Morgan Concrete Company v. Westfield Insurance Company

• Court: Court of Appeals for the Eleventh Circuit
• Decided: February 26, 2021
• Docket: 20-14081
• Status: Unpublished

Opinion

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[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 20-14081 Non-Argument Calendar ________________________

D.C. Docket No. 2:18-cv-00151-RWS

MORGAN CONCRETE COMPANY,

Plaintiff-Appellant,

versus

WESTFIELD INSURANCE COMPANY,

Defendant-Appellee.

________________________

Appeal from the United States District Court for the Northern District of Georgia ________________________

(February 26, 2021)

Before WILLIAM PRYOR, Chief Judge, MARTIN and BRANCH, Circuit Judges.

PER CURIAM: USCA11 Case: 20-14081 Date Filed: 02/26/2021 Page: 2 of 8

Morgan Concrete Company appeals the summary judgment against its

complaint for breach of contract and for a declaratory judgment that it was owed a

defense by and indemnification from Westfield Insurance Company. Morgan

Concrete sold its product to another contractor that refused to pay for it after

discovering that the concrete failed to comply with engineering and quality

requirements. Westfield provided a defense to Morgan Concrete under a

reservation of rights, but Westfield withdrew the defense after learning that

Morgan Concrete blamed the defect in the product on the other contractor and that

it had withheld payment to recover its costs to strengthen the defective product.

The district court ruled that Westfield had no duty to defend or indemnify because

Morgan Concrete caused no “property damage” under the insurance policy and

because the policy excluded coverage for the property damage that Morgan

Concrete suffered. We affirm.

I. BACKGROUND

Westfield issued an insurance policy to Morgan Concrete that included

coverage for “those sums that [it] becomes legally obligated to pay as damages

because of . . . ‘property damage’” “caused by an ‘occurrence.’” The policy

defined “property damage” as either “[p]hysical injury to tangible property,

including all resulting loss of use of that property” or the “[l]oss of use of tangible

property that is not physically injured.” And the policy defined “occurrence” as “an

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accident, including continuous or repeated exposure to substantially the same

general harmful conditions.” The policy contained several exclusions to coverage,

including “property damage” to the Morgan Concrete “product.”

While the policy was in effect, Georgia Concrete hired Morgan Concrete to

supply ready-mix concrete for a multi-level building being constructed at Clemson

University in South Carolina. The specifications required concrete that could

withstand 5,000 pounds per square inch. During construction of the second floor,

Georgia Concrete encountered strength deficiencies with the concrete supplied by

Morgan Concrete. Georgia Concrete ordered higher strength ready-mix concrete

from Morgan Concrete for future pours on the second-level slab but encountered

the same strength deficiency. Georgia Concrete refused to pay Morgan Concrete,

which, in turn, refused to supply more concrete.

Morgan Concrete attributed the strength issues to the mishandling of its

product by Georgia Concrete. Morgan Concrete blamed Georgia Concrete for

exposing the concrete to high ambient temperatures and for failing to comply with

standards established by the American Society for Testing and Materials to sample,

maintain, and test the concrete. Those errors, Morgan Concrete contended, caused

its ready-mix concrete to dry out or to be “cooked,” which lessened its strength.

The owner of the project, the general contractor, and Georgia Concrete

elected to repair rather than replace the second-level slab. Project consultants

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identified a “product failure (low break) problem” and a “lower than required 5000

PSI” in the second-level slab. The general contractor notified Georgia Concrete

and Morgan Concrete that they were liable for two incidents of concrete failure.

Morgan Concrete filed a mechanic’s lien on the building project for

$408,733.35. Morgan Concrete also filed a claim with Westfield, which launched

an investigation. Westfield provided a defense to Morgan Concrete under a

reservation of rights. Westfield warned Morgan Concrete that its claim might not

constitute “property damage” caused by an “occurrence” under the insurance

policy or might be barred by several of its exclusions from coverage.

Georgia Concrete proposed to apportion repair costs by absorbing $98,796

and requesting $116,046 from Morgan Concrete. Georgia Concrete stated that its

expenditures included the premium it had paid Morgan Concrete for higher-

strength concrete; an x-ray taken of the second-level slab; the addition of fiber

mesh “tendons” and other materials to strengthen the second-level slab; anticipated

future expenses for making cosmetic repairs to the second-level slab; additional

labor; and a premium paid to another company to supply concrete for the third

level of the building.

Morgan Concrete rejected the proposal. The company disclaimed

responsibility for the strength of its concrete after dispensing the product from its

trucks. Morgan Concrete responded that, after it advised Georgia Concrete several

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times how to handle the concrete, Georgia Concrete disregarded standard practices

and failed to ensure that a certified field technician made and cured samples of the

concrete. Morgan Concrete identified two deliveries in July when test cylinders

showed that its concrete exceeded the strength of 5,000 pounds per square inch.

