                         IN THE NEBRASKA COURT OF APPEALS

               MEMORANDUM OPINION AND JUDGMENT ON APPEAL
                        (Memorandum Web Opinion)

                        GRINNELL MUTUAL REINSURANCE CO. V. FISHER


  NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
 AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).


                    GRINNELL MUTUAL REINSURANCE COMPANY, APPELLEE,
                                               V.

               ROBERT D. FISHER, APPELLANT, AND ROBERTA F. SMITH, APPELLEE.


                            Filed March 13, 2018.    No. A-16-1047.


       Appeal from the District Court for Richardson County: DANIEL E. BRYAN, JR., Judge.
Affirmed in part, and in part reversed and vacated, and cause remanded for further proceedings.
       Douglas E. Merz and Zachary L. Blackman, of Weaver & Merz Law Office, for appellant.
       Marvin O. Kieckhafer, of Smith Peterson Law Firm, L.L.P., for appellee Grinnell Mutual
Reinsurance Company.


       MOORE, Chief Judge, and INBODY and BISHOP, Judges.
       BISHOP, Judge.
                                      I. INTRODUCTION
       Grinnell Mutual Reinsurance Company (GMR) brought a declaratory judgment action in
Richardson County District Court seeking a determination that it had no duty under a commercial
general liability (CGL) policy to indemnify or defend its insured, Robert D. Fisher, in an action
Roberta F. Smith filed against Fisher. (Smith filed an action against Fisher after he stopped
working on a house she had contracted him to build for her.) GMR and Fisher filed motions for
summary judgment; the district court found in favor of GMR and against Fisher. Fisher now
appeals. We affirm in part, and in part reverse and vacate, and we remand for further proceedings.




                                              -1-
                                       II. BACKGROUND
        Fisher is a contractor who does construction and cement work individually and as Fisher
Concrete Construction, Inc. Smith hired Fisher to build her a house in November 2009. Smith filed
an action in Nemaha County District Court against Fisher related to his work on her house
(hereinafter “Nemaha County” or “Smith” case). Fisher had a CGL policy through GMR, and he
provided GMR notice of Smith’s claims against him. GMR, under a reservation of rights, provided
legal counsel to assist in Fisher’s defense against Smith’s claims. GMR subsequently filed a
declaratory judgment action (at issue in this appeal) to determine its duty, if any, under the CGL
policy. We begin by setting forth in more detail: (1) the facts related to Smith’s lawsuit against
Fisher, (2) the substance of GMR’s claim for declaratory judgment, (3) the relevant portions of the
CGL policy, and (4) the summary judgment motions and order.
                              1. SMITH’S LAWSUIT AGAINST FISHER
         Smith entered into an agreement with Fisher to rebuild her home, which had been destroyed
in a fire. The contract stated the price was no less than $106,200 and no more than $113,280,
depending on the cost of supplies. She paid $60,000 up front on November 9, 2009, another
$15,000 for materials on March 22, 2010, and an additional $10,000 for materials on June 16. She
stated Fisher stopped work on the house while it was still largely incomplete. Smith filed her action
against Fisher and Fisher Concrete Construction, Inc. on November 29, 2010. Her complaint
asserted claims for (1) breach of contract for failing to complete construction of the house; (2)
fraudulent misrepresentation by Fisher for representing that he had the education, skills, and tools
to complete the construction; (3) quantum meruit for unjust enrichment from the payments to
Fisher for work that was never completed; (4) and negligence for failing to perform the work in a
good, workmanship-like manner.
         Smith claimed her damages were for (1) the cost to complete the construction and correct
the work, (2) the cost of non-delivery and installation of building materials performed by other
contractors, (3) the loss of materials that Smith paid Fisher for but which were not delivered, (4)
the $85,000 Smith paid to Fisher, (5) the cost to repair damage to portions of the home that were
uninhabitable due to the unfinished work, and (6) any amount Fisher had overcharged Smith.
         Smith testified in her deposition that the concrete work on the new house was done in
November 2009, and house construction began in March 2010. As the construction progressed into
the summer of 2010, Smith noticed the outside dimensions of the house were incorrect, several of
the rooms were the incorrect size, and one room on the floor plan was missing completely, though
she never took any measurements of the house or rooms herself. Smith claimed she talked to Fisher
about the walls to the interior rooms being incorrect before and after the sheetrock was installed.
         According to Smith, Fisher asked for another payment on July 6, 2010, and she refused.
Fisher then packed up all of the materials and tools from the job site and left. Smith called Fisher
on July 14 and asked if he was going to finish, but also told him she was not going to pay him
“until it was correct” (meaning the floorplan and size of the rooms). After Fisher left, Smith never
hired anyone to finish the work. She attempted to board up the windows and put on Tyvek
wrapping to protect the house. Smith stated that as a result of the work Fisher did and his refusal
to finish, some of the materials in the house rotted, the fireplace rusted, and the insulation fell
down where there was no sheetrock.


