Insurance: Contracts: Appeal and Error. The
interpretation of an insurance policy presents a question of
law that an appellate court decides independently of the
Summary Judgment: Appeal and Error. An
appellate court will affirm a lower court's grant of
summary judgment if the pleadings and admitted evidence show
that there is no genuine issue as to any material facts or as
to the ultimate inferences that may be drawn from those facts
and that the moving party is entitled to judgment as a matter
Insurance: Contracts: Appeal and Error. The
meaning of an insurance policy is a question of law, in
connection with which an appellate court has an obligation to
reach its own conclusions independently of the determination
made by the lower court.
Insurance: Contracts. In construing
insurance policy provisions, a court must determine from the
clear language of the policy whether the insurer in fact
insured against the risk involved.
Insurance: Contracts: Proof. In a coverage
dispute between an insured and the insurer, the burden of
proving prima facie coverage under a policy is upon the
__:__:__. If the insured meets the burden of establishing
coverage of the claim, the burden shifts to the insurer to
prove the applicability of an exclusion under the policy as
an affirmative defense.
Neb. 387] 7. Insurance: Contracts:
Damages. Standard commercial general liability
policies provide coverage for accidents caused by faulty
workmanship only if there is bodily injury or property damage
to something other than the insured's work product.
Insurance: Contracts. The cost to repair and
replace faulty workmanship is a business risk that is not
covered under a commercial general liability policy.
Insurance. Business risks are normal,
frequent, and predictable and do not involve the kind of
fortuitous events for which insurance is obtained.
Insurance: Contracts: Liability. Where a
product manufacturer is liable as a matter of contract to
make good on or replace products that are defective or
otherwise unsuitable because they are lacking in some
capacity, the economic loss incurred because of the product
or work is not what was bargained for as part of general
__:__: __ . There is a fundamental distinction between the
non-covered business risk of having to correct faulty
products or work and the covered risk of liability when
faulty products or work cause damage to other property that
cannot be corrected through the correction of the faulty
products or work.
from the District Court for Douglas County: Joseph S. Troia,
D. Davidson, of Baird Holm, L.L.P., and Thomas A. Vickers and
Scott A. Ruksakiati, of Vanek, Vickers & Masini, P.C.,
K. Bailey, of Engles, Ketcham, Olson & Keith, P.C., and
John F. Maher, of Colliau, Carluccio, Keener, Morrow,
Peterson & Parsons, for appellee Continental Casualty
O. Kieckhafer, of Smith Peterson Law Firm, L.L.P, and Brian
O'Gallagher, of Cremer, Spina, Shaughnessy, Jansen &
Siegert, L.L.C., for appellees Employers Mutual Casualty
Company and EMCASCO Insurance Company.
Heavican, C.J., Wright, Connolly, Cassel, and Kelch, JJ.
Neb. 388] Wright, J.
NATURE OF CASE
case concerns the meaning of coverage provisions in a general
liability and umbrella policy insuring the fabricator of
steel rebar under a purchase agreement with a general
contractor. The rebar was improperly fabricated and had a
reduced reinforcing capacity as a result. The defective rebar
was incorporated into the construction of concrete pile caps
that would form support for the Pinnacle Bank Arena (Arena).
Several of the pile caps had to be modified in order to
conform to the required specifications of the contract. The
insurers refused to reimburse Drake-Williams Steel, Inc.
(DWS), for costs incurred to modify these compromised pile
caps. The insurers claimed the costs of the remedial measures
did not fall under the coverage of the policies. The district
court entered summary judgment in favor of the insurers. DWS
appeals, and the insurers cross-appeal.
Mortenson Company (Mortenson) is a general contractor hired
by the city of Lincoln to build the Arena. Mortenson entered
into a purchase agreement with DWS to supply rebar for the
Arena. The rebar was improperly bent when it was fabricated
by DWS and therefore did not conform to the terms of the
purchase agreement. The rebar was incorporated into three
components of the Arena: the columns, the grade beams, and
the pile caps. The pile caps provide support for the
Arena's columns, which in turn support the floor and the
roof. The pile caps were made of concrete with reinforcing
rebar and were installed below ground level on top of the
concrete piles that extended to the bedrock. The grade beams
were also made of concrete and rebar. The beams formed an
oval around the Arena and connect different pile caps
together and were also installed below ground level. DWS did
not seek to recover any expenses for any corrections that
were made to [294 Neb. 389] the columns that contained the
improperly bent rebar. No corrections were made to the grade
rebar was bent by DWS at too tight a radius and did not meet
the specifications. This incorrect radius was determined to
be the result of machine and operator error during the
process of fabrication. Because of the incorrect radius, the
rebar had approximately 50 percent of its normal reinforcing
capacity. The nonconforming rebar that had not been cast in
the concrete pile caps was removed and replaced by DWS. And
DWS made no claim on this replacement. There were 52 pile
caps that had been cast with improperly bent rebar.
Approximately half of these pile caps with the nonconforming
rebar would nevertheless perform adequately given the
particular pile caps' shape or placement. But the other
half were deemed incapable of providing the required
structural support, because of the diminished reinforcing
capacity of the nonconforming rebar. If these pile caps were
not modified, they would not provide the support required.
This could have resulted in a structural failure in part of
the Arena. Engineers eventually determined that the most
cost-effective solution was to install a reinforcing band
around each of the compromised pile caps. This modification
would provide the necessary structural support.
modify these pile caps, new concrete was adhered to the sides
of pile caps to make the existing pile caps wider. The new
concrete was joined to the existing pile caps by new rebar
that was drilled and epoxied into the existing pile caps.
This process, once completed, made the pile caps wider and
suitable for their intended purpose. The pile caps were
essentially wrapped in a ring of concrete and rebar that
would then perform as originally designed. The process
required excavating around the pile caps, assembling a new
form around the pile caps, placing rebar into that form, and
pouring concrete into the form.
initially refused to pay for the costs of the correction.
Mortenson paid the costs and sought reimbursement from [294
Neb. 390] DWS in the amount of $1, 355, 860. Eventually DWS
reimbursed Mortenson. DWS sought coverage from its insurers.
The insurers denied DWS' claim and commenced this action
to determine their obligations under the policies of
period of November 1, 2010, to November 1, 2011, DWS was
insured through a primary commercial general liability (CGL)
policy with Employers Mutual Casualty Company (Employers).
From November 1, 2011, to November 1, 2012, DWS was insured
through a primary CGL policy with EMCASCO Insurance Company
(EMCASCO). DWS was also insured during the relevant time
period through an umbrella policy with Continental Casualty
Company (Continental). DWS sought coverage under its CGL
policies and the umbrella policy. We refer to the insurance
companies collectively as "the Insurers."
relevant coverage provisions of the umbrella policy with
Continental are substantially similar to the provisions of
the policies with Employers and EMCASCO.
Damages and Property Damage
policies agreed to cover "those sums that [DWS] becomes
legally obligated to pay as damages because of . . .
'property damage' to which this insurance
applies." "Property damage" is defined by the
EMCASCO policy as:
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 ...