmed the trial court’s findings. The
court, based on the policy’s definitions section and this Court’s recent decision
in Harrod, found that Peters had experienced “property damage.” The Court of
Appeals also determined that an “occurrence” had taken place, because the
property damage—the trespassory removal and conversion of Peters’ coal—was
not intended by the insured. See Bituminous Casualty Corp. v. Kenway
Contracting, Inc., 240 S.W.Sd 633, 638-39 (Ky. 2007).
Because the Court of Appeals found that “Ikerd mined the Peters’
property in good faith, and thus property damage was ‘not the plan, design or
intent of the insured[,]”’ it did not address the “control” aspect of the two-part
1 The “ability to mine” requisite for reaching market rate damages under Bowman was subsequently nullified by Harrod, 458 S.W.3d at 296. fortuity test for an “accident” outlined in Bituminous, 240 S.W.Sd at 639, and
Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W.Sd 69, 76-77 (Ky. 2010).
Without providing analysis, the Court of Appeals affirmed the trial court’s
finding that the PCOH policy provides a source for coverage additional to the
aggregate limit set on the CGL policy. As for the damages to be awarded, the
Court of Appeals agreed with the trial court that the correct measure of
damages is the net market value rate of $400,000.
Analysis
We generally conduct a de novo review of the interpretation of insurance
contracts. Cincinnati, 306 S.W.Sd at 73 (internal citation omitted). Likewise,
whether the trial court applied the correct legal standard to measure damages
is also a question of law, which we review de novo. Nash v. Campbell Cnty.
Fiscal Ct., 345 S.W.Sd 811, 816 (Ky. 2011).
Under the CGL policy at issue, coverage applies to “property damage”
caused by an “occurrence.” Here, as in Cincinnati and Bituminous, Section V of
the insurance policy defines the term “occurrence” as “an accident, including
continuous or repeated exposure to substantially the same general harmful
conditions[,]” and, analogous to Cincinnati and Bituminous, the term “accident”
is not defined within the policy agreement.
‘‘Occurrence” and “Accident”
The language of a written insurance policy is given its plain meaning,
unless terms are otherwise defined therein; ambiguities are interpreted against
the drafter-insurer. Kentucky Ass’n of Cntys. All Lines Fund Trust v. McClendon, 157 S.W.3d 626, 630 (Ky. 2005). Where the term “accident” is not
defined within an insurance policy, it is defined by its ordinary meaning, as
“accident” has not acquired a technical meaning within the law. Cincinnati,
306 S.W.3d at 74 (internal citation omitted). “Inherent in the plain meaning of
‘accident’ is the doctrine of fortuity.” Cincinnati, 306 S.W.3d at 74. The
doctrine of fortuity involves analysis of the insured’s intent and control. Id.
Additionally, this Court recognized in Bituminous that an “accident” is
“an event that takes place without one’s foresight or expectation . . . something
that does not result from a plan, design or . . . intent on the part of the
insured.” Id. at 76 (internal citations omitted). However, as this Court now
holds in the related case Martin/Elias Properties, LLC v. Acuity, 544 S.W.3d
639, 642 (Ky. 2018), Cincinnati effectively modified the Bituminous test of the
insured’s “plan, design or intent,” and “instead focused on . . . the doctrine of
‘fortuity’ of the event.”2 Accordingly, under the fortuity doctrine, whether
Peters Farms is covered by Ikerd’s CGL policy depends upon Ikerd’s intent and
control regarding its excavation and conversion of Peters’ coal.
i. Intent
This Court has held that “a loss or harm is not fortuitous if the loss or
harm is caused intentionally by [the insured].” Cincinnati, 306 S.W. 3d at 74.
Indeed, this Court recognizes that “the requirement that loss be fortuitous, i.e.
2 Given the method by which Martin/Elias Properties distinguishes Bituminous from Cincinnati regarding the intent and control of the insured, this opinion illustrates how the fortuity-related facts in the case at hand differ from those in Bituminous, which remains binding precedent in Kentucky insurance law. not intended, is a concept inherent in all liability policies.” Aetna Cas. & Sur.
Co. V. Commonwealth, 179 S.W.Sd 830, 836 (Ky. 2005).