                                                -2-
         Fisher testified in his deposition that he had a contract with Smith to build her house which
they agreed to in November 2009. The single-paged contract did not cover all of the extra details
and add-ons Smith asked for, but he thought they had a good verbal agreement on each of the
extras. He had subcontractors help with some of the framing, the sheetrock, and the electrical work
on Smith’s house. He got into a dispute with Smith about payment for the extras on the house in
July 2010, and his company quit working when she refused to pay him more money. He later tried
to contact her via telephone but she told him she was not feeling well. She never contacted him
again until he was served with her lawsuit on November 29.
         Fisher also stated in his deposition that when he left the worksite, the sheetrock was just
over 90-percent completed. None of the finishing was done in terms of trim boards, cabinetry,
hanging doors, and painting, which he claimed was not part of the original contract. According to
Fisher, what was complete was done properly. He stated that he was aware there was a leak coming
down the fireplace, and that was the only leak to his knowledge. He also stated it was not something
Smith was complaining about at the time they got into the argument that caused him to stop
working on the house; it occurred after he was gone.
         On March 3, 2011, GMR sent Fisher a letter regarding reservation of rights and excess
liability. The letter explained GMR had received the complaint filed by Smith, and there were
questions as to whether Fisher’s policy covered the losses alleged in Smith’s complaint. It stated
any action by GMR in “investigating, adjusting, or defending this loss” did not waive GMR’s right
to deny coverage or withdraw from handling the case. The letter listed out several provisions of
the policy that possibly precluded coverage, and also informed Fisher that GMR had hired an
attorney to defend him in the lawsuit subject to GMR’s right to withdraw or deny coverage. Finally,
the letter also advised Fisher that GMR’s reservation of rights set up a potential conflict of interest
in the legal proceedings, and he may wish to consult his own attorney regarding that conflict.
                           2. GMR’S DECLARATORY JUDGMENT ACTION
        GMR filed a complaint for declaratory judgment on December 12, 2012, against Fisher
and Smith. GMR asked the court to enter a declaratory judgment against Fisher and Smith finding
that the damages in Smith’s case against Fisher were (1) not for “personal and advertising injury,”
(2) not for “bodily injury,” (3) not for “property damage,” and (4) not the result of an “occurrence.”
The complaint also asked the court to declare that even if there were “property damages” caused
by an “occurrence,” they were not covered by the policy because of the exclusions set forth in the
policy, and therefore GMR had no duty to indemnify or defend Fisher in the action brought by
Smith.
                                           3. CGL POLICY
       In “Section 1 - Coverages,” the CGL policy provides:
       We will pay those sums that the insured becomes legally obligated to pay as damages
       because of . . . “property damage” to which this insurance applies. We will have the right
       and duty to defend the insured against any “suit” seeking those damages. However, we will
       have no duty to defend the insured against any “suit” seeking damages for . . . “property
       damage” to which this insurance policy does not apply[.]




                                                 -3-
        A “suit” means “a civil proceeding in which damages because of ‘bodily injury,’ ‘property
damage,’ or ‘personal and advertising injury’ to which this insurance applies are alleged.” Fisher
does not challenge the district court’s order concluding that “bodily injury” or “personal and
advertising injury” are not applicable to Smith’s lawsuit against him. Accordingly, we set forth
relevant provisions of the policy pertaining only to coverage for “property damage.”
        The policy covers “property damage” if the “property damage” is caused by an
“occurrence” that takes place in the “coverage territory” and occurs during the policy period.
“Property damage” is defined 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 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.

