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FOR IMMEDIATE NEWS RELEASE NEWS RELEASE # 34

FROM : CLERK OF SUPREME COURT OF LOUISIANA

The Opinions handed down on the 22nd day of May, 2007 , are as follows:

BY JOHNSON, J. :

2006-C -1827

SUPREME SERVICES AND SPECIALTY CO., INC. v. SONNY GREER, INC., ET AL. (Parish of Iberia) Therefore, we conclude that the court of appeal erred in granting Greer's motion for summary judgment. We reverse the court of appeal's ruling and reinstate the trial court's ruling. REVERSED and REMANDED. KIMBALL, J., concurs in the result only. KNOLL, J., concurs in the result only.

05/22/07 SUPREME COURT OF LOUISIANA 06 - C - 1827

SUPREME SERVICES AND SPECIALTY CO., INC. vs. SONNY GREER, INC., et al.
ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, THIRD CIRCUIT, PARISH OF IBERIA

JOHNSON, Justice
We granted this writ application to address whether the commercial general liability ("CGL") policy at issue provides coverage to the insured for liability arising out of defective work performed by the insured's subcontractor at a construction site. AXA Global Risk U.S. Insurance Company (hereinafter referred to as "AXA"), the contractor's insurer, filed this writ to review the court of appeal's decision in Supreme Services and Specialty Co. Inc. v. Sonny Greer, Inc., 04-1400 (La. App. 3 Cir. 5/3/06), 930 So.2d 1077, which reversed the trial court's granting of the insurer's motion for summary judgment. The trial court held that the CGL policy clearly and unambiguously excluded coverage of faulty workmanship performed by, or on behalf of, the contractor. For the following reasons, we reverse the court of appeal's ruling and reinstate the judgment of the trial court. FACTS AND PROCEDURAL HISTORY On December 4, 1996, Supreme Services and Specialty Company, Inc. ("Supreme") contracted with Sonny Greer, Inc., d/b/a Sonny Greer Construction

Company, Inc. ("Greer") for the construction of an Oilfield Service Facility in Iberia Parish. Several subcontractors were involved in the construction project,1 i.e., clearing the site, compacting the area, delivering and pouring the concrete for the building's slab and the parking lot. Greer's President, Bridgette Greer, supervised the subcontractors who poured the concrete at this facility. Shortly after the concrete was poured, Supreme complained of cracks in the concrete in both the building and exterior slabs. Thereafter, Greer cut out the cracked sections and poured a new slab in its place. In an effort to satisfy Supreme, Greer signed an agreement which warranted against defects caused by its workmanship in pouring and finishing the concrete. Greer made several attempts to correct the cracking problem; however, the cracks continued to worsen. After the completion of the construction project, Supreme filed suit against its contractor, Greer, and the architect, Melvin J. Oubre, to recover damages resulting from Greer's alleged faulty and defective design and construction of the concrete slabs, arguing breach of contract and breach of the warranty agreement. In response, Greer filed an answer and a third party demand against its insurer, AXA,2 pursuant to the CGL policy issued to Greer.

The record shows the following subcontractors contributed to this project: 1)Louisiana Excavation Co., Inc.- degrassed and compacted the dirt where the building slab was laid; 2) Sea Shell, Inc. - performed the same services as Louisiana Excavation Co., except it constructed the outside parking and work lots; 3) Louisiana Test & Inspection, Inc., - inspected the compacting work; and 4) Cajun Concrete Services, Inc., - poured and finished the concrete for the building slab, while Greer poured and finished the exterior slabs. Angelle Concrete supplied the concrete for both the building and the exterior areas. AXA is the successor to Colonial Insurance Company, which insured Sonny Greer Construction Co., Inc., pursuant to a Commercial General Liability policy, number CGL 158493, with the effective dates of July 15, 1996 to July 15, 1997. 2
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Thereafter, AXA filed a motion for summary judgment, arguing that the "work product" exclusion section 1, paragraph 2(1) of the policy expressly excluded coverage for improper construction by the insured's own workers or any of its subcontractors. Greer argued that the language in the policy was identical to the language in the policy in Mike Hooks v. JACO Services, Inc., 674 So.2d 1125 (La.App. 3 Cir. 1996), writ denied, 681 So.2d 1264 (La. 1996), where the court of appeal found that the CGL policy covered the damages alleged. The trial court granted AXA's motion for summary judgment and denied Greer's motion for summary judgment, explaining that: The issue before the court is whether the `work product' exclusions in the CGL policy exclude coverage to Sonny Greer, Inc. The pertinent exclusion in the policy reads as follows: Property damage to..[.](6) that particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it. 19. "Your work" means: a. work or operations performed by you or on your behalf; and b. Material, parts or equipment furnished in connection with such work or operations. The trial court concluded that the policy exclusion's language is clear and unambiguous and allows for no other interpretation but that " . . . this particular exclusion does exclude the particular work that was incorrectly performed by Sonny Greer on this piece of property." The trial court rejected Greer's argument that Paragraph L (under said subsection "Damage to your Work") creates an ambiguity. Greer appealed from this ruling. The court of appeal reversed the trial court's ruling and found that the work performed by Greer and its subcontractors was covered under the CGL policy. Specifically, the court of appeal held that: 1) the "work product" exclusion was inapplicable to the work performed by the subcontractors and 2) the "products3

