Standard Construction Co., Inc. v. MARYLAND CASUALTY CO. and NORTHERN INSURANCE CO. OF NEW YORK

*The Honorable William O. Bertelsman, United States District Judge
for the Eastern District of Kentucky, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0068P (6th Cir.)
File Name: 04a0068p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
STANDARD CONSTRUCTION
CO., INC.,
Plaintiff-Appellee,
v.
MARYLAND CASUALTY CO.
and NORTHERN INSURANCE
CO. OF NEW YORK,
Defendants-Appellants.
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No. 02-6039
Appeal from the United States District Court
for the Western District of Tennessee at Memphis.
No. 01-02006—Diane K. Vescovo, Magistrate Judge.
Argued: December 11, 2003
Decided and Filed: March 4, 2004
Before: ROGERS and COOK, Circuit Judges;
BERTELSMAN, District Judge.*
2 Standard Construction Co. v.
Maryland Casualty Co., et al.
No. 02-6039
_________________
COUNSEL
ARGUED: J. Robert Hall, MECKLER, BULGER &
TILSON, Chicago, Illinois, for Appellants. J. Brooke
Lathram, BURCH, PORTER & JOHNSON, Memphis,
Tennessee, for Appellee. ON BRIEF: J. Robert Hall,
Michael M. Marick, MECKLER, BULGER & TILSON,
Chicago, Illinois, for Appellants. J. Brooke Lathram,
BURCH, PORTER & JOHNSON, Memphis, Tennessee, for
Appellee.
BERTELSMAN, D. J., delivered the opinion of the court,
in which COOK, J., joined. ROGERS, J. (pp. 16-17),
delivered a separate concurring opinion.
_________________
OPINION
_________________
BERTELSMAN, District Judge. Defendants, Maryland
Casualty Company and Northern Insurance Company of New
York, appeal the district court’s judgment in favor of plaintiff,
Standard Construction Company. The district court ruled that
defendants owed plaintiff both a duty to defend and a duty to
indemnify under certain commercial general liability
insurance policies. For the reasons set forth, we AFFIRM the
district court’s judgment.
Factual Background
Standard Construction Company is an asphalt paving
contractor. Maryland Casualty Company and Northern
Insurance Company of New York insured Standard from
January 1, 1990 through January 1, 1993, under three

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successive one-year commercial general liability (“CGL”) and
umbrella policies, respectively.
In March 1990, Standard entered into a contract with the
State of Tennessee to perform paving and road work as part
of a road-widening project on Highway 64 near Arlington,
Tennessee. Under the contract, Standard was responsible for
the clearing and removal of certain debris, to be performed in
accord with specifications issued by the Tennessee
Department of Transportation. These specifications required
Standard to remove debris from the construction area; to take
ownership of the debris and dispose of it elsewhere; to secure
written permission from landowners prior to dumping the
debris on any private property; and to make reparations for
any damage to private or public property that might occur
during disposal.
Standard subcontracted this disposal work to Ronald S.
Terry Construction Company. Terry’s superintendent, Gene
A. Bobo, obtained written permission from six owners of the
property adjacent to Highway 64 to dump on their property
construction debris from the road-widening project. With
respect to a seventh property owner, the then 90-year old
Cassella Love, Bobo obtained a similar agreement signed by
Love’s daughter, Louise Poole, in Love’s name.
Terry, believing that it had Love’s permission, proceeded
to dump construction debris, including trees, corrugated metal
pipes, concrete chunks with exposed steel, and asphalt, on
Love’s property. At that time, Love’s property, which was
zoned commercial, was the subject of condemnation
proceedings brought by the State in connection with the
widening project. William H. Fisher, an attorney representing
Love in the condemnation action, retained an engineer to
inspect Love’s property. The engineer opined that the debris
dumped on Love’s property rendered the land unsuitable for
development.
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After receiving the engineer’s report, Fisher wrote to
Standard by letter, dated May 22, 1992, demanding that the
company cease dumping on Love’s property, revoking any
authority Standard may have had for such dumping, and
requesting that Standard remove the debris. Fisher also stated
that Love suffered from senile dementia and that her ability
to enter into a binding contract was questionable.