(Emphasis in original.)
       According to the policy, an “[o]ccurrence means an accident, including continuous or
repeated exposure to substantially the same general harmful conditions.”
       There are certain exclusions to coverage GMR contends may be applicable in the event
property damage caused by an occurrence is established. We set forth the relevant policy language
when discussing the specific exclusions in the analysis section later in this opinion.
                          4. SUMMARY JUDGMENT MOTIONS AND ORDER
        Smith and Fisher filed answers to GMR’s complaint for declaratory judgment; Fisher also
filed a counterclaim against GMR, seeking an order declaring that GMR has a duty to provide
coverage and defend Smith’s claims against him. GMR subsequently filed a motion for summary
judgment on August 29, 2014. In the motion for summary judgment was a list of evidence GMR
expected to offer in support of its motion; it included several depositions taken in the Nemaha
County case.
        Fisher filed a motion in limine on June 22, 2015, seeking to prevent GMR from using any
depositions that were taken in the Nemaha County case in support of GMR’s motion for summary
judgment. (A second motion in limine filed on June 22, sought to exclude different evidence not
relevant to this appeal). On July 17, the court ruled it would consider any sworn testimony in the
motions for summary judgment, and both motions in limine were denied by the court.
        After some delay resulting from Smith filing a suggestion of bankruptcy, Fisher filed a
motion for summary judgment against GMR on July 16, 2016. At the hearing on GMR’s and
Fisher’s summary judgment motions, evidence was received. In addition to the information
previously set forth, we note that in an affidavit from Smith, she claimed Fisher improperly
constructed the roof on her house, and as a result there was water damage to the interior of the
structure. Smith further averred, “[s]aid water damaged certain property which was installed by
[Fisher] and said water damaged certain property which was installed by certain subcontractors
and said water damaged certain property which was property owned by [Smith] herself.” Smith
claimed the water damage to her property was due to faulty installation of the roof by Fisher. Smith
claimed in her deposition that the fireplace was damaged, as well as the sheetrock, and potentially


                                               -4-
some insulation. Smith said the chimney was made of plywood, which resulted in water damage.
Although Smith’s affidavit asserted damage to her own property, as well as to subcontractor
property, she did not state what specific property was damaged.
        Fisher acknowledged there was a leak, though he stated it was from the chimney. Two
GMR employees, Hugh Sheridan (director of commercial underwriting) and Kami Holmes
(attorney), both stated in their depositions that rain leaking through a roof could potentially
constitute an occurrence in combination with faulty workmanship under the policy in question. At
the summary judgment hearing, GMR’s counsel stated, “I don’t think the facts are abundantly clear
on [damage to someone else’s property as a result of what Fisher did in his construction project],
but to that extent, if there’s coverage under the policy for that kind of damage, it’s very limited.”
When the district court inquired about how much damage was claimed by Smith, GMR’s counsel
stated there was yet not sufficient information from Smith’s case regarding the damage to the
property of others.
        The district court entered an order on October 11, 2016, finding GMR was entitled to
judgment as a matter of law. The order set forth a “Statement of Facts,” which we note does not
include any facts related to Smith’s claims of water leakage and property being damaged as a result
of alleged faulty roof installation by Fisher, as we described above. After concluding it had
jurisdiction over the issues presented, the district court found that the policy “clearly denies
coverage in respect to the claims of [Smith’s] suit for a breach of contract and business risk of
unworkmanlike conduct in the building of homes; it does cover [Fisher’s] tort liability for physical
injury or property damages.” The court found that Smith’s claims against Fisher did not involve
bodily injuries. The court went on to state:
        While not apparent from the pleadings Smith’s case against Fisher may involve property
        damage. But to be covered by the policy, the property damage must be caused by an
        “occurrence”. Under the policy, “Occurrence” [sic] is defined as “an accident including
        continuous or repeated exposure to substantially the same general harmful conditions.”
        There seems to be no occurrence as defined by the policy in regard to the claims of Smith.
                In fact, the policy sets out a damage to property exclusion (exhibit # 20) to clearly
        deny any coverage of any negligence in unworkmanship [sic] performance by Fisher.
                Neither is the “personal and advertising injury” liability coverage applicable to
        Fisher in regard to Smith’s claims.

        The district court then acknowledged the existence of two endorsements to the policy and
generally laid out what they stated. However, the court did not explain the relevance of those
endorsements, if any, to Smith’s lawsuit against Fisher. The court concluded, “It is clear that Fisher
does not have coverage under GMR’s policy for paying or defending the Smith suit as it presently
exists from the pleadings.” The court found “no genuine issue of material fact that exists,” and
determined that GMR was entitled to judgment as a matter of law. The court denied Fisher’s
motion for summary judgment and dismissed Fisher’s counterclaim.
        Fisher appeals.




