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Dodson v. St. Paul Ins. Co.3/5/1991
Rehearing Denied July 2, 1991
RALPH F. DODSON, D/B/A, DODSON CONSTRUCTION COMPANY, APPELLEE,
v.
ST. PAUL INSURANCE COMPANY, APPELLANT.
Appeal From the District Court of Murray County; Gary L. Lumpkin, District Judge.
Roberts, Burns & Delashaw, Inc., Darryl F. Roberts, Ardmore, for appellee.
Deaton & Davison, Inc., Austin R. Deaton, Jr., Ada, for appellant.
The opinion of the court was delivered by: DOOLIN, Justice.
Appellant, St. Paul Insurance Company, (Insurer), appeals from summary judgment of liability under a Comprehensive General Liability Insurance Coverage Form-Board Policy (CGLI), issued to appellee Dodson Construction Company, and the resultant jury award of actual and punitive damages. The district court also ordered Insurer to pay Dodson's attorneys fees and cost of this action. We reverse.
Dodson Construction, a general building contractor, constructed a school building for the Board of Education of Independent School District No. 1 in Sulphur, Oklahoma. Upon completion of the building, the Board of Education discovered the roof of the school was poorly constructed, causing leaks and interior damage to the school building. The roofing subcontractor, employed by Dodson, had used defective and/or nonspecified materials, improperly installed the roof, and upon demand was unable to repair or replace the roof. Dodson forwarded a loss notice to insurer concerning the leaky roof. Insurer denied coverage for the subcontractor's defective workmanship and the materials used to construct the roof.
The school district instituted action against Dodson and Mid-Continent Casualty Company, as surety on the performance bond. Dodson's attorney and the School District agreed to submit the case to arbitration before the American Arbitration Association. The Construction Industry Arbitration Tribunal granted judgment against Dodson for the sum of $44,997.00, representing the cost to replace the roof, and $1,000.00 for interior damage caused by the leaky roof. Dodson did not request Insurer to defend against, or even notify Insurer of the school board's action.
Dodson then instituted this action against Insurer for failure to defend and the insurer's alleged bad faith refusal to comply with the terms of the CGLI policy. Insurer subsequently admitted liability for the school building's interior property damage caused by the roofing defect, but insisted that the policy did not cover the subcontractor's defective workmanship or materials. Firm in its belief, insurer requested the district court to determine, as a matter of law, that the CGLI policy provided no coverage for the roofing subcontractor's defective material and faulty workmanship.
The CGLI policy, submitted to the district court, is a standardized contractual form developed, revised and generally used in the insurance industry. Dodson paid liability coverage premiums for bodily injury and property damage in two broad areas: Contractors' Liability Insurance Coverage and Products and Completed Operations Liability Coverage. The insurance contract in question has two interrelated provisions; first, the general declaration of coverage, followed by the second part, the exclusions. The pertinent language of the standardized contract provides:
The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of:
Coverage A. bodily injury or
Coverage B. property damage to which this insurance applies, cau
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