Metric Construction Co. v. Allianz Global Risks US Ins. Co.

Filed 10/24/06 Metric Construction Co. v. Allianz Global Risks US Ins. Co. CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

Allianz Global Risks US Insurance Company (Allianz) issued an "all risks" insurance policy to Metric Construction Company, Inc. (Metric) for the construction of a warehouse. The policy excluded coverage for the cost of repairing faulty workmanship in construction but, in an exception to the exclusion, covered damage to other parts of the building and its contents that resulted from the faulty workmanship.

The roof of the warehouse was seriously damaged, and Metric filed an action seeking coverage of the cost of repairing the roof. Allianz claimed the roof repairs were excluded as a cost of repairing faulty workmanship in constructing the roof. Metric claimed that the roof was damaged by defects in the steel frame of the building and, therefore, that the cost of repairing the roof was covered as damage resulting from defects in another component of the building.

After a bench trial, the trial court entered judgment in favor of Allianz. The court found that the predominant or "efficient proximate cause" of the roof damage was faulty workmanship in constructing the roof itself. Therefore, the cost of repairing the roof was an excluded cost of repairing faulty workmanship, and not a cost of repairing other damage that resulted from faulty workmanship.

Metric appeals the judgment. Metric contends that the trial court erred in the determination of the "efficient proximate cause" of the loss, and incorrectly imposed the burden of proving application of the exception to the exclusion on Metric. We affirm.

FACTS AND PROCEDURAL HISTORY

In 1999, Metric entered into a contract with the United States Corps of Engineers to act as general contractor for the construction of a large military warehouse on an air force base. At all relevant times, Metric was insured by Allianz under a builder's risk insurance policy. The policy insures against all risks "of direct physical loss of or direct physical damage to" the warehouse, but includes an exclusion and an exception to the exclusion concerning defective construction. The policy provides that there is an exclusion from coverage for: "[t]he cost of making good faulty or defective workmanship, material, construction, designs, plans and/or specifications but this exclusion shall not apply to direct physical loss or direct physical damage resulting from such faulty or defective workmanship, material, construction, designs, plans and/or specifications." (Italics added.)

Metric retained a subcontractor, Professional Rain Gutter, Inc., to construct the roof. The roof, a "structural standing seam metal roof system," was to be installed over a structural steel frame and had to be free to expand and contract in response to daily temperature changes. The roof consisted of numerous panels that were fastened with bolts and had "floating clips" attached to panel seams to permit expansion and contraction.

The roof leaked. Water came into the building through fastener holes in the roof that had been elongated by the inability of the roof to properly expand and contract, and due to other damage to the roof panels.

The parties agreed that, as a corrective measure, Metric would add a new layer of rigid insulation above the existing roof and install a new metal "skin" over that new insulation. The cost of repairing the roof exceeded $1.7 million.[1]

The parties, however, disagreed on the cause of the failure of the roof and, consequently, on whether the cost of repairing the roof was covered under the policy. Metric filed a complaint seeking a declaratory judgment that there was coverage and damages for breach of contract.

The case was tried by the court in March 2004. Both parties relied heavily on expert testimony. Allianz's expert concluded that the primary cause of the damage to the roof was defective workmanship in the construction and installation of the roof. He testified that there were numerous deficiencies in the roof construction, including faulty alignment of roof panels, improper seams, deficient flashing, use of incorrect fastener clips, and the failure to install shims. He concluded that these deficiencies restricted the ability of the roof to adequately expand and contract to accommodate changes in weather conditions. Based on this testimony, Allianz claimed that the cost of roof repairs was excluded from coverage under the exclusion for the "cost of making good faulty or defective workmanship."

Metric's expert agreed that there had been defective roof construction, but concluded that the primary cause of the damage to the roof was a defect in the structural steel frame of the warehouse. Metric's expert concluded that the structural steel framing was uneven and "out of plane," and that the damage to the roof was caused by the excessive pressure exerted on the roof by the defective steel framing. Metric's expert also concluded that excessive fiberglass insulation was a less significant contributing cause to the failure of the roof panels. Based on this testimony, Metric claimed that the cost of repairing the roof fell under the exception to the exclusion for direct physical loss or damage "resulting from" faulty or defective workmanship in the steel frame.

After trial, the court tentatively found that the predominant cause of the damage to the roof was defective construction of the steel frame and faulty insulation, not defective workmanship in the roof construction. Based on this finding, the trial court tentatively ruled in favor of Metric, concluding that the cost of repairing the roof was covered under the exception to the exclusion because it resulted from defective workmanship in another component of the building.

After the submission of proposed statements of decision by both parties, the court rethought and rejected its tentative ruling. In its final statement of decision, the court found that the "efficient proximate cause" of the roof damage was defective roof workmanship, not defects in the steel frame. Accordingly, the court ruled that the cost of roof repairs was excluded from coverage.

DISCUSSION

No Error in Determination of Efficient Proximate Cause

Metric contends that the trial court erred as a matter of law by failing to find a single "efficient proximate cause" of its loss. We disagree.