                                                -5-
                                 III. ASSIGNMENTS OF ERROR
        Fisher assigns, consolidated and restated, that the district court erred by (1) determining it
had jurisdiction to enter an order for declaratory judgment, (2) determining the claims against
Fisher were not covered by any provision of the CGL policy, (3) finding there were no genuine
issues of material fact and granting GMR’s motion for summary judgment, and (4) considering
depositions from another case as evidence in support of GMR’s motion for summary judgment.
                                  IV. STANDARD OF REVIEW
        We review the district court’s grant of summary judgment de novo, viewing the record in
the light most favorable to the nonmoving party and drawing all reasonable inferences in that
party’s favor. Waldron v. Roark, 298 Neb. 26, 902 N.W.2d 204 (2017).
        When reviewing questions of law, an appellate court has an obligation to resolve the
questions independently of the conclusion reached by the trial court. O’Brien v. Cessna Aircraft
Co., 298 Neb. 109, 903 N.W.2d 432 (2017).
        A trial court has the discretion to determine the relevancy and admissibility of evidence,
and such determinations will not be disturbed on appeal unless they constitute an abuse of that
discretion. Id.
                                           V. ANALYSIS
                                 1. SUBJECT MATTER JURISDICTION
        Subject matter jurisdiction is the power of a tribunal to hear and determine a case in the
general class or category to which the proceedings in question belong and to deal with the general
subject matter involved. J.S. v. Grand Island Public Schools, 297 Neb. 347, 899 N.W.2d 893
(2017). But the question of a court’s subject matter jurisdiction does not turn solely on the court’s
authority to hear a certain class of cases. In re Interest of Trey H., 281 Neb. 760, 798 N.W.2d 607
(2011). Instead, it also involves determining whether a court has authority to address a particular
question that it assumes to decide or to grant the particular relief requested. Id.
        Fisher argues that since no judgment has been rendered against him in the Nemaha County
case, a declaratory judgment action cannot be used to determine the legal effects of a set of facts
which are future, contingent, or uncertain. He argues that without a judgment obtained against him,
no controversy yet exists, and therefore the district court had no jurisdiction over the case.
        This same argument was raised by the insured in Cincinnati Ins. Co. v. Becker Warehouse,
Inc., 262 Neb. 746, 635 N.W.2d 112 (2001), and the Nebraska Supreme Court held that the district
court did have subject matter jurisdiction over the insurance company’s declaratory judgment
action even though underlying damages had not yet been determined. The insured in Cincinnati
Ins. Co. was sued for damages to food products stored in the insured’s warehouse. A sealant (a
hazardous air pollutant) had been applied to the warehouse’s concrete floor and it was alleged that
fumes from the sealant contaminated the food products. Before the insured’s liability for damages
had been determined, the insured’s insurance company filed for a declaratory judgment on the
grounds that the damages at issue were excluded from coverage under a pollution exclusion
contained in the insured’s policy. Like the district court in the present matter, the district court in
Cincinnati Ins. Co. granted summary judgment in favor of the insurance company. The district



                                                 -6-
court found, as a matter of law, that there was no coverage for the alleged damages based on the
policy’s pollution exclusion. And, as Fisher does here, the insured in Cincinnati Ins. Co. relied
upon Allstate Ins. Co. v. Novak, 210 Neb. 184, 313 N.W.2d 636 (1981), for the proposition that a
declaratory judgment could not be granted until the potential damages were determined.
Accordingly, as the Nebraska Supreme Court did in Cincinnati Ins. Co., we take a moment to
consider the applicability, if any, of Novak to the case before us.
         In Novak, the Nebraska Supreme Court stated that there must be an actual controversy in
order to maintain an action for declaratory judgment. Further, a declaratory judgment “cannot be
used to decide the legal effect of a state of facts which are future, contingent, or uncertain.” Allstate
Ins. Co. v. Novak, 210 Neb. at 188, 313 N.W.2d at 638. In Novak, the insured assaulted a man, but
claimed he did so in self-defense. When the assault victim sued the insured, the insured called
upon the insurance company to provide a defense and to pay sums which the insured might be
legally obligated to pay. The insurance company refused to provide coverage based upon an
exclusion in the policy for bodily injury which is either expected or intended from the standpoint
of the insured. The district court entered a declaratory judgment in favor of the insurance company.
         On appeal, the Nebraska Supreme Court in Novak said that “[t]he question now presented
to us is whether we can judicially determine whether [the insurance company] is required to make
payment on behalf of [the insured]. However, until it is determined that [the insured] is legally
obligated to pay [the assault victim], the question of [the insurance company’s] obligation is
uncertain and contingent.” Id. at 188-89, 313 N.W.2d at 639. The court held that injuries resulting
from actions taken in self-defense are not expected or intended within the meaning of the policy.
Therefore, the damages caused by the insured were potentially covered. The Nebraska Supreme
Court reversed the declaratory judgment, finding that “unless and until a final determination is in
fact made that [the insured] is legally obligated to pay,” then the question of whether the insurance
company had an obligation to pay on behalf of the insured could not be decided.” Id. at 193, 313
N.W.2d at 641.
         Notably, Novak also stated:
                 We are not suggesting by this opinion that there may never be an appropriate
         instance where the carrier may seek declaratory relief prior to the insured’s liability being
         ascertained. There may, indeed, be situations where the language of the policy is such that
         the carrier’s obligation to pay can be determined even before the insured’s liability is
         determined.

