Lower Chesapeake Associates v. Valley Forge Insurance

Present: All the Justices

LOWER CHESAPEAKE ASSOCIATES, A LIMITED
PARTNERSHIP T/A WILLOUGHBY HARBOUR
MARINA AND LITTLE BAY, LTD.

v. Record No. 991787 OPINION BY JUSTICE BARBARA MILANO KEENAN
June 9, 2000
VALLEY FORGE INSURANCE COMPANY

FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
Jerome James, Judge

In this appeal, we consider whether the trial court erred

in ruling that the owner of a marina was entitled to insurance

coverage under a commercial property insurance policy for damage

to the marina's docks allegedly caused by a hurricane.

Lower Chesapeake Associates, a limited partnership trading

as Willoughby Harbour Marina, and its general partner, Little

Bay, Ltd. (collectively, Lower Chesapeake), operate a commercial

marina in Norfolk on Willoughby Bay (the marina). The marina

consists of four, seven-foot wide floating docks, designated as

Docks A, B, C, and D, which provide about 300 boat slips for

pleasure craft.

On September 6, 1996, Hurricane Fran struck the coast of

North Carolina and affected the Norfolk area with wind, rain,

and a storm surge. About five months earlier, Lower Chesapeake

had obtained a commercial property insurance policy (the policy)

for the marina from Valley Forge Insurance Company (Valley
Forge). Lower Chesapeake submitted a damage claim under the

policy for "debris removal and repair and replacement of the

damaged docks," based on damage allegedly caused by Hurricane

Fran. After Valley Forge denied coverage for the claim, Lower

Chesapeake brought this breach of contract action seeking, among

other things, an award of compensatory damages in the amount of

$1.2 million.

At a bench trial, James Ripley, Jr., the marina's dock

master, testified that all four docks were damaged during

Hurricane Fran as a result of wind blowing against the boats

moored at the marina. Ripley stated that some of the lines

securing the moored boats broke, and that the boats repeatedly

collided with the short finger piers that project from the main

docks. He also explained that many of the boat lines were tied

to cleats that were affixed to the deck boards. The wind caused

boats to draw against the lines and the cleats, causing the deck

boards to "pull up."

Ripley testified that the waves during Hurricane Fran were

insignificant and did not cause damage to the docks, but he

agreed that the moored boats were "pitching" during the

hurricane as a result of the wind and the waves. He also

acknowledged that he had told an insurance investigator soon

after the hurricane that wind caused the wave action that

damaged the docks.

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 Ripley explained that the floating docks were comprised of

separate sections linked together by joints constructed of metal

brackets and a type of flexible plastic or rubber. He stated

that before Hurricane Fran struck, the marina had experienced

problems involving broken joints, and that additional joints had

broken during a "nor-easter" storm in March 1996 (the March

storm), prior to the effective date of the policy.

Whenever a joint broke, marina personnel routinely repaired

or "patched" it by replacing the flexible joint with a rigid

connection between the dock sections. These rigid connections

were made by nailing or bolting boards across the top of the

deck or onto the stringers, the horizontal support beams under

the deck, at the location of a broken joint. Similar repairs

were made to the connections between the finger piers and the

main docks. Many of these repairs "gave way" during Hurricane

Fran.

The marina also had a floating wooden breakwater located

between the docks and the entrance to the bay, which served to

shelter the docks. Ripley explained that many sections of the

breakwater had broken away during the March storm and had not

been replaced before Hurricane Fran struck.

Lower Chesapeake had obtained an estimate of $194,000 to

make the permanent repairs necessitated by the March storm, but

had not made those repairs before Hurricane Fran struck. Ripley

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described in detail the damage sustained by each section of each

dock during Hurricane Fran, referring to numerous photographs

that were admitted into evidence. The damage to all four docks

included loose and missing deck boards, displaced pilings,

overturned utility pedestals, broken deck joints, and missing

finger piers. Ripley testified that Dock C "gave way" at its

"dogleg" angle when wind pushed a moored boat against the dock.

He acknowledged that the marina continued to use all of Docks A

and B, and most of Docks C and D after the hurricane, without

replacing any part of the docks.

Robert Layton, whose home is adjacent to the marina,

testified that he went to the marina during Hurricane Fran to

help secure the boats. He saw cleats, planks, and utility

pedestals pull from the dock decking, and observed finger piers

break loose from the docks after some of the boats hit against

the docks. Layton stated that Hurricane Fran did not cause

"significant" waves, and that "for a hurricane event, it was a

relatively flat occurrence."

