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Nationwide Mutual Fire Insurance Co. v. David Group, Inc.

Supreme Court of Alabama

May 24, 2019

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY
v.
The DAVID GROUP, INC.

         Rehearing Denied August 23, 2019.

         Appeal from Jefferson Circuit Court, Bessemer Division (CV-08-902856)

Page 733

          Kile T. Turner of Norman, Wood, Kendrick & Turner, Birmingham, for Appellant.

          William E. Rutledge, Birmingham, for Appellee.

         SHAW, Justice.

         Nationwide Mutual Fire Insurance Company ("Nationwide"), the defendant in a declaratory-judgment action below, appeals from a judgment entered in favor of the plaintiff below, The David Group, Inc. ("TDG"), holding that TDG was entitled to coverage and indemnification under a commercial general-liability ("CGL") insurance policy issued by Nationwide. We reverse and remand.

         Facts and Procedural History

         In January 2004, TDG, a construction company that specializes in custom-built houses, remodeling, and construction services, purchased a CGL policy from Nationwide. Under the terms of that CGL policy, Nationwide agreed to "pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies." According to the policy, its coverage applied to "bodily injury" and "property damage" only if "[t]he `bodily injury' or `property damage' is caused by an `occurrence.'"

         In October 2006, while TDG's CGL policy with Nationwide was in effect, Saurin and Valerie Shah purchased a newly built house from TDG. After they moved in, the Shahs began experiencing problems with their new house. Despite TDG's efforts at correcting the problems, however, in February 2008, the Shahs sued TDG.

         In their complaint, the Shahs alleged that the house had "severe structural issues" and that they had discovered "numerous and substantial construction defects in the residence including, but not limited to, serious defects resulting in health and safety issues, building code violations, poor workmanship, misuse of construction materials, and disregard of proper installation methods." They also asserted claims of rescission, breach of contract, breach of express and implied warranties, negligence and wantonness, negligent supervision and training, misrepresentation and fraud, suppression, and "gross negligence" and "incompetence." As a result of the purported defects in the house, the Shahs alleged that they "suffered and/or are continuing to suffer damages including, but without limitation[,] repair, and/or replacement costs, loss of the use and enjoyment of areas of their home, loss of market value in their home, mental anguish and emotional distress damages."

         Although Nationwide initially defended TDG against the Shahs' action, Nationwide withdrew its defense after conducting its own investigation into the Shahs' allegations. Nationwide explained in a letter to TDG that, based on its investigation, it concluded that it had no duty either to defend or to indemnify TDG because, according to Nationwide, the damage the Shahs complained of did not constitute an

Page 734

"occurrence" so as to trigger coverage under the CGL policy.

         In September 2008, TDG initiated an action against Nationwide seeking a judgment declaring that Nationwide was obligated to defend TDG in the Shahs' action and to indemnify TDG for any judgment entered against it. TDG also requested that all fees and expenses it incurred in defending against the Shahs' action be paid by Nationwide. Finally, TDG sought a preliminary injunction to ...


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