completed operations hazard" (PCOH) provision was ambiguous and should be interpreted in favor of coverage. In reaching this conclusion, the court of appeal distinguished Vintage Contracting, L.L.C. v. Dixie Building Material Company, Inc., 03-422 (La. App. 5 Cir. 9/16/03), 858 So.2d 22, where the court of appeal found that the CGL policy excluded coverage for the damages alleged. The court of appeal concluded that part "l" of the CGL is inapplicable to subcontractors and constitutes an exception to the "work product" exclusion, and creates a conflict with part "(2)(j)(5)," which purports to exclude coverage for the work-product of subcontractors as well as the insured.3 In relying on Mike Hooks, Inc. v. JACO Services, Inc., 9501485 (La. App. 3 Cir. 5/8/96), writ denied, 96-1924 (La. 11/1/96), 681 So. 2d 1264, the court of appeal found that the CGL policy provides coverage under the PCOH provision. It further found that the ambiguity in the "work product" and PCOH exclusions should be interpreted against the insurer. AXA filed a writ application with this Court. This Court granted AXA's writ application to review and resolve the conflict among the circuits in applying the "work product" exclusion. Supreme Services and Specialty Co. Inc., v. Sonny Greer, Inc., 06-1827 (La. 11/9/06). DISCUSSION Standard of Review

The court of appeal noted that the Vintage court did not address the language of the CGL policy, which states that the exclusion is inapplicable to subcontractors. The court of appeal relied upon Iberia Parish School Board v. Sandifer & Son Const. Company, Inc., 1998-319 (La. App. 3 Cir. 10/28/98), 721 So.2d 1021. 4

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This Court has determined that the appellate courts must review summary judgments de novo, using the same criteria that govern the trial court's consideration of whether summary judgment is appropriate, i.e., whether there is a genuine issue of material fact and whether the mover is entitled to judgment as a matter of law. Champagne v. Ward, 03-3211 (La. 1/19/05), 893 So.2d 773. Initially, the movant bears the burden of proof. LSA- C.C.P. art. 966(C)(2). If the movant successfully meets this burden, then the burden shifts to the other party to present factual support adequate to establish that he/she will be able to satisfy the evidentiary burden at trial. Richard v. Hall, 03-1488 (La.4/23/04), 874 So.2d 131, 137. If the other party fails to meet this burden, there is no genuine issue of material fact, and the movant is entitled to summary judgment as a matter of law. Id. In Smith v. Our Lady of the Lake Hospital, Inc., 93-2512 (La.7/5/94), 639 So.2d 730, 750, this Court recognized that: a "genuine issue" is a "triable issue." . . . "An issue is genuine if reasonable persons could disagree. If . . . reasonable persons could reach only one conclusion, there is no need for a trial on that issue." . . . [A] "fact is `material' when its existence or nonexistence may be essential to plaintiff's cause of action under the applicable theory of recovery." Id.