Id. at 189, 313 N.W.2d at 639.
        In Cincinnati Ins. Co., the Nebraska Supreme Court addressed its holding in Novak, noting
that bodily injury was clearly covered by the policy, but that the pending case against the insured
would determine whether or not the injury was intentional and therefore excluded under the
policy’s coverage. However, in Cincinnati Ins. Co., the language of the policy at issue contained
an exclusion for damages arising from pollutants, which the insured claimed was ambiguous.
Cincinnati Ins. Co. pointed out that Novak “turned on facts; this case turns on law[,]” and therefore,
“the district court had subject matter jurisdiction over the declaratory judgment[.]” Cincinnati Ins.
Co. v. Becker Warehouse, Inc., 262 Neb. at 753, 635 N.W.2d at 118. The Nebraska Supreme Court



                                                  -7-
concluded that the contamination incident fell within the pollution exclusion in the policy, and
affirmed the district court’s decision.
        We agree with GMR that a declaratory judgment can be entered when it is clear from the
language of the policy that the insured’s actions are not covered by the policy. An insurer may
petition a court to declare, pursuant to Neb. Rev. Stat. § 25-21,149 (Reissue 2016) of Nebraska’s
Uniform Declaratory Judgments Act, whether an insured’s conduct or a specific event is excluded
from coverage under a policy of insurance. American Fam. Mut. Ins. Co. v. Hadley, 264 Neb. 435,
648 N.W.2d 769 (2002). Where it is proved that a specific event or type of conduct is beyond the
terms of an insurance policy, a court may enter a declaratory judgment that the insurer is not
obligated to provide coverage to the insured for the event or conduct. Id.
        Accordingly, GMR’s declaratory judgment action seeking to establish what was not
covered under the CGL policy was properly before the district court. We now turn to the district
court’s interpretation of the CGL policy.
                                2. INTERPRETATION OF CGL POLICY
                                (a) Coverage for Property Damage
        As set forth previously, the policy covers property damage if the property damage is caused
by an “occurrence,” and an “[o]ccurrence means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
        Although the district court determined Smith’s claims against Fisher “may involve property
damage,” the court nevertheless concluded there “seems to be no occurrence as defined by the
policy.” The court acknowledged the existence of the two endorsements which modify coverage,
however, other than generally setting forth what they stated, the court did not provide any
explanation as to why the endorsements would or would not be applicable to any of Smith’s claims
against Fisher. The court then concluded, “It is clear that Fisher does not have coverage under
GMR’s policy for paying or defending the Smith suit as it presently exists from the pleadings.”
        Fisher argues that the district court erred by determining there was no “occurrence.” Fisher
asserts that because Smith alleged Fisher’s negligent roofing caused water to leak and resulted in
damage to her property and the property of others, this meets the definition of an occurrence. He
also claims that the endorsements to the policy provide coverage for damages to the injury or
destruction of property of others (including loss of use) while in the care, custody, or control of
Fisher.
        The interpretation of an insurance policy is a question of law. Fokken v. Steichen, 274 Neb.
743, 744 N.W.2d 34 (2008). When reviewing questions of law, an appellate court has an obligation
to resolve the questions independently of the conclusion reached by the trial court. Id.
        In construing insurance contracts, the Nebraska Supreme Court has stated:
                An insurance policy is a contract between an insurance company and an insured,
        and as such, the insurance company has the right to limit its liability by including
        limitations in the policy definitions. If the definitions in the policy are clearly stated and
        unambiguous, the insurance company is entitled to have such terms enforced.
                Insurance contracts, like other contracts, are to be construed according to the sense
        and meaning of the terms which the parties have used. If the terms of the contract are clear
        and unambiguous, they are to be taken and understood in their plain, ordinary, and popular