All mining cases that involve the unauthorized removal of minerals are
cases of a “trespass/conversion hybrid.” Harrod, 458 S.W.Sd at 294. Trespass
and conversion are inherently intentional torts. There always exists the
general intent to commit the act, if not the specific result. Consequently, there
are two sub-categories in mineral trespass cases for determining the “intent” to
wrongfully remove the minerals—whether the trespass was “innocent” or
“willful.” Id. This nuance of Kentucky mineral trespass law was aptly
summarized by the Sixth Circuit Court of Appeals:
An innocent trespass is one that is “inadvertent or the result of an honest mistake.” Id. at 297 (internal quotation marks omitted). Willful conduct, in contrast, involves a trespasser “who knowingly and willfully encroaches or enters upon the land of another and takes his mineral without color or claim of right, or one who dishonestly or in bad faith mines minerals of another and converts them to his own use.” Id. (citation omitted).
Journey Acquisition-II, L.P. v. EQT Prod. Co., 830 F.3d 444, 458 (6th Cir. 2016) (citing Harrod, 458 S.W.3d at 297).
As previously noted, the trial court determined that the unlawful removal
of 19,012 tons of coal occurred because of Ikerd’s good faith, albeit mistaken,
belief as to the correct location of the boundary lines between Peters’ and
Gross’ properties. Peters argues that such an “innocent trespass” constitutes
an “accident” under the CGL policy. This Court stated in Harrod Concrete that
mineral trespass is either innocent or willful, and damages available against
the trespasser depend upon the trespass’ classification.
7 However, although it may not have been Ikerd’s intent to mine Peters’
coal specifically, Ikerd did intend to mine and sell the coal it extracted.
Regardless of whether its trespass was willful or innocent, Ikerd intended to
act. This contrasts with Bituminous, wherein this Court concluded that
“[ajccident includes intentional acts that cause unexpected or unintended
results from the standpoint of the insured.” Bituminous, 240 S.W.3d at 638.
Elaborating upon its conclusion, this Court stated that “while [the insured’s
employee’s] actions were intentional, the damage that resulted to the
[plaintiffs] property was neither expected nor intended from the perspective of
the [insured]. This falls within the plain meaning of the term accident and
therefore meets the definition of occurrence under the CGL policy.” Id. at 642.
The Bituminous insured never had the intent to demolish its customer’s house,
whereas Ikerd fully intended for its employees to mine the coal.
Further, while “[t]he insured is entitled to all the coverage he may
reasonably expect under the policy[,]” James Graham Brown Found., Inc. v. St.
Paul Fire & Marine Ins. Co., 814 S.W.2d 273, Til (Ky. 1991), this Court has
stated as a matter of law that “[c]onversion is an intentional tort” and “[t]here is
no such thing as conversion by accident.” McClendon, 157 S.W.3d at 632.
Thus, because the “intent” element of the two-part fortuity test set forth in
Cincinnati is satisfied here, next we assess Ikerd’s control. Cincinnati, 306
S.W.3d at n.
8 ii. Control
Here, Ikerd had complete control over its employees and any
subcontractors who extracted the coal from Peters’ property. “For an event to
be fortuitous, and therefore an accident, it must be ‘beyond the power of any
human being to bring ... to pass, [or is] . . . within the control of third persons
....’” Martin/Elias, 544 S.W.Sd at 644 (quoting Cincinnati, 306 S.W.Sd at 76).
Rather, we find here, as in Martin/Elias, that “the [property] damage resulted
from the actions purposefully taken by the contractor or those working under
the contractor’s control.” Id. Ikerd had a much higher level of control than did
the insured in Bituminous, where the insured’s employee mistakenly
demolished a customer’s house in a matter of minutes—instead of just the
house carport—which is what the insured had actually intended. In
comparison, Ikerd directed its employees to excavate coal from Peters’ property
for several months.
Thus, “[b]ecause the actions taken by [Ikerd], which led to property
damage, were entirely under [its] control, and [Ikerd] fully intended to execute
the [excavation] plan as [it] did, we cannot say that the resulting damage
throughout the property was an accident.” Id. at 644-45. Accordingly, because
we cannot find that Ikerd’s disturbance of the foliage upon Peters’ land, nor
removal and conversion of coal beneath the surface of Peters’ land, resulted
from an “accident,” that property damage is not covered by the CGL policy.
Although Peters could have maintained suit against Ikerd in tort, Ikerd’s
intentional acts are not covered by the CGL policy. “Products-completed operations hazard” Coverage
Finally, we must address the argument concerning the PCOH coverage
for “property damage,” as set forth in Section V of the policy.
CGL coverage analysis is a three-step process: (1) was the event covered
under the policy as an “occurrence?” If so, (2) are there any explicit policy
exclusions for the damage that occurred? If not, (3) are there any exclusions to
those policy exclusions, such as PCOH coverage?