According to LSA-C.C.P. art. 966 (B), a motion for summary judgment is properly granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits submitted, show that there is no genuine issue of material fact, and the mover is entitled to a judgment as a matter of law. A court should only grant the motion for summary judgment when the

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facts are taken into account and it is clear that the provisions of the insurance policy do not afford coverage. Reynolds v. Select, 93-1480 (La. 4/11/94), 634 So.2d 1180, 1183. An insurance policy is a conventional obligation that constitutes the law between the insured and the insurer, and the agreement governs the nature of their relationship. LSA-C.C. art. 1983. An insurance policy is a contract, which must be construed employing the general rules of interpretation of contracts. Reynolds, at 634 so.2d at 1183; LSA-C.C. arts. 2045-2057. If the insurance policy's language clearly expresses the parties' intent and does not violate a statute or public policy, the policy must be enforced as written. However, if the insurance policy is susceptible to two or more reasonable interpretations, then it is considered ambiguous and must be liberally interpreted in favor of coverage. Reynolds, supra; Newby v. Jefferson Parish Sch. Bd., 99-0098 (La.App. 5 Cir.6/1/99), 738 So.2d 93. Liability insurance policies should be interpreted to effect, rather than to deny coverage. Yount v. Maisano, 627 So.2d 148, 151 (La.1993). However, it is well-settled that unless a statute or public policy dictates otherwise, the insurers may limit liability and impose such reasonable conditions or limitations upon their insureds. Reynolds, 634 So.2d at 1183; Livingston Parish School Board v. Fireman's Fund American Insurance Company, 282 So.2d 478 (La.1973); Oceanonics, Inc. v. Petroleum Distributing Company, 292 So.2d 190 (La.1974). In these circumstances, unambiguous provisions limiting liability must be given effect. Jones v. MFA Mutual Insurance Company, 398 So.2d 10 (La. App. 3 Cir.

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1981); Snell v. Stein, 259 So.2d 876 (La.1972); Niles v. American Bankers Insurance Company, 258 So.2d 705 (La.App. 3 Cir.1972). With that stated, we note that the insurer bears the burden of proving that a loss falls within a policy exclusion. Blackburn v. National Union Fire Ins. Co., 00-2668 (La.4/3/01), 784 So.2d 637, 641.

ANALYSIS Now, we turn to the language of the subject insurance policy to determine whether the court of appeal erred in finding coverage existed for the damages claimed as a matter of law. AXA's CGL policy provides, in pertinent part, as follows: SECTION I--COVERAGES COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY 1. Insuring Agreement. a. We will 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. . . . . b. This insurance applies to "bodily injury" and "property damage" only if: (1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory;" and (2) The "bodily injury" or "property damage" occurs during the policy period. . . . . 2. Exclusions. This insurance does not apply to: .... j. Damage to Property "Property damage" to: (1) Property you own, rent or occupy;
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. . . . (5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations; or (6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it. . . . . Paragraph (6) of this exclusion does not apply to "property damage" included in the "products-completed operations hazard." k. Damage to Your Product "Property damage" to "your product" arising out of it or any part of it. l. Damage to Your Work "Property damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard." This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor. . . . . SECTION V--DEFINITIONS . . . . 14. a. "Products-completed operations hazard" includes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work" except: (1) Products that are still in your physical possession; or (2) Work that has not yet been completed or abandoned. b. "Your work" will be deemed completed at the earliest of the following times: (1) When all of the work called for in your contract has been completed. (2) When all of the work to be done at the site has been completed if your contract calls for work at more than one site. (3) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project. Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.
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c. This hazard does not include "bodily injury" or "property damage" arising out of: ( 1) The transportation of property. . . . (2) The existence of tools. . . . (3) Products or operations for which the classification in this Coverage Part or in our manual of rules includes products or completed operations. 15. "Property damage" means: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it. . . . . 17. "Your product" means: a. Any goods or products, other than real property, manufactured, sold, distributed or disposed of by: (1) You; (2) Others trading under your name; or (3) A person or organization whose business or assets you have acquired; and b. Containers (other than vehicles), materials, parts or equipment furnished in connection with such goods or products. "Your product" includes: a. Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your product;" and b. The providing of or failure to provide warnings or instructions. . . . . 19. "Your work" means: a. Work or operations performed by you or on your behalf; and b. Materials, parts or equipment furnished in connection with such work or operations. "Your work" includes: a. Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of "your work;" and b. The providing of or failure to provide warnings or instructions. (Emphasis Added.)

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Professors McKenzie and Johnson define both the "work product" exclusion and the "PCOH" provision. See,

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