                                                -8-
       sense. An ambiguity exists only when the policy can be interpreted to have two or more
       reasonable meanings. The language of an insurance policy should be read to avoid
       ambiguities, if possible, and the language should not be tortured to create them.

Fokken v. Steichen, 274 Neb. at 751, 744 N.W.2d at 40-41.
        We find Auto-Owners Ins. Co. v. Home Pride Cos., 268 Neb. 528, 684 N.W.2d 571 (2004),
to be helpful in considering the CGL policy at issue before this court. In Home Pride Cos., the
Nebraska Supreme Court, as a matter of first impression, considered whether damage caused by
faulty workmanship was covered under a standard CGL insurance policy. The policy in Home
Pride Cos., like the policy at issue here, provided coverage for “property damage” if it is caused
by an “occurrence.” In Home Pride Cos., it was alleged that the insureds’ faulty workmanship in
their installation of roof shingles on apartment buildings (they were breaking apart and falling off
roofs) caused substantial and material damage to the roof structures and buildings. The insurance
company filed a declaratory judgment action, claiming the policy did not provide coverage because
faulty workmanship did not constitute an “occurrence” under the policy. Id. at 533, 684 N.W.2d
at 576. On competing motions for summary judgment, the district court granted summary
judgment in favor of the insurance company.
        The CGL policy in Home Pride Cos., again like the policy at issue here, defined occurrence
as “an accident, including continuous or repeated exposure to substantially the same general
harmful conditions.” Id. Observing that although the term “accident” was not defined in the policy,
the Nebraska Supreme Court noted that “we have previously stated that ‘an accident within the
meaning of liability insurance contracts includes any event which takes place without the foresight
or expectation of the person acted upon or affected thereby.’” Id. (quoting Farr v. Designer
Phosphate & Premix Internat., 253 Neb. 201, 570 N.W.2d 320 (1997)). The court further stated:
                 Whether faulty workmanship fits within the aforementioned definition of accident
        is a difficult question, and courts have answered it in a variety of ways. For example, a
        relatively small number of courts have determined that the damage that occurs as a result
        of faulty or negligent workmanship constitutes an accident, so long as the insured did not
        intend for the damage to occur. [Citations omitted.]
                 However, the majority of courts have determined that faulty workmanship is not an
        accident, and, therefore, not an occurrence.

Auto-Owners Ins. Co. v. Home Pride Cos., 268 Neb. at 533, 684 N.W.2d at 576.
        The Nebraska Supreme Court aligned with the majority rule and concluded that “faulty
workmanship, standing alone, is not covered under a standard CGL policy because it is not a
fortuitous event.” Id. at 535, 684 N.W.2d at 577. “Important here, although faulty workmanship,
standing alone, is not an occurrence under a CGL policy, an accident caused by faulty
workmanship is a covered occurrence.” Id. (Emphasis in original.) “Stated otherwise, although a
standard CGL policy does not provide coverage for faulty workmanship that damages only the
resulting work product, if faulty workmanship causes bodily injury or property damage to
something other than the insured’s work product, an unintended and unexpected event has
occurred, and coverage exists.” Id. at 535, 684 N.W.2d at 578.