Michael Whitt testified that he rented a boat slip on Dock

D of the marina from March 1995 until after Hurricane Fran

struck. He stated that he had complained to Ripley about the

poor condition of the docks and the breakwater every week during

the boating season. Whenever the wind exceeded 20 to 30 miles

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per hour, the cleats to which the boats were tied pulled from

the deck boards because the deck wood was rotten.

Whitt testified that there had been numerous "Band-Aid

fixes" made to the docks, such as boards being nailed or bolted

over rotted dock joints and finger pier connections. He also

explained that he frequently nailed boards across the decking

near the cleats he was using in order to keep the cleats from

"popping up," but that the deck wood was so rotten that these

repair attempts were usually unsuccessful. Whitt stated that

sections of the breakwater would "break loose during any type of

storm that produced a good wind," and that some disconnected

sections frequently floated loose in the water. He also

testified that Dock C "broke in half" at its "dogleg" angle

during Hurricane Fran.

James W. Smith qualified as an expert witness and rendered

opinions on the damage to the docks and the estimation of repair

and replacement costs. After Hurricane Fran, Smith inspected

the marina's damage and estimated the cost of repairing all four

docks. He concluded that 80% of Dock C and 88% of Dock D had

sustained "considerable damage," and that the least expensive

means of repairing these docks was to replace them completely.

Smith also testified that about 40% of Dock B and 20% of Dock A

were damaged and required replacement.

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 Smith's total assessment of the replacement cost for all

four docks was about $1.3 million. He acknowledged, however,

that he could not determine whether some of the damage he

observed after Hurricane Fran had been caused by the earlier

March storm. He also explained that he had not distinguished

between storm damage and damage caused by rot or poor

maintenance.

Jesse Herman Brown, Jr., also testified as an expert

witness and rendered opinions on the damage to the docks and the

estimation of repair and replacement costs. He examined the

marina about a month after Hurricane Fran and concluded that the

structural framework of Docks C and D had deteriorated to the

point that these docks could not be repaired. Brown stated that

this deterioration occurred over a period of years, and that the

repairs made by marina personnel to the dock joints and finger

pier connections were "[v]ery temporary, and dangerous."

Brown estimated a cost of about $991,000 to replace Docks C

and D. He explained that he could not state the percentage of

this cost attributable to the repair of damage caused by the

hurricane, and that most of the damage he observed was caused by

general deterioration and wear.

Richard Potts, a forensic civil engineer, qualified as an

expert witness on the causes of structural failure and was the

only expert to express an opinion about the cause of the storm

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damage incurred during Hurricane Fran. He examined the marina's

docks about three weeks after the hurricane and also consulted a

report on the hurricane issued by the National Oceanic and

Atmospheric Administration (NOAA). That report indicated that

the NOAA station nearest the marina recorded sustained wind

speeds of 42 miles per hour, a peak gust of 63 miles per hour,

and a storm surge of two feet, six inches.

Potts explained that a storm surge is "the rise above

normal elevation of the water due to the storm," and that this

is a different phenomenon from waves or tides. Although he had

no data establishing the height of the waves at the marina

during the hurricane, he concluded that there was a high

probability that there was wave action of some degree. Potts

also explained that because large sections of the breakwater

were missing, the breakwater could not dissipate as much of the

wave energy as it was designed to do.

Potts testified that he found "excessive deterioration

[and] decay," especially on Docks C and D, which had occurred

over a period of between several months and a few years. He

stated that the pattern of damage he observed on the docks was

not consistent with damage caused by wind alone. In Potts'

opinion, the primary cause of the damage was long-term

deterioration, combined with the impact of waves and surging

water. He noted that the docks failed at the joints, and that

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due to the existing deterioration, movement caused by even small

waves would have been sufficient to inflict the damage.

Potts also testified that the repairs made by marina

personnel to the docks' joints and finger pier connections prior

to the hurricane were not effective. He stated that the purpose

of having flexible joints was to permit the floating dock

sections to move with the water without experiencing undue

stress. The temporary repairs affixing rigid connections

restricted the docks' flexibility and, thus, reduced their

ability to withstand the stress caused by wave movement.