In many cases, the loss or damage subject to a claim under an all risk policy results from both covered and excluded perils. "'. . . The task becomes one of identifying the most important cause of the loss and attributing the loss to that cause.'" (Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 406.) Our Supreme Court has developed the concept of "efficient proximate cause" as "a workable rule of coverage that provides a fair result within the reasonable expectations of both the insured and the insurer whenever there exists a causal or dependent relationship between covered and excluded perils." (Id., at p. 404; see also Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 754.)

The efficient proximate cause of a loss is the single "predominating" or most important cause of the loss. (Garvey v. State Farm Fire & Casualty Co., supra, 48 Cal.3d at p. 403.) When the efficient proximate cause is covered by insurance, the fact an excluded risk contributed to the loss does not preclude coverage. Conversely, there is no coverage when an excluded risk is the efficient proximate cause and a covered risk contributes to the cause. (Id., at pp. 402-403.)

Here, there was evidence that the damage to the roof had multiple causes, and the critical issue before the trial court was the determination of which cause constituted the efficient proximate cause. Metric's expert testified that defective construction of the roof and excessive insulation contributed to the damage, but opined that the primary cause was the uneven and "out of plane" steel framing. Allianz's expert opined that the primary cause was defective construction of the roof and minimized the significance of other causes.

In addition, the policy excludes the cost of repairing faulty workmanship in one element of the building, but covers the cost of repairing damage to another part of the building "resulting from" that defective workmanship. Both Metric and Allianz accepted the position that the cost of repairing the roof would be excluded from coverage if the efficient proximate cause of the roof damage was defective roof workmanship, but would be covered as resulting damage if the efficient proximate cause was a defect in another component of the building.

Metric contends that the trial court did not make a finding of a single efficient proximate cause and, instead, erroneously found multiple efficient proximate causes. Relying on one sentence in the statement of decision, Metric argues that the court found that the efficient proximate cause of the loss was defective workmanship in the roof construction, and Metric's failure to properly supervise roof construction, and defective insulation.[2] We conclude, based on the statement of decision as a whole, that the trial court found defective workmanship in the construction of the roof to be the single efficient proximate cause of the loss.

We reject Metric's premise that, by referring to improper supervision, the trial court viewed defective supervision of roof construction as a cause of the damage separate from defective workmanship in roof construction. Nothing in the record suggests that supervision was anything other than an element of workmanship. The record also shows that the trial court's reference to "faulty and defective insulation" does not constitute a finding that the insulation constituted a second efficient proximate cause of the roof damage in addition to defective roof construction.

When faced with ambiguity or uncertainty, well-established authority requires a reviewing court to draw all intendments and presumptions in favor of the judgment and to resolve all matters in favor of affirmance. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) When findings are superficially inconsistent, we are obliged to reconcile them if possible, rather than to presume prejudicial error. (Allen v. Sundean (1982) 137 Cal.App.3d 216, 224; Ungemach v. Ungemach (1943) 61 Cal.App.2d 29, 40.) “In construing findings the law is well settled that all of the findings must be read together, and if, when so read, the clear intent and purpose of the findings are made plain, the mere fact that a clause or a sentence therein, read alone, would appear to be contradictory or insufficient, such error or failure, to completely express that which is intended to be stated will not vitiate the findings or render them insufficient to support the conclusions of law drawn therefrom and the judgment based thereon.” (Vila v. Brovelli (1935) 3 Cal.App.2d 713, 716-717.)

The reference to defective insulation is out of place and detracts from the clarity of the sentence, but the trial court restated its finding later in the statement of decision with indisputable clarity. It stated that the damage to the roof panels is "excluded from coverage because the efficient proximate cause of such damage was the faulty or defective workmanship and construction in the installation of these panels themselves."

Moreover, the critical factual dispute presented by the evidence at trial concerned the relative importance of defective roof workmanship and uneven steel framing, and the statement of decision focuses its attention almost exclusively on roof construction. The court made extensive findings of fact regarding defects in the workmanship and construction of the roof, including a specific finding that the expansion and contraction of roof panels causing damage "was due to the anticipated thermal cycles action upon long metal strips exposed to heat and cold and because these strips were installed with faulty workmanship, the roof tore itself apart." In addition, although Metric's expert testified that the excessive insulation contributed to the roof damage, there was no evidence or contention that it could have been the primary cause.

Metric also argues that the trial court failed to properly determine the efficient proximate cause of the roof damage because confused, contradictory, and incorrect findings in the statement of decision reveal that the court did not understand how the multiple causes interrelated and, therefore, could not properly weigh the evidence.

Although a judgment must be reversed when there are clearly contradictory and irreconcilable findings on critical matters, findings in a statement of decision must be liberally construed to support the judgment. (Hollywood Cleaning & Pressing Co. v. Hollywood Laundry Service, Inc. (1932) 217 Cal. 131, 137; U. S. Industries, Inc. v. Vadnais (1969) 270 Cal.App.2d 520, 532.) Here, we conclude that the statement of decision does not include contradictory or irreconcilable findings.