The language of the PCOH coverage in Section V creates an exception to
particular CGL policy exclusions. Determination whether PCOH coverage
exists occurs only if this Court finds an exception exists to one or more of the
CGL policy exclusions. See Cincinnati, 306 S.W.3d at 78 n. 35 (internal
citation omitted):
In simplistic terms, the process is such: if the insuring clause does not extend coverage, one need look no further. If coverage exists, exclusions must then be considered. If an exclusion excludes coverage, an exception to the exclusion may re-grant coverage. However, the entire process must begin with an initial grant of coverage via the insuring clause; otherwise, no further consideration is necessary. Therefore, in the present case, we do not address any arguments regarding exclusions or exceptions to exclusions because here there is no initial coverage due to the lack of . . . an “occurrence.”
(emphasis added).
Likewise, because we found no CGL policy coverage for Ikerd’s
innocent trespass and conversion of coal, our analysis ends there.
Conclusion
For the foregoing reasons, we reverse the ruling of the Court of Appeals.
We find that the intentional removal and conversion of coal is not an “accident” 10 constituting an “occurrence,” regardless of whether the trespass was willful or
innocent. Furthermore, there is no PCOH coverage, because no “occurrence”
took place under the CGL policy for which to apply the PCOH exception to any
exclusions. This case is remanded to the Owsley Circuit Court for entry of a
judgment consistent with this ruling.
Minton, C.J.; Cunningham, Hughes, Keller, Venters, and Wright, JJ.,
sitting. Minton, C.J.; Cunningham, Hughes, and Venters, JJ., concur. Wright,
J., concurs in part and dissents in part by separate opinion in which Keller, J.,
joins. VanMeter, J., not sitting.
WRIGHT, J., CONCURRING IN PART AND DISSENTING IN PART; The
Owsley Circuit Court found two separate and distinct mistakes committed by
Ikerd Mining, LLC (hereinafter “Ikerd”). The first was the removal of 19,012
tons of coal from property owned by Peters Farms, LLC (hereinafter “Peters”)
when Ikerd thought it was mining property owned by Charles Gross. Ikerd’s
mistake is apparent from the fact it paid royalties for the coal removed from
Peters’ property to Charles Gross. The second mistake occurred when Ikerd
mined 1,200 tons of coal from Peters’ property when Ikerd thought it had oral
permission, although the lease was never executed.
The majority opinion states that “[t]he court determined that both of
Ikerd’s mistakes in mining Peters’ property were ‘accidents,’ which meant each
was an ‘occurrence’ under the CGL policy.” 1 agree with the majority that the
trial court’s ruling was incorrect when it found that the removal of 1,200 tons
under the presumption of a lease with Peters was an occurrence or accident.
11 The trial court specifically found that . the nature of the accident, where
1,200 tons were later removed, is different. When this coal was removed from
the two orange areas, the employees intended to remove coal from Peters’
property under a mistaken belief that it had a lease or a verbal agreement with
Fred Peters to allow mining of this area. The court does find this to qualify as
an occurrence or accident within the meaning of the policy.”
In this instance, Ikerd knew it was mining on Peters’ property,
intentionally mined the coal, and knew that it did not have a written agreement
giving it the right to mine the coal. Ikerd claims that it thought it had verbal
authorization to mine the coal. This cannot be considered an accident because
the statute of frauds requires that a lease to mine coal must be in writing. KRS
371.010. Ikerd’s actions were intentional mining of the 1,200 tons of coal
when they knew that the property and coal were owned by Peters Farms, Inc.
Ikerd knew that it did not have any written lease or authorization to
mine, although they claim to have believed that they had an oral lease or
permission to mine, under the statute of frauds they were without any legal
right to mine. The circumstances and insurance contract must be interpreted
consistent with the laws and administrative regulations of the Commonwealth
of Kentucky. Therefore, this is not an accident and cannot be an occurrence
under the terms and conditions of the insurance contract.
All parties must comply with the laws and administrative regulations of
the Commonwealth of Kentucky. KRS 350.020 states that “[tjherefore, it is the
purpose of this chapter to provide such regulation and control of surface coal
12 mining operations is to minimize or prevent injurious effects on the people and
resources of the Commonwealth. To that end, the cabinet is directed to rigidly
enforce this chapter and to adopt whatever administrative regulations are
found necessary to accomplish the purpose of this chapter.”