The Valley Forge policy issued to Lower Chesapeake, in

addition to standard provisions for commercial liability and

property insurance coverage, also contained "commercial inland

marine coverage." Included in the inland marine coverage

provisions was a form entitled "Piers, Wharfs, and Docks

Coverage Form" (dock coverage form). The relevant portions of

the dock coverage form provide:

A. COVERAGE

We will pay for "loss" to Covered Property from any of
the Covered Causes of Loss.

1. COVERED PROPERTY, as used in this Coverage
Form, means:

a. Floating or fixed piers, wharfs and
docks;

b. Anchors and floats used with floating
docks;

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 c. Covers, awnings, electrical wiring or
plumbing which is permanently fixed to
the pier, wharf or dock; or

d. Buoys or moorings.

. . . .

3. COVERED CAUSES OF LOSS

Covered Causes of Loss means RISK OF DIRECT
PHYSICAL "LOSS" to Covered Property except
those causes of "loss" listed in the
exclusions.

4. a. ADDITIONAL COVERAGE - COLLAPSE

We will pay for direct "loss" caused by
or resulting from risks of direct
physical "loss" involving collapse of
all or part of a building or structure
caused by one or more of the following:

(1) Fire; lightning; windstorm; hail;
explosion; smoke; aircraft;
vehicles; riot; civil commotion;
vandalism; breakage of glass;
falling objects; weight of snow,
ice or sleet; water damage; all
only as covered in the Coverage
Form;

(2) Hidden decay;

(3) Hidden insect or vermin damage;

. . . .

We will not pay for loss or damage to
the following types of property, if
otherwise covered in this Coverage
Form, under items (2), (3) . . . unless
the loss or damage is a direct result
of the collapse of a building:

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 outdoor radio or television
antennas, including their lead-in
wiring, mast or towers; awnings;
gutters or down spouts; yard
fixtures; outdoor swimming pools;
fences; piers, wharves and docks;
beach or diving platforms or
appurtenances; retaining walls;
walks; roadways and other paved
surfaces.

. . . .

b. ADDITIONAL COVERAGE - DEBRIS REMOVAL

We will pay for expenses you incur for
the removal of debris of the Covered
Property, which is occasioned by a
"loss" covered by this Coverage Form.

. . . .

B. EXCLUSIONS

1. We will not pay for a "loss" caused directly
or indirectly by any of the following. Such
"loss" is excluded regardless of any other
cause or event that contributes concurrently
or in any sequence to the "loss":

. . . .

e. WATER

. . . .

(4) Flood, surface water, waves,
tides, tidal waves, overflowing of
any body of water, or their spray,
all whether driven by wind or not.

. . . .

3. We will not pay for a "loss" caused by or
resulting from any of the following. But if

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 "loss" by a Covered Cause of Loss results, we
will pay for the resulting "loss":

a. Weather conditions. But this exclusion only
applies if weather conditions contribute in
any way with a cause or event excluded in
paragraph 1. above to produce the "loss";

. . . .

c. Collapse except as provided in the
Additional Coverage - Collapse section of
this Coverage Form.

d. Wear and tear, marring, denting or
scratching; . . . gradual deterioration,
depreciation; mechanical breakdown; insects,
vermin, rodents, birds or other animals;
corrosion, rust, dampness or dryness, . . .

. . . .

F. DEFINITIONS

"Loss" means accidental loss or damage.

After hearing the parties' evidence, the trial court found

that part of Dock C had collapsed as a result of a "windstorm"

and "water damage" and, thus, was covered under Section A(4)(a),

"Additional Coverage - Collapse," of the dock coverage form.

The court ruled that because part of Dock C had suffered a

collapse, the policy's exclusions set out in Section B did not

apply. However, the trial court concluded that Docks A, B, and

D had not suffered collapses. The court found that the damage

to these docks resulted from causes excluded under Section B of

the dock coverage form. The trial court entered judgment in

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favor of Lower Chesapeake for the damage to Dock C in the amount

of $500,000.

Lower Chesapeake appeals from the trial court's denial of

coverage for the damage sustained by Docks A, B, and D. Valley

Forge assigns cross-error to the trial court's ruling that the

policy provided coverage for the damage to Dock C.