In fact, Metric does not challenge the statement of decision standing alone. Metric cites differences between the trial court's tentative decision and final statement of decision. Clearly, the tentative and final decisions are irreconcilable because the trial court reached different conclusions. But, a tentative decision is not binding on the court and may be modified or changed. (See Khan v. Superior Court (1988) 204 Cal.App.3d 1168, 1173, fn. 4; see also People ex rel. State Air Resources Bd. v. Wilmshurst (1999) 68 Cal.App.4th 1332, 1341.) The court was not bound by its tentative decision and, upon further consideration of the evidence and law, could properly enter a wholly different judgment. (In re Marriage of Ditto (1988) 206 Cal.App.3d 643, 646.)

Trial Court Applied Correct Burden of Proof

Metric also contends that the trial court made its decision based upon an incorrect burden of proof. Metric argues that the court improperly required Metric to prove that its loss was covered by the policy and did not require Allianz to prove that the exception to the exclusion for defective workmanship did not apply. We disagree.

When an insurance policy covers a specified peril, the insured has the initial burden of proving that its loss was caused by that peril. (Strubble v. United Services Auto. Assn. (1973) 35 Cal.App.3d 498, 504.) An "all risk" policy, however, does not cover a specified peril. Instead, it broadly covers all risks of physical loss or damage, and limits coverage through specific exclusions. (Ibid.) Under an all risk policy, once the insured shows that an event falls within its basic coverage, the burden is on the insurer to prove a claim is excluded. (Garvey v. State Farm Fire & Casualty Co., supra, 48 Cal.3d at p. 406.) Consequently, the insurer "must prove the policy's noncoverage of the insured's loss - that is, that the insured's loss was proximately caused by a peril specifically excluded from the coverage of the policy." (Strubble, at p. 504.)

Here, the trial court correctly assigned the burden of proof in its statement of decision by stating that Metric had the burden of establishing that it "sustained fortuitous loss that falls within [the] policy's basic coverage," and Allianz had the burden of "establishing the applicability of an exclusion." There was no dispute at trial that the roof damage fell within the "basic coverage" provided by an all-risk insurance policy, and the trial court did not require Metric to prove that the roof damage was covered by the policy. In addition, the statement of decision does not state, or permit the conclusion that Allianz was required to establish faulty roof workmanship but not to negate the exception for damage resulting from such faulty workmanship.

Metric asserts that the trial court's error in assessing the burden of proof is revealed by its failure to determine a single efficient proximate cause, inconsistencies between its tentative and final decisions, and factual omissions and errors in the statement of decision. We have already rejected Metric's arguments based on the finding of an efficient proximate cause, and on differences between the tentative and final rulings.

In oral argument, however, Metric focused on purported inconsistencies and factual omissions within the statement of decision. A statement of decision must determine the ultimate facts and material issues of a case, but need not specify all the evidence considered by the trial court in reaching that determination. (Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1124-1125.) And, it is fundamental that an appellate court does not reweigh the evidence or decide disputed questions of fact by substituting its choice of the most convincing evidence for that of the trial court. (See Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1379-1380.)

Here, the statement of decision adequately analyzes the evidence and makes consistent and reasoned findings of fact and conclusions of law regarding the ultimate issues. Metric searches for any detail that could be criticized or interpreted favorably to its position, and cites isolated sentences that could have been phrased differently, or could have been reconciled with contrary factual findings. Because the entire case turned on testimony by experts who reached fundamentally different conclusions, inevitably there will be some evidence supporting both positions. But, Metric is not challenging the burden of proof. Metric is simply arguing that its evidence was more persuasive despite the trial court's conclusions.

The judgment is affirmed. Costs are awarded to respondent.

NOT TO BE PUBLISHED.

PERREN, J.

We concur:

GILBERT, P.J.

COFFEE, J.

Frederick H. Bysshe, Judge

Superior Court County of Ventura

______________________________

Peel Brimley LLP, Steven D. Meacham and Robert E. Schumacher for Plaintiff and Appellant.

Jones Turner, LLP, Alan M. Jones and Ron H. Burnovski for Defendant and Respondent.

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Analysis and review provided by Poway Property line Lawyers.

[1] Other repair costs totaling approximately $100,000 are not contested in this appeal.

[2] The sentence states: "The Court finds that the 'efficient proximate cause' of the roof leaks resulting in an unacceptable roof which caused water damage to the insulation, epoxy floor, interior walls and electrical units, and the ultimate need to install a new roof, was the numerous instances of Rain Gutter's faulty workmanship and construction, such as unseamed and improperly seams [sic]; the improper or inadequate sealant at lap joints and ridge panels; the missing, over-driven, and backed up fastener/screws; the improper installation of curb flashings at the rake; the improper integration of curb flashings at air handlers; the use of improper fastener clips [and] the over-lightening or under-lightening of the panel fasteners, the lack of fasteners, lack of or inadequate installation with butyl tape on the ridge, end laps and seams; the misaligned panels; the failure of Metric to properly supervise the roof installation, including Metric's failure to require Rain Gutter to use shims or other techniques to bring the structural steel even to comply with the project specifications, as well as faulty and defective insulation." (Italics added.)