KRS 350.060 (10) requires that a permit applicant shall file proof that it
has “public liability insurance coverage satisfactory to the Cabinet . . . .”
Pursuant to this statute, the cabinet has promulgated administrative
regulations. 405 KAR 10:030 (2)(b) states that “[t]hc policy shall provide for
personal injury and property damage protection in an amount adequate to
compensate for all personal injury and property damage resulting from surface
coal mining and reclamation operations, . . .” (Emphasis added.) The
regulation requires the insurance policy to compensate for all damage without
any limitation as to whether the damage was accidental or not.
The commercial general liability coverage form (hereinafter “CGL”) used
in this case is a multipurpose form intended to cover a wide range of
businesses under a wide range of circumstances. This results in ambiguities
that must be resolved in favor of the insured and consistent with Kentucky
statutes and regulations. The statutes and regulations would require that the
policy be interpreted as providing coverage for the damages inflicted on the
property owned by Peters Farm when Ikerd mined 19,012 tons of coal that it
mistakenly thought was owned by Charles Gross.
The mining of the 19,012 tons of coal before the establishment of Peters’
property line has different circumstance that constitutes an accident and an
13 occurrence under the insurance contract. Ikerd intended to mine coal owned
by Charles Gross, mined the coal, and paid the royalty to Charles Gross. The
accident occurred when the property was mistakenly identified as belonging to
Charles Gross when it belonged to Peters Farm. The majority’s opinion turns
on Ikerd’s intent to mine the coal. Ikerd intended to mine coal, but the intent
was to mine the coal owned by Charles Gross. Ikerd accidentally mined the
property owned by an innocent third party, Peters Farm, Inc.
The court must determine whether the mining of the coal was an
occurrence under the terms and conditions of the insurance contract. The
contract was drafted by American Mining Insurance Company and any
ambiguity in the contract must be construed against the drafter. Simon v.
Cont'l Ins. Co., 724 S.W.2d 210, 213 (Ky.l986) (“when ambiguities exist, we
resolve them against the drafter in order to circumvent the technical, legalistic
and complex contractual terms which limit benefits to the insured) (internal
quotation marks omitted). This case must also be interpreted under the
requirement that the “occurrence” must be broadly and liberally construed.
“Courts and commentators alike are in agreement that the term ‘occurrence’ is
to be broadly and liberally construed in favor of extending coverage to the
insured.” James Graham Brown Found., Inc. u. St. Paul Fire & Marine Ins. Co.,
814 S.W.2d 273, 278 (Ky. 1991). “A policy or contract of insurance ordinarily
is to be construed liberally in favor of the insured and strictly as against the
insurer.” Koch v. Ocean Acc. & Guar. Corp., 313 Ky. 220, 224, 230 S.W.2d 893,
895 (1950).
14 The case this Court has decided that is closest to the present facts is
Bituminous Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.Sd 633 (Ky. 2007).
In Bituminous, a contractor was hired to remove the driveway, carport and the
concrete pad on which it sat. The contractor hired a subcontractor to assist
with the job. The subcontractor misunderstood his task, began work on the
house owned by the individuals who hired the contractor before the contractor
arrived and demolished a large part of the residence. This court ruled that the
subcontractor’s demolition of the house was an “accident” that constituted an
“occurrence” due to a mistake that resulted in his misunderstanding what part
of the property he was to demolish. Id. at 636, 639-40.
In the current case, all the conditions are present that occurred in
Bituminous plus the additional condition that the property that was ripped
apart and the coal gouged from the earth belonged to an innocent third party.
Here, the property boundaries were unclear, unmarked, heavily disputed
throughout the life of this case, and no notice was given to Ikerd that it was
coming up to and then crossing Peters’ property line. The trial court found
that Conway Speaks “clearly testified that they never had a ‘plan, intent or
design’ to take this coal belonging to Peters but, rather, only intended to mine
coal from land belonging to Charles Gross. This coal (19,012 tons) was
removed from the horseshoe area on Exhibit 5 of Peters’ property by accident,
as established by the uncontested proof of witness Conway Speaks. No witness
was called who rebutted or contradicted this testimony.”
15 In Bituminous, the subcontractor accidentally tore down part of the
residence that the people who hired the contractor did not intend to have torn
down. In other words, he worked on the wrong part of the property owned by
the people who hired them to do work. In the current case, the mining
company accidentally mined coal on property owned by someone other than
the person who leased coal to Ikerd. The trial court found the uncontested
evidence to prove that Ikerd intended to mine property owned by Charles Gross
and mined the property owned by Peters Farm by mistake—which was an
accident.