After attempting unsuccessfully to locate a copy of the first
Love agreement, Standard obtained a second dumping
agreement, signed either by Love or by Poole in Love’s name,
dated June 17, 1992. Handwritten on the agreement was the
notation: “agree to asp[halt] driveway + dump 2 loads of dirt
in front yard.” Thereafter, Standard paved Love’s driveway
and spread dirt on her land.
On November 22, 1994, Love, by and through her
daughter, filed suit in Tennessee state court against Standard,
Terry, Bobo and the State of Tennessee. Love asserted
various claims for damage to her property, including a claim
for trespass. Standard tendered defense of the Love case to
Maryland and Northern, but the insurers denied coverage on
several different grounds. Following amendments to the Love
complaint, the insurers again refused to defend Standard.
Standard eventually settled the Love matter for approximately
$200,000.
On January 5, 2001, Standard filed the instant declaratory
judgment action alleging that the insurers breached their
duties to defend and indemnify Standard in connection with
the Love lawsuit. The parties consented to the jurisdiction of
United States Magistrate Judge Diane K. Vescovo, pursuant
to 28 U.S.C. § 636(c).
After discovery, the parties filed cross-motions for
summary judgment. By order, dated May 15, 2002,
Magistrate Judge Vescovo granted summary judgment in
Standard’s favor as to the duty to defend, ruling that property

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damage resulting from trespass would constitute a covered
claim under the applicable policies and that certain “business
risk” exclusions relied upon by the insurers were inapplicable
to claims by a stranger to the construction contract for
damages resulting from a trespass. Magistrate Judge Vescovo
denied the motions as to the duty to indemnify, however,
finding that there were genuine disputes of material fact as to
whether a contract was entered into between Love and
Standard (through Terry) so as to trigger the business risk
exclusions.
Magistrate Judge Vescovo conducted a bench trial on
June 17 and 18, 2002, after which she entered Findings of
Fact, Conclusions of Law, and a Judgment in Standard’s
favor. Specifically, Magistrate Judge Vescovo found that
Terry’s disposal of construction debris on Love’s property
constituted a trespass because, although Terry (and Standard)
believed it had Love’s permission to dump the debris, in
reality such consent was lacking because Love herself was
incompetent to enter into any agreement and because her
daughter, Poole, had neither actual nor implied authority to do
so on Love’s behalf. Thus, no contract between Love and
Standard ever existed, and Terry’s dumping on the property
was wrongful.
Magistrate Judge Vescovo also concluded that Standard
had acted reasonably in settling the Love case and that
Standard had not impaired the insurers’ subrogation rights.
The trial court awarded Standard $244,750 for its Love
defense costs; $200,000 for its settlement costs; and
$6,487.30 in pre-judgment interest.
The insurers now appeal the grant of partial summary
judgment to Standard on the issue of the duty to defend, the
denial of summary judgment on that issue to the insurers, and
the judgment in favor of Standard on the duty of
indemnification.
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1The relevant terms in the Maryland and Northern policies are
identical.
Analysis
A. Standard of Review
We review the district court’s grant of summary judgment
de novo, employing the same legal standard applied by the
district court. Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d
503, 506 (6th Cir. 2003) (citation omitted). The same
standard applies where the district court denies summary
judgment based upon purely legal grounds. Id. The district
court’s findings of fact are reviewed under the clearly
erroneous standard. See Fed. R. Civ. P. 52(a).
B. Applicable Law
The district court held that Tennessee law was applicable,
and neither party contests this ruling. Throughout the opinion
and briefs, however, citations are made to authorities of many
jurisdictions, since the policy provisions and cases
interpreting them are reasonably uniform. We agree with this
approach.
C. Scope of Coverage
1. “Occurrence”
The insuring agreement of these policies1 states, in
pertinent part:
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. We will have the right and duty
to defend any “suit” seeking those damages. . . .

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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.
