[No. 57959-2-I. Division One. April 16, 2007.]
[1] Insurance — Construction of Policy — Question of Law or Fact — Standard of Review. The interpretation of an insurance contract is a question of law that is reviewed de novo. [2] Insurance — Construction of Policy — Policy as a Whole — Plain, Ordinary Meaning. A court construes an insurance contract as a whole, giving the words used in the contract their plain, ordinary meaning. [3] Insurance — Construction of Policy — Average Purchaser — In General. An insurance contract is read by a court the way the average consumer of insurance would read it. [4] Insurance — Construction of Policy — Reasonable Interpretation — In General. An insurance contract should be given a practical and reasonable interpretation, not a strained or forced one. [5] Appeal — Review — Issue Not Raised in Trial Court — In General. An appellate court may decline to consider a claim that was not raised in the trial court. [6] Insurance — Claim for Loss — Causation — Concession — Effect. In a case concerning whether an insurance policy provides coverage for a loss, where the insured concedes the cause of the loss in proceedings before the trial court, a reviewing court may decline to consider the insured's claim on appeal that the loss was the result of some other cause. [7] Insurance — Scope of Coverage — Question of Law or Fact — Undisputed Facts. An issue of insurance coverage may be decided as a matter of law if the material facts are undisputed. [8] Insurance — Scope of Coverage — Determination. A court engages in a two-step process to determine whether an insurance policy provides coverage for a loss. First, the court must decide whether the policy applies to the type of loss. Second, the court must decide whether any coverage exclusion in the policy applies. [9] Insurance — All-Risk Insurance — Scope of Coverage — In General. Under an all-risks insurance policy, recovery is allowed for all fortuitous losses unless a specific exclusion applies. [10] Insurance — Exclusions — Construction — Limitation to Plain Meaning. A court must give effect to the plain meaning of an insurance policy coverage exclusion. [11] Insurance — Exclusions — Faulty Work — What Constitutes — Negligent Performance by Contractor. For purposes of a coverage exclusion in an all-risk insurance policy for "loss caused by faulty, inadequate or defective: . . . design, specifications, workmanship, repair, construction, renovation, remodeling, grading, [or] compaction," "faulty" means marked by a fault and "workmanship" means both (1) using skill to make or do something and (2) the end product of that work. Accordingly, "workmanship" includes using skill or craft to make or do something that is not limited to the construction of property. A loss to the insured caused by a contractor's negligence while performing the work required by the contract can therefore constitute "faulty workmanship" for which coverage under the policy is excluded. Nature of Action: A city sought coverage under an "all-risks" insurance policy for damage to the liner of a municipal wastewater lagoon caused by a contractor in the course of dredging biosolids from the lagoon. Superior Court: The Superior Court for Island County, No. 04-2-00450-5, Vickie I. Churchill, J., on February 16, 2006, entered a summary judgment in favor of the insurer, ruling that the faulty workmanship exclusion under the policy applied. Court of Appeals: Holding that the damage to the lagoon liner caused by the contractor in the course of dredging biosolids from the lagoon constituted faulty workmanship that was excluded from coverage under the "all-risks" policy, the court affirms the judgment. Lawrence Gottlieb- (of Betts Patterson Mines, P.S.), for appellant. Thomas D. Heffernan- (of Heffernan Law Firm, P.L.L.C.), for respondent. ¶1 COX, J. — At issue is whether St. Paul Mercury Insurance Company met its burden to show there was no genuine issue of material fact regarding the application of its faulty work exclusion to the City of Oak Harbor's (City) claim under its all-risks policy. Because this record shows there was no genuine issue of material fact and St. Paul was entitled to judgment as a matter of law, we affirm. ¶2 In 2002, the City hired R&R Environmental, Inc., to dredge biosolids from lagoons located in the City's wastewater treatment plant. The City and R&R signed a contract for this service. The contract, among other things, required R&R to leave no more than approximately one foot of biosolids in the bottom of the lagoon. ¶3 R&R performed the dredging project. About a year later, the City discovered many tears in one of the lagoon liners. An engineering firm determined that R&R more likely than not caused the liner damage, most probably from defectively operating the auger that was used to break up the biosolids. Shortly before trial, the City, in a separate action from this, settled with R&R in exchange for its primary insurance limits of $1,000,000. ¶4 The City had an "all-risks" insurance policy with St. Paul. The City sued St. Paul in this action to recover under that policy. The trial court granted St. Paul's motion for summary judgment based