The judgment of a trial court, sitting without a jury, is

entitled to the same weight as a jury verdict and will not be

set aside unless it appears from the evidence that the judgment

is plainly wrong or without evidence to support it. Code

§ 8.01-680; Willard v. Moneta Bldg. Supply, Inc., 258 Va. 140,

149, 515 S.E.2d 277, 283 (1999); Cardinal Dev. Co. v. Stanley

Constr. Co., 255 Va. 300, 302, 497 S.E.2d 847, 849 (1998). The

court's factual finding that part of Dock C sustained a

collapse, while the other three docks did not, is central to the

resolution of this appeal. Lower Chesapeake argues that the

evidence established that all four docks suffered collapses,

while Valley Forge contends that none of the docks did.

Since the term "collapse" is not defined in the policy, the

term must be given its ordinary and accepted meaning. See Craig

v. Dye, 259 Va. 533, 538, 526 S.E.2d 9, 11-12 (2000);

Lumbermen's Mut. Cas. Co. v. Keller, 249 Va. 458, 460-61, 456

S.E.2d 525, 526 (1995). An ordinary and accepted meaning of the

word "collapse" is "to break down completely: fall apart in

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confused disorganization: . . . disintegrate." Webster's Third

New International Dictionary 443 (1993).

The trial court stated that it did not use "a dictionary

definition" of the term, but instead reviewed the photographs of

the damaged docks and the other evidence and concluded that the

damage to part of Dock C was "what the policy meant when it says

collapse." The court also stated that it compared the

photographs of the other docks to the photographs of Dock C and

concluded that only Dock C satisfied the term "collapse" as set

forth in the policy.

Despite the trial court's statement that it did not rely on

a dictionary definition of the term "collapse," the court

properly applied the ordinary and customary meaning of that term

when reaching its conclusion. The photographs and evidence to

which the trial court referred show that all the docks lost deck

boards and finger piers, and sustained various other minor

damage, but that only Dock C suffered a complete break, which

occurred at its "dogleg" angle. A complete break of this nature

falls within the ordinary and customary meaning of the term

"collapse." Thus, the trial court's conclusion that only one

section of Dock C had suffered a "collapse," within the meaning

of the policy term, is not plainly wrong or without evidence to

support it.

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 Next, we consider whether the exclusions listed in Section

B of the dock coverage form preclude coverage for the damage

sustained by Docks A, B, and D. The trial court made a factual

finding that these docks did not suffer a collapse, and that the

damage to these docks was caused by wind-driven water and

gradual deterioration, which were excluded causes under Sections

B(1)(e)(4) and B(3)(d) of the dock coverage form. Lower

Chesapeake contends, however, that even if these docks did not

suffer a "collapse," the policy covers losses sustained to those

docks because Valley Forge failed to meet its burden of proving

that this damage resulted from an excluded cause. In response,

Valley Forge asserts that the trial court correctly found that

the damage to these docks resulted, at least in part, from

excluded causes.

Under the plain terms of Section B(1), coverage is excluded

under the policy if a loss is caused "directly or indirectly" by

one of the enumerated causes or events, "regardless of any other

cause or event that contributes concurrently or in any sequence"

to the loss. The evidence amply supports the trial court's

finding that the damage to Docks A, B, and D resulted, at least

in part, from the excluded causes of "[f]lood, . . . waves,

tides, tidal waves, . . . all whether driven by wind or not," or

from the excluded cause of "gradual deterioration," or from any

combination of these excluded causes. Since the trial court's

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factual finding on this issue is supported by the evidence, we

will affirm that part of the judgment denying coverage under the

policy for the damage to Docks A, B, and D. *

We next consider whether the trial court correctly

concluded that the exclusions in Section B of the dock coverage

form do not apply to losses encompassed within the provisions of

the "Additional Coverage-Collapse" section of the form. Lower

Chesapeake contends that the exclusions in Section B do not

apply to losses resulting from a collapse, while Valley Forge

asserts an opposite interpretation of the two sections of the

policy.

Courts interpret insurance policies, like other contracts,

in accordance with the parties' intentions as determined from

the words they have used in their contract. Floyd v. Northern

Neck Ins. Co., 245 Va. 153, 158, 427 S.E.2d 193, 196 (1993).