The policies further define “occurrence” as an “accident,
including continuous or repeated exposure to substantially the
same general harmful conditions.” The term “accident,”
however, is not defined. In addition, the policy excludes from
coverage “bodily injury” or “property damage” that is
“expected or intended from the standpoint of the insured.”
Appellants argue that there was no coverage under the
policies because Standard intended to dump the debris on
Love’s land. This situation, it asserts, does not fit the policy’s
definition of an “occurrence.”
The district court held that the dumping was an
“occurrence” or “accident” within the meaning of the policy
because, while the dumping was intentional, the fact that it
was done without permission, thus making it wrongful, was
not intended by the insured.
We agree with this conclusion. As pointed out by the trial
court, “if the resulting damages are unintended, the resulting
damage is accidental even though the original acts were
intentional.” (J.A. at 169) (Order) (quoting State Farm Fire
and Cas. Co. v. CTC Development Corp., 720 So.2d 1072,
1075 (Fla. 1998)).
A Supreme Court of Tennessee opinion relied upon by the
trial court is instructive. In Tennessee Farmers Mut. Ins. Co.
8 Standard Construction Co. v.
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No. 02-6039
v. Evans, 814 S.W.2d 49 (Tenn. 1991), the court, after noting
several approaches to this issue by various courts, held:
After carefully weighing the implications of the several
approaches discussed in the preceding paragraphs, this
Court is persuaded that the best approach, and the one
that should be adopted in Tennessee, is that followed by
a majority of the states that have had an opportunity to
construe the language involved in this case. That is, in
order to find that an intended or expected acts exclusion
applies, it must be established that the insured intended
the act and also intended or expected that injury would
result. These are separate and distinct inquiries because
many intentional acts produce unexpected results and
comprehensive liability insurance would be somewhat
pointless if protection were precluded if, for example, the
intent to cause harm was not an essential (and required)
showing. . . . The intent itself may be actual or inferred
from the nature of the act and the accompanying
reasonable foreseeability of harm. It is immaterial that
the actual harm was of a different character or magnitude
or nature than that intended.
Id. at 55-56 (citation omitted) (italics in original).
We reject appellants’ argument that Evans is “irrelevant”
because the court there was construing an exclusion rather
than a coverage term. As the trial court here noted, the
“expected or intended” language of the exclusion discussed in
Evans was historically part of the definition of “occurrence.”
Moreover, whether expressed as part of the definition of
“occurrence” or stated as a separate exclusion, the point is the
same.
Moreover, this court recently reached a similar conclusion
in a case where it had occasion to comment at length on the
meaning of “occurrence/accident” in liability policies. See
Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503 (6th Cir.

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2003) (applying Kentucky law). There, the insured, a carpet-
cleaning company, hired an individual as a carpet cleaner, but
it negligently failed to perform a background check on him.
Id. at 505. The individual subsequently gained entrance to a
customer’s home to clean her carpet and, using knowledge of
the premises gained in that endeavor, later broke into the
home and murdered the homeowner. Id. The homeowner’s
estate sued the insured carpet-cleaning company.
The insurance company argued that this scenario did not
constitute an “occurrence” under the policy because both the
hiring and murder were intentional. The policy at issue
defined “occurrence” exactly as the policies do here: as “an
accident, including continuous or repeated exposure to
substantially the same general harmful conditions.” Id.
This court rejected the insurance company’s argument.
First, we held that the term “accident” was not ambiguous,
observing that the ordinary meaning of that term is “an event
which . . . is unusual and not expected by the person to whom
it happens.” Id. at 507 (quoting Black’s Law Dictionary (5th
ed. 1979)). Further, we noted that an “accident is generally
understood as an unfortunate consequence which befalls an
actor through his inattention, carelessness or perhaps for no
explicable reason at all.” Id. (quoting Fryman v. Pilot Life
Ins. Co., 704 S.W.2d 205, 206 (Ky. 1986)). “The result is not
a product of desire and is perforce accidental.” Id.