                                               -9-
        Referring to a New Hampshire case, the Home Pride Cos. court noted that in a lawsuit
brought against builders for negligent construction of some condominiums’ exterior walls, the
claims for faulty workmanship, standing alone, did not constitute an “occurrence” within the
meaning of a CGL policy. However the claim against the builders not only requested compensation
to repair and replace the poorly constructed exterior walls, but also requested compensation for
water damage that allegedly occurred as a result of the builder’s faulty workmanship. The
consequential damages from the water damage constituted accidental damage to property other
than the insured’s own work product, and was therefore a proper claim for property damage caused
by an occurrence. See Home Pride Cos., supra.
        Accordingly, in Home Pride Cos., the Nebraska Supreme Court concluded that as a
consequence of the faulty work by the insured (installing shingles), it was alleged that the roof
structures and buildings experienced substantial damage. This allegation “represents an
unintended and unexpected consequence of the contractor’s faulty workmanship and goes beyond
damages to the contractor’s own work product.” Id. at 537, 684 N.W.2d at 579. “Therefore, the
amended petition properly alleged an occurrence within the meaning of the insurance policy.” Id.
        The same is true in the case before this court. Although Smith’s pleading in the Nemaha
County case does not specifically allege damage to the property of others, she does allege
negligence on Fisher’s part for failing to perform the work in a good, workmanship-like manner.
In the evidence submitted for summary judgment purposes, Smith claimed damages to property
owned by herself, as well as to subcontractor property, as a result of Fisher’s alleged faulty
workmanship. Specifically, Smith claimed water damaged the home due to Fisher’s negligent
roofing. Fisher acknowledged there was a leak, but claimed it was from the chimney. Smith
claimed the fireplace was damaged, as well as the sheetrock, and potentially some insulation.
Smith said the chimney was made of plywood, which resulted in water damage. Two GMR
employees both stated that rain leaking through a roof could potentially constitute an occurrence
in combination with faulty workmanship under the policy in question.
        Notably, the district court found that Smith’s case against Fisher “may involve property
damage,” but that there was no “occurrence.” We determine, however, that Home Pride Cos.,
supra, requires a different conclusion. Smith’s allegations of property damage represent
unintended and unexpected consequences of Fisher’s alleged faulty workmanship and go beyond
damages related to Fisher’s own work product; accordingly, such claims of property damage
sufficiently allege an occurrence within the meaning of the CGL insurance policy. We therefore
reverse and vacate the portion of the district court’s order concluding otherwise.
                                     (b) Policy Exclusions
       Concluding there was an occurrence does not end our analysis regarding coverage under
the CGL policy; we must now consider whether any policy exclusions would prevent coverage.
Once again, we find guidance in Home Pride Cos., supra. In that case, after determining that the
claim against the insureds sufficiently alleged property damage caused by an occurrence, the
Nebraska Supreme Court turned to the policy exclusions, noting that the “burden to prove that an
exclusionary clause applies rests upon the insurer.” Auto-Owners Ins. Co. v. Home Pride Cos., 268
Neb. at 537, 684 N.W.2d at 579. In Home Pride Cos., the insurance company claimed that there
was no coverage because of exclusions related to damages claimed for any loss, cost or expense


                                             - 10 -
incurred by “you or others for the loss of use, withdrawal, recall, inspection, repair, replacement,
adjustment, removal or disposal of: . . . ‘Your work’; or . . . ‘Impaired property’; if such . . . work
or property is withdrawn . . . from use . . . ‘because of a known or suspected defect, deficiency,
inadequacy or dangerous condition in it.’” Id. In considering those exclusions, the Nebraska
Supreme Court stated:
               Generally speaking, the “your work” exclusions . . . operate to prevent liability
       policies from insuring against an insured’s own faulty workmanship, which is a normal
       risk associated with operating a business. [Citations omitted.] Essentially, the rationale
       behind the “your work” exclusions is that they discourage careless work by making
       contractors pay for losses caused by their own defective work, while preventing liability
       insurance from becoming a performance bond. [Citations omitted.]

Id. at 538, 684 N.W.2d at 579.
        In Auto-Owners Ins. Co. v. Home Pride Cos., 268 Neb. 528, 684 N.W.2d 571 (2004), the
Nebraska Supreme Court concluded the CGL policy’s exclusions did not apply to the damage
claim at issue before it because the claim extended beyond the cost to simply repair and replace
the contractor’s work, such as reshingling the roofs. The court found that the damage to the roof
structures and buildings fell outside the exclusion. Additionally, in considering the exclusion
related to “impaired property,” it noted that property is not impaired unless it is capable of being
restored by the repair, replacement, adjustment or removal of “your work,” or by fulfilling the
terms of the contract or agreement. In Home Pride Cos., the court concluded that because the
damage to the roof structures and buildings could not be repaired or restored by simply reshingling
the apartment roofs, the damages were not “impaired property” within the meaning of the
exclusion. Id. at 538-39, 684 N.W.2d at 580.
        In the present matter, GMR argues the following exclusions apply: (a) contractual liability,
(b) damage