on the defense that the faulty workmanship exclusion applied. ¶5 The City appeals. SCOPE OF THE POLICY EXCLUSION ¶6 The City argues that there is a material factual dispute regarding the cause of the liner damage. It also claims that the policy exclusion for faulty workmanship does not apply to the damage in this case. Because the cause of the liner damage is not in dispute and it is covered by the plain meaning of "faulty workmanship," the trial court correctly ruled that the exclusion applies to bar coverage. ¶7 We review a trial court's summary judgment determination de novo. ¶9 If an insurance contract is ambiguous in that it is subject to more than one reasonable interpretation, the language should be interpreted against the insurer. ¶10 First, the City argues that there is a genuine issue of material fact regarding the cause of the liner damage. But the City conceded in its trial court brief that R&R's negligence caused the property damage in this case: During its dredging operations in August and September 2002, R&R negligently caused the auger of its hydraulic dredge to repeatedly cut, rip and tear the heavy plastic liner on the bottom of the City's sewer lagoon. ¶14 The City argues that the faulty workmanship exclusion does not apply because the property damage was "fortuitous." This argument misapplies the legal doctrines at issue in this case. We won't cover loss caused by faulty , inadequate or defective . . . design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction . . . . . . . . All of the above apply to part or all of any property on or off the location described in the Coverage Summary. According to the dictionary, "faulty" means "marked by a fault." ¶17 Washington law requires us to give effect to the plain meaning of each contract exclusion. ¶18 In interpreting exclusions similar to the one in this case, many courts have debated whether the term "workmanship" means a process or a product. ¶19 It is not necessary for us to resolve these debates in this case. Under any of these definitions, the exclusion applies to the facts of this case. ¶20 The City conceded below that R&R was negligent in dredging the pit. This violates the "negligence" definition of "faulty workmanship." It also means that R&R was faulty in making or doing something—a process. ¶21 It is equally clear that R&R breached its contract, which specifically required R&R to dredge within one foot of the liner without causing any tears in or damage to the liner. Therefore, R&R likewise violated the "contract" definition of "faulty workmanship." And R&R produced a faulty product—a dredged pit that had a liner torn in several places. ¶22 The City argues that the faulty workmanship exclusion cannot apply because something "external" to construction of the lagoon liner caused the damage to the liner. This argument contravenes Washington case law, and we reject it. ¶23 In Capelouto v. Valley Forge Insurance Co., ¶24 The City's similar argument in this case, where workmanship is involved, is unpersuasive. The City admits in its brief that Capelouto involved "damage to a house from extraneous operations." It attempts to distinguish that case on the basis that the cause of the damage was inadequate design or specifications "within the plain meaning of that policy's exclusion." This distinction misses the point. The "design" and "specifications" terms are not at issue in this case. Capelouto does not help us define the term "workmanship," which is a separate term in the exclusion. Capelouto simply illustrates that something "external" from the covered property can qualify as faulty design, specifications, or workmanship. ¶25 The City further argues that negligently performing the dredging project was not faulty workmanship because it was not completely foreseeable or "inherent" in the project. According to this theory, because R&R acted outside of the contract requirements by dredging too close to the liner and cutting it, its actions were not inherent in the construction process. But contractor negligence is never a project requirement. By the City's reasoning, anytime a contractor was negligent and performed in a faulty manner, the faulty workmanship exclusion would not apply because that negligence was not "inherent" in the project. This makes no sense. If faulty workmanship were only exempted when foreseeable and inherent in a project, the exclusion would cease to have any meaning whatsoever. ¶26 Similarly, the City argues, "Nor was there any inherent defect in the process of dredging the biosolids that necessarily caused damage to the liner." ¶27 R&R's dredging was not external to the "workmanship" being done on the covered property—it was the workmanship in question. Although the lagoon and its liner were constructed long ago, R&R was still negligent in its "workmanship" when it dredged the lagoon. This was in fact the work R&R contracted to complete. The faulty manner in which it performed that work was the cause of the property damage. ¶28 Finally, the parties dispute the applicability of McDonald v. State Farm Fire & Casualty Co., ¶29 We affirm the summary judgment order. SCHINDLER, A.C.J., and DWYER, J., concur.