The next issue we must consider is the concept of fortuity as it has been
defined in our case law. The first part of the concept is the issue of intent. As
former Supreme Court Justice William E. McAnulty, Jr., wrote while sitting on
the Court of Appeals, under insurance law an accident is “something that does
not result from a plan, design, or an intent on the part of the insured.” Stone
V. Kentucky Farm Bureau Mut. Ins. Co., 34 S.W.3d 809, 812 (Ky. App. 2000).
Moreover, this Court has held “[i]t is abundantly clear, therefore, that the issue
of control is encompassed in the fortuity doctrine. . . . Simply put, faulty
workmanship is not an accident.” Cincinnati Ins. Co. v. Motorists Mut. Ins. Co.,
306 S.W.3d 69, 76 (Ky. 2010) (internal quotation marks and citation omitted).
We went on to hold “[b]ut the contractor's action in Bituminous Cas. Corp, is
readily factually distinguishable from the case at hand because that case was
not a faulty construction case.” Id. at 77.
16 The case before us is not a faulty construction case. As in Bituminous,
the current case is one in which the company mistakenly tore apart the wrong
piece of property. There is no allegation that Ikerd performed a continuing
series of bad or inferior work. Ikerd made a mistake in identifying the property
line. This is a mistake that was made once and then Ikerd proceeded with
mining the property. It is not the type of mistake that would be revisited each
time another layer of earth was removed or a pit of coal severed. The location
of property lines can often be a difficult issue to resolve in the mountains of
eastern Kentucky. Changes in topography, lost markers or monuments,
overlapping or conflicting land patents, and the possibility of the severance of
mineral ownership from the surface creates many challenges to the
establishment of property lines and mineral ownership. Mistakes can occur.
Once Ikerd made a mistake as to the location of the property lines and
began mining, the monuments and markers that could identify the property
line were wiped from the face of the earth by the stripping away of the layers of
trees, rock, and soil. This makes it much more difficult for Ikerd to identify
and correct its initial mistake in locating the property lines once the mining
had begun. The accident was Ikerd’s mistake in identifying the property lines
and that occurred in a very short space of time. The mining did take place over
a much longer period of time, but the mistake and accident occurred in a short
space of time and was impossible to correct once the monuments and markers
were stripped away.
17 In Bituminous, the owner of the property was the one who hired the
contractor to tear down the carport and had much greater control of what was
done than did Peters Farm. In the current case, Peters did not know that its
trees were being torn down, the very earth itself being ripped apart, and 19,012
tons of coal being gouged from the earth it owned. Peters lacked any ability to
notify Ikerd, explain the property lines, warn it not to cross onto Peters’
property, or correct the mistake that Ikerd had made.
In Cincinnati Ins., we cite to Essex Ins. Co. v. Holder, where the Supreme
Court of Arkansas held “[f|aulty workmanship is not an accident; instead, it is
a foreseeable occurrence, and performance bonds exist in the marketplace to
insure the contractor against claims for the cost of repair or replacement of
faulty work.” 370 Ark. 465, 540 (2007). The contrast between commercial
general liability insurance and performance bonds provides options for
someone hiring a contractor to do work. In the present case, Peters was an
innocent third party which lacked any contact, ties, oversight, or ability to
purchase insurance or performance bond for the work done by Ikerd.
Ikerd made a mistake in identifying the property lines that resulted in
terrible damages to the property owned by Peters. If this court takes the
position that any mistake by the insured was within their control and not
covered by the insurance policy, then this insurance will be meaningless. It is
a slippery slope when you can take any mistake, claim it was within the control
of the insured, and eliminate the coverage.
18 For the foregoing reasons, I eannot agree with the majority’s conclusion
that Ikerd’s removal of coal from Peters’ property was not an accident—and
therefore, not covered under the policy. I would hold instead that the removal
of coal from the wrong property was accidental and amounted to an
“occurrence” under the policy. Therefore, I dissent as to this portion of the
majority opinion.
Keller, J. joins.
COUNSEL FOR APPELLANT:
Virginia Hamilton Snell Amanda Warford Edge WYATT, TARRANT & COMBS, LLP
COUNSEL FOR APPELLEE:
Mendel Austin Mehr Philip Gray Fairbanks Bartley Kemble Hagerman MEHR FAIRBANKS & PETERSON TRIAL LAWYERS, PLLC