In Westfield, the insured deliberately hired a person, but
that act had unforseen and unintended consequences due to
the insured’s negligence, thus bringing the event within the
definition of “occurrence” for purposes of its liability
insurance.
In the instant case, the insured deliberately dumped debris
on Love’s property, but that act too had unforeseen and
unintended consequences due to the insured’s negligence in
failing to secure a valid agreement from the property’s owner.
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We thus agree with the trial court that, as a matter of law, the
act falls within the definition of “occurrence.”
2. “Property Damage”/The “Your Work” Exclusion
Appellants also assign as error the district court’s holding
that the underlying Love action sought recovery for “property
damage” under these liability policies. As defined in the
policies, “property damage” means:
a. Physical injury to tangible property, including all
resulting loss of use of the property; or
b. Loss of use of tangible property that is not
physically injured.
The policies exclude coverage, however, for “property
damage” to “impaired property” arising out of a “defect,
deficiency, inadequacy or dangerous condition in ‘your
product’ or ‘your work.’”
Appellants’ contention, as we understand it, is that because
Standard was performing work pursuant to a contract with the
State, the tort it committed against Love - - a stranger to that
contract - - is not covered either because it was caused merely
by faulty workmanship and/or because the injury arose out of
Standard’s “work.”
We agree with the district court’s resolution of this issue.
The trial court reasoned that, since Love was a third person,
not a party to Standard’s contract with the State, the damage
to her property from the wrongful dumping was not subject to
the exclusion for “your [the insured’s] work.”
This principle was derived from the decision of the
Supreme Court of Tennessee in Vernon Williams & Son
Constr., Inc. v. Continental Ins. Co., 591 S.W.2d 760 (Tenn.
1979). There, speaking of this type of coverage, the court
pointed out: “The coverage is for tort liability for physical

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2The discussion of the general principle underlying business risk
exclusions, infra, is also pertinent to this subsection.
damages to others and not for contractual liability of the
insured for economic loss because the product or completed
work is not that for which the damaged person bargained.”
Id. at 764 (citation omitted) (emphasis added).
Further, “it clearly appears that property damage claims of
third persons resulting from the insured’s breach of an
implied warranty are covered unless the claimed loss is
confined to the insured’s work or work product.” Id.
(emphasis added).
In the instant case, it is not the manner in which the
dumping was performed (the “work”) that is faulty or caused
damage, but rather that the dumping itself at the location in
question was unauthorized. Some damage to Love’s land
inevitably resulted. The damage was to the land, not to the
insured’s “work.” Therefore, there is coverage for “property
damage” and the “your work” exclusion does not apply.
Accord Standard Fire Ins. Co. v. Chester-O’Donley & Assoc.,
Inc., 972 S.W.2d 1, 10 (Tenn. App. 1998) (“The exclusion
does not apply if there is damage to property other than the
insured’s work.”) (discussing extensively the history of this
policy language and many other cases and texts); Weedo v.
Stone-E-Brick, Inc., 405 A.2d 788, 791-95 (N.J. 1979)
(extensive discussion).2
3. Exclusion 2j(5)
Appellants also assign as error the district court’s
conclusion that the exclusion found in section 2j(5) of the
policy does not apply to Standard’s claim. This exclusion
precludes coverage for property damage to:
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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.
As previously noted, at the conclusion of the
indemnification trial, the district court found as a fact that
there was no permission by Love for Terry to dump debris on
her land, and that Standard thus had no contract with her.
Therefore, it held that the dumping was a trespass. This
finding is not clearly erroneous.
The district court further held that Exclusion j(5) was not
applicable, since it was not intended to apply to claims by
third parties, but only to claims by the entity with which the
insured construction contractor had expressly contracted.
(J.A. at 19-22) (Findings of Fact and Conclusions of Law).
Thus, the district court further held that whether Love was a
third-party beneficiary of Standard’s construction contract
with the State was immaterial.
