In honor of the first place Kansas City Royals, I thought I’d share a Missouri case I recently found. I fell in love with the Royals as a little kid when the great George Brett came to my school. Drury Company v. Missouri United School Insurance Counsel,1 also involves a school district and an occurrence in October. A Sub-Contractor won summary judgment even though it was not listed as an insured on the policy. Since the Royals are all about winning too, here it is:

The School District entered into a contract with Penzel Construction Company to perform work on its premises. Penzel then hired a subcontractor, Drury, to install a cementitious roof deck known as Tectum. The School District obtained an insurance policy from MUSIC (Missouri United School Insurance Counsel) that provided “basic property coverages” and “special property coverages” including “automatic builder’s risk.” The policy stated:

Where required by contract, this insurance shall include the interests of the Member [School District], the Contractor, all Subcontractors and Sub-sub contractors.

The policy covered:

[A]ll risks of direct physical loss … to the property covered from any external cause except as hereinafter excluded.” The policy provided: “PERILS EXCLUDED: MUSIC does not cover loss due to … faulty workmanship or materials, unless loss by a peril not otherwise excluded in this Document ensues and then MUSIC shall be liable only for such ensuing loss.

Drury began installing the Tectum, but the wet October weather caused moisture damage to the Tectum. Drury submitted a claim to the School District’s carrier, which was denied for faulty workmanship. Drury filed a petition alleging that MUSIC breached the insurance contract by denying Drury’s claim and for vexatious refusal to pay. MUSIC argued that Drury was not an insured under the policy and that the claim was excluded under various provisions, including the faulty workmanship exclusion.

The trial court granted Drury’s motion for summary judgment. It found that the policy covered Drury as a subcontractor based on the plain language of the policy. The trial court also determined that the policy covered Drury’s loss because rain was a covered peril. The trial court awarded Drury actual damages, statutory damages for vexatious refusal to pay, interest, and attorneys’ fees.

The insurance company appealed the court’s ruling claiming that Drury lacked standing. However, a provision in the policy stated, "Where required by contract, this insurance shall include the interests of the Member, the Contractor, all Subcontractors and Sub-subcontractors." The Court of Appeals found this provision expressed an intent to cover subcontractors even though they are not named on the policy.

Second, the insurance company claimed there was no coverage. The Tectum was “covered property” because it was a material “installed or to be installed” at the School District’s building project. The Tectum was also “in the open” on the project’s roof. The Tectum sustained damage as a result of the wet weather. Under the plain language of the policy, the damage to the Tectum resulting from “rain, snow, [or] sleet” is covered.

MUSIC also contended that the policy’s faulty workmanship provision expressly excluded Drury’s loss from coverage, but the appellate court found that because Drury sustained an ensuing loss from the precipitation, MUSIC was liable for that ensuing loss under the plain language of the policy regardless of whether Drury’s workmanship was faulty.

The court also found that MUSIC focused its review of the claim on gathering evidence that Drury’s workmanship was faulty, rather than on the merits of the claim, so damages were awarded for vexatious refusal.

Summary judgement was confirmed.

I hope you find the above case helpful. I have the pleasure of working on cases in Missouri and I’m a big fan of the Kansas City sports teams. It is great to see the Royals doing so well, and to see fans of other teams embracing their success. The K is a fantastic stadium in which to see a game. I hope it gets another World Series flag this year.

1 Drury Co. v. Missouri United Sch. Ins. Counsel, No. ED 100320, 2014 WL 1225265 (Mo. Ct. App. Mar. 25, 2014).