Morgan Concrete sued Georgia Concrete in a South Carolina court for

foreclosure on the mechanic’s lien bond, breach of contract, and quantum meruit,

and Georgia Concrete filed an answer and a counterclaim for breach of contract.

Georgia Concrete alleged that Morgan Concrete breached its agreement to provide

concrete of a specified strength, which required Georgia Concrete to “perform

repairs on the portions of the Project in which [the inferior] concrete was used,

including but not limited to structural repair work [costing] in excess of $115,000

. . . on the Project’s Level 2 Slab.”

Westfield notified Morgan Concrete that it was withdrawing its defense.

Westfield determined that Morgan Concrete caused Georgia Concrete no “property

damage,” which its policy defined as “[p]hysical injury to tangible property,

including all resulting loss of use of that property.” Westfield also determined that

the spoilage of the concrete Morgan Concrete supplied was barred by exclusions in

the policy for “‘Property damage’ to [its] product,” “‘Property damage’ to [its]

work,” and “Damages claimed for any loss, cost, or expense incurred by [it] or

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others for the loss of, . . . inspection, repair, replacement, [or] adjustment . . . of

‘[its] product,’ ‘[its] work,’ or ‘Impaired Property.’”

Morgan Concrete filed a complaint in the district court that Westfield

breached its contract and owed a duty to resume its defense of and to indemnify

Morgan Concrete for the costs it had incurred in its action against Georgia

Concrete. Westfield moved for summary judgment and argued that its policy did

not cover the claim for the reasons it had earlier disclosed to Morgan Concrete.

The district court ruled that Westfield had no duty to defend or indemnify

and entered summary judgment in its favor. The district court “presume[d] the

existence of an occurrence” based on “the unexpected (and unintended) self-

desiccation of the concrete used for the Level 2 Slab,” but determined the

“property damage” was to the concrete and not to any “other component parts of

the Level 2 Slab” or to “the structure as a whole.” Alternatively, the district court

determined that the “property damage” to the concrete supplied by Morgan

Concrete “f[ell] squarely within the Policy’s Exclusion for Damage to Product”

and that the “remediation of the Level 2 Slab . . . to ameliorate problems with the

concrete” was excluded from coverage as damage to the work of Morgan Concrete.

II. STANDARD OF REVIEW

We review de novo a summary judgment. Am. Gen. Life Ins. Co. v.

Schoenthal Family, LLC, 555 F.3d 1331, 1337 (11th Cir. 2009).

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III. DISCUSSION

Morgan Concrete argues that Westfield was obligated to defend and

indemnify it in the state action. Morgan Concrete argues that the concrete it

supplied caused “property damage” because Georgia Concrete had to purchase and

install external cable support systems to strengthen the slab. Morgan Concrete also

argues that the exclusions for damage to its product or work do not apply because

its “bad ready-mix concrete damaged other subcontractors’ property” and the

“Level 2 Slab.”

In the policy that Westfield issued, “property damage” is defined as

“physical injury to tangible property, including all resulting loss of use of that

property.” We must interpret the language in the policy consistent with Georgia

law. See Amerisure Mut. Ins. Co. v. Auchter Co., 673 F.3d 1294, 1300 (11th Cir.

2012). The Georgia Supreme Court has held that the term “property damage”

means damage to property that was previously undamaged “and to damage beyond

mere faulty workmanship.” Taylor Morrison Servs., Inc. v. HDI-Gerling Am. Ins.

Co., 746 S.E.2d 587, 591 (Ga. 2013). As a result, there is no coverage for

“liabilities for the repair or correction of the faulty workmanship of the insured.”

Id.

The only “property damage” identified in the state lawsuit was damage to

the product that Morgan Concrete supplied. Morgan Concrete alleged in its

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complaint that its concrete was damaged through mishandling by Georgia

Concrete. Georgia Concrete alleged in its counterclaim that it incurred economic

losses to strengthen the concrete.

Westfield had no duty to continue to defend because there was no claim for

“property damage” that was covered by the insurance policy. The insurance policy

excluded from coverage “property damage” to a “product” that was

“manufactured, sold, handled or distributed” by Morgan Concrete. That exclusion

applied to the allegations by Morgan Concrete that Georgia Concrete damaged its

product. The policy covered “property damage” that Morgan Concrete caused, but

the claim against it was for breach of contract to recover costs attributable to

repairing its defective product. And Morgan Concrete identified no allegation or

evidence that its inferior concrete damaged “any property that [was] nondefective”

in the slab or the structure. See Taylor Morrison, 746 S.E.2d at 591. Because the

dispute between the concrete companies involved only damage to the inferior

concrete and economic losses for repairs necessitated by the defective product, the

insurance policy did not require Westfield to provide a defense.

IV. CONCLUSION

We AFFIRM the summary judgment in favor of Westfield Insurance.