We agree with these conclusions. Appellants cite Vinsant
Elec. Contractors v. Aetna Cas. & Surety Co., 530 S.W.2d 76
(Tenn. 1975), and Standard Fire Ins. Co. v. Chester-
O’Donley & Assoc., Inc., 972 S.W.2d 1 (Tenn. App. 1998).
Neither of these cases, however, is of help to the insurers
because neither involved a third party. Rather, both were
actions by the owner with whom the insured construction
company had contracted.
The Tennessee court describes general liability policies as
follows:
General liability policies are not “all-risk” policies. . . .
They provide an insured with indemnification for
damages up to policy limits for which the insured
becomes liable as a result of tort liability to a third
party. . . . The risk insured by these policies is the

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possibility that the insured’s product or work will cause
bodily injury or damage to property other than the work
itself for which the insured may be found liable.
Standard Fire, 972 S.W.2d at 6-7 (citations omitted)
(emphasis added).
The Standard Fire court further cites with approval an
article by Peter J. Neeson and Phillip J. Meyer entitled “The
Comprehensive General Liability Policy and Its Business
Risk Exclusions: An Overview.” Id. at 7 n. 8. There, the
learned authors state:
The Business Risk exclusions do not purport to bar
coverage for personal injuries or for physical injury to
other property which are caused by the insured’s product
or work.
Peter J. Neeson & Phillip J. Meyer, The Comprehensive
General Liability Policy and Its Business Risk Exclusions: An
Overview, 79-80, reprinted in Reference Handbook on the
Comprehensive General Liability Policy (American Bar
Ass’n 1995).
We agree with these observations and also with the authors’
application of these principles to construction projects:
In every construction project, the owner and contractor
incur risks or exposure to loss. Some of these risks can
be shifted to insurers -- others cannot. The owner has the
risk that the contractor will fail to properly perform his
contractual obligations. This risk can be shifted by the
owner either securing, or requiring the contractor to
provide, a performance bond. The owner likewise has
the risk the project may be destroyed by fire, explosion
or the like during construction. The contractor may have
a similar risk. Either or both may shift that risk to an
insurer by acquiring a builder’s risk policy. Again, such
14 Standard Construction Co. v.
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No. 02-6039
losses are generally beyond the effective control of either
the contractor or owner . . . [The] risk of third party
personal injury or property damage claim[s] due to
defective workmanship or materials may be shifted by the
contractor purchasing a comprehensive general liability
insurance policy. . . . However, in addition to and apart
from those risks, the contractor likewise has a contractual
business risk that he may be liable to the owner resulting
from failure to properly complete the building project
itself in a manner so as to not cause damage to it. This
risk is one the general contractor effectively controls and
one which the insurer does not assume because it has no
effective control over those risks and cannot establish
predictable and affordable insurance rates.
Id. at 81-82 (quoting Knutson Constr. Co. v. St. Paul Fire and
Marine Ins. Co., 396 N.W.2d 229, 234 (Minn. 1986))
(emphasis added).
Thus:
When read together, these [business risk] provisions
exclude coverage when there has been no physical injury
to tangible property other than the insured’s work.
Standard Fire, 972 S.W.2d at 12 (emphasis added).
In other words, there is coverage where there has been
physical injury to tangible property that is not the insured’s
work. As we have pointed out earlier in this opinion, we
agree with the district court’s view that Love’s tangible real
property is not the insured’s “work,” and that it was
physically damaged by having the construction debris from
the road-widening project dumped on it. Therefore, this
exclusion does not apply. See Thommes v. Milwaukee Mut.
Ins. Co., 622 N.W.2d 155, 159-60 (Minn. App. 2001)
(holding that j(5) exclusion did not bar coverage for claim
against insured by third party arising out of insured’s damage

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to third party’s property), aff’d, 641 N.W.2d 877 (Minn.
2002). Cf. Dewitt Constr. Inc. v. Charter Oak Fire Ins. Co.,
307 F.3d 1127, 1134-35 (9th Cir. 2002) (holding that j(5)
exclusion did not bar coverage for damage to subcontractors’
work because damage did not arise from insured’s performing
operations on subcontractors’ work).
