The federal district court found that under Montana law, water damage resulting from alleged faulty workmanship in repairing the insured's roof was covered. Leep v. Trinity Universal Ins Co., 2017 U.S. Dist. LEXIS 86759 (D. Mont. June 6, 2017).
The insured's property was damaged in a hail storm. The insured contracted with Sprauge to repair the hail damage. Sprauge tore off and replaced roof lining and shingles. Sprague replaced a vent cap and tubes, but did not replace any vent piping or vents. The contract between the insured and Sprauge provided it was the owners' responsibility to check the exhaust vents for all furnaces and water heaters after the roofing project was completed.
Subsequent to the repairs, water was found dripping from a bathroom fan. Moisture was also found on the second story emanating from the ceiling. Finally, in the attic, the furnace vent piping was disconnected and the furnace exhaust was venting into the attic.
The insured reported the water damage to Trinity, noting his belief that Sprauge had not properly connected the new roof vent to the attic. Trinity hired an inspector who found moisture damage, including a large amount of mold in the attic area and wet insulation in need of replacement. Sprauge contended it did not replace any vent piping or vents; it disputed that it detached or disconnected the furnace vent piping, and disputed that the work caused any damage to the insured's home.
Nevertheless, Trinity denied the claim based upon the all-risk policy's exclusion for faulty workmanship or construction. The ensuing damage that resulted from the moisture in the attic was not a separate loss, but was the direct result of the contractor's failure to properly repair the roof.
The insured sued and the parties filed cross-motions for summary judgment. The insured argued that the faulty workmanship exclusion did not apply because connected the furnace vent was not within Sprauge's scope of work. Further, even if the exclusion applied, the loss was nevertheless covered under the policy's ensuing loss exception.
The court denied the insured's motion for partial summary judgment. The contract between Sprauge and the insured did not control whether the faulty workmanship exclusion applied. Further, the policy did not limit the exclusion to only faulty workmanship that fell within the scope of work agreed upon between the insured and a contractor. Rather, the exclusion broadly applied to "any" losses caused by faulty workmanship.
The court also found, however, that there were disputed issues of material fact regarding whether Sprauge's workmanship was, in fact, faulty. It was unclear whether Sprauge was responsible for disconnecting the vent pipe, and whether a reasonable roofer would have known the vent had been disconnected.
Even if the faulty workmanship exclusion applied, however, there was coverage under the ensuing loss exception in the policy. A reasonable consumer would understand that the ensuing loss provision provided coverage for any otherwise covered loss that took place as a result of faulty workmanship. Unlike the faulty workmanship exclusion, several exclusions in the policy applied to loss "caused directly or indirectly" from "any other cause or event contributing concurrently or in any sequence to the loss." Trinity could have included similar language for the faulty workmanship exclusion, but instead expressly limited the application of the exclusion by the inclusion of the ensuing loss provision.
Therefore, assuming Sprauge's workmanship was faulty and caused the furnace vent to become disconnected, the cost to repair or replace the furnace venting was not covered by the policy. However, the loss that followed as a result, i.e., the damage caused by the intrusion of water vapor form the furnace, was an ensuing loss that was covered.
Accordingly, the court found that summary judgment should be entered in favor of the insured on the issue of coverage.