The interpretation of policy provisions presents a question of

*
Lower Chesapeake also argues that the trial court erred in
denying coverage for Docks A, B, and D because the evidence
showed that the damage was caused by decay, not by gradual
deterioration and, thus, Section B(3)(d) is inapplicable. Lower
Chesapeake further contends, in essence, that because Valley
Forge failed to conduct a "loss control survey" of the marina,
as permitted by the policy, Valley Forge has forfeited any right
to assert deterioration as an excluded cause of loss. However,
the trial court based its denial of coverage to Docks A, B, and
D on a finding that the damage to these docks was caused by
deterioration and wind-driven water. Thus, we do not address
these arguments since the trial court's finding that wind-driven
water contributed to the damage is a sufficient reason to
exclude coverage under the policy language.

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law that we consider de novo. Craig, 259 Va. at 537, 526 S.E.2d

at 11.

When an insurer drafts policy language setting forth

exclusions that limit coverage under a policy, the insurer is

required to use language that clearly and unambiguously defines

the scope of the exclusions. See S.F. v. West Am. Ins. Co., 250

Va. 461, 465, 463 S.E.2d 450, 452 (1995); Granite State Ins. Co.

v. Bottoms, 243 Va. 228, 233, 415 S.E.2d 131, 134 (1992); Smith

v. Allstate Ins. Co., 241 Va. 477, 480, 403 S.E.2d 696, 697-98

(1991). If exclusionary provisions are ambiguous, such that

they may be understood in more than one way, we will interpret

the policy in a manner that provides coverage. S.F., 250 Va. at

464, 463 S.E.2d at 452; Granite State Ins. Co., 243 Va. at 234,

415 S.E.2d at 134; Smith, 241 Va. at 480, 403 S.E.2d at 697.

We conclude that the disputed policy language permits more

than one reasonable interpretation of the applicability of

Section B to collapse losses covered under Section A(4)(a). As

Lower Chesapeake notes, under Section B(3)(c) of the dock

coverage form, losses resulting from collapse are specifically

excluded from coverage "except as provided in the Additional

Coverage-Collapse section of the Coverage Form." Further, the

exclusions set forth in Section B are specifically referenced in

Section A(3), but Section A(4)(a) is silent regarding any such

exclusions. Based on these considerations, one reasonable

16
conclusion concerning the disputed policy language is that the

Section B exclusions are inapplicable to the losses covered by

Section A(4)(a).

In contrast, as Valley Forge observes, Section A(4)(a)(1)

provides coverage for losses resulting from collapse caused by

windstorm or water damage "all only as covered in the Coverage

Form." Valley Forge contends that this language clearly

subjects the collapse coverage of Section A(4)(a) to the other

terms of the dock coverage form, including the exclusions set

forth in Section B. Under these considerations, a second

reasonable conclusion that can be drawn from the disputed

language is that the Section B exclusions are applicable to the

collapse of part of Dock C.

Because these provisions of the dock coverage form are

ambiguous, we construe the policy in favor of providing coverage

and hold that the exclusions in Section B are inapplicable to

the collapse coverage of Section A(4)(a). The evidence supports

the trial court's findings that the collapse of part of Dock C

was caused by "windstorm" or "water damage" and, thus, that this

collapse is included within the coverage provisions of Section

A(4)(a). Therefore, we will affirm the trial court's judgment

that the policy provides coverage for Lower Chesapeake's loss

resulting from the collapse of part of Dock C.

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 Finally, Valley Forge argues that the evidence does not

support the amount of damages awarded by the trial court for the

damage sustained to Dock C. We agree. As stated above, Dock C

sustained a complete break at its "dogleg" angle. This damage

to a limited portion of Dock C was the only damage found by the

trial court to have resulted from a collapse and, thus, to

qualify for coverage under the policy.

Neither party presented evidence concerning the cost of

repairing only the collapsed portion of Dock C. Instead, James

Smith testified that it would cost $584,551 to completely

replace Dock C, plus an additional amount to pay for debris

removal. Jesse Brown testified that it would cost $991,014 to

replace both Docks C and D entirely, except for one 16-foot

section of Dock C that was salvageable. Therefore, the trial

court's award of $500,000 in damages to Lower Chesapeake as

compensation for its loss resulting from the collapse of a

limited portion of Dock C is not supported by the evidence and

must be set aside.

For these reasons, we will affirm in part, and reverse in

part, the trial court's judgment and remand the case to the

trial court for a determination of damages owed to Lower

Chesapeake as a result of the collapse of part of Dock C.

Affirmed in part,
reversed in part,
and remanded.

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