D. Other Issues
The insurers also claim that the district court erred in
holding that they were not prejudiced by a delay in notice.
We find no error in this conclusion.
Appellants further challenge the district court’s ruling that,
by refusing to defend Standard against the underlying action
by Love, appellants waived any right to control the
settlement. We believe, however, that the district court’s
ruling on this issue was correct. See, e.g., Esicorp, Inc. v.
Liberty Mut. Ins. Co., 193 F.3d 966, 970 (8th Cir. 1999)
(noting that by refusing to defend, the insurer gives up its
contractual right to control defense, and insured may
negotiate reasonable settlement); Cambridge Mut. Fire Ins.
Co., 692 A.2d 1388, 1391-92 (Me. 1997) (similar); Sentinel
Ins. Co., Ltd. v. First Ins. Co. of Hawai’i, 875 P.2d 894, 913
(Haw. 1994) (by breaching duty to defend, insurer forfeits any
right to control defense costs and strategy; insured is then
entitled to negotiate reasonable settlement).
For the foregoing reasons, the district court’s judgment is
affirmed.
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____________________
CONCURRENCE
____________________
ROGERS, Circuit Judge, concurring. I concur in the
majority opinion. I write separately to explain why, in my
view, the seemingly applicable “j(5)” exclusion does not
apply in the circumstances of this case.
The insurance policies in this case, in the “j(5)” exclusion,
exclude coverage for “property damage” to
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.
Notably, the policies do not define “performing operations”
or “operations.”
Two canons of constructions are crucial to my resolution of
this issue. First, the insurer bears the burden of showing that
an exception applies. Interstate Life & Acc. Ins. Co. v.
Gammons, 408 S.W.2d 397, 399 (Tenn. Ct. App. 1966).
Second, ambiguous insurance contracts, and, in particular,
ambiguous language limiting coverage, are construed in favor
of the insured. American Justice Ins. Reciprocal v.
Hutchinson, 15 S.W.3d 811, 815 (Tenn. 2000); Interstate Life
& Acc. Ins. Co., 408 S.W.2d at 399.
The insurers argue that the j(5) exclusion applies because,
under Standard’s contract with the State of Tennessee,
Standard was required to dispose of construction debris. As
explained in the majority opinion, Standard entered into a
contract with the State of Tennessee to perform paving and
road widening work as part of a state project to widen
Highway 64 from two to five lanes. In the contract, Standard

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agreed to “clear and grub” vegetation and debris, to remove
“structures and obstructions,” and to dispose of this material
“outside the limits of view from the project.” Regarding the
“clearing and grubbing,” Standard was required to “make all
necessary arrangements with property owners for obtaining
suitable disposal locations,” and the cost involved was
“included in the unit price bid for other items of
construction.” Regarding the removal of “structures and
obstructions,” the contract provided that, “[i]f the material is
disposed of on private property, [Standard] shall secure
written permission from the property owner.”
While in my view the question is close, the term
“operations” is ambiguous in that it is not clear whether
Standard was “performing operations” on Ms. Love’s
property when it dumped debris there. It is true that Standard
was required under the contract to dispose of construction
debris and to obtain permission from any property owners on
whose property Standard chose to dispose of the debris.
However, Standard was not obligated to dispose of the debris
in any particular fashion—Standard owned the debris once it
was removed and could dispose of it in a number of ways. It
was not necessary for Standard to dump debris on Ms. Love’s
property in order to fulfill its contract to widen the highway.
The requirement that Standard obtain permission before it
dumped debris on private land simply served to shield the
State of Tennessee from liability to third parties. As the
district court found, “work on Ms. Love’s property was an
additional duty or task that Standard was to undertake through
additional contracts with adjacent landowners.” Or as
Standard argues, it was “hired” to widen a road—not to
perform work on Ms. Love’s land.
Thus, given that the canons of construction favor coverage,
and that, as explained in the majority opinion, coverage in the
present case coincides with the underlying purpose of CGL
insurance, the district court properly concluded that the j(5)
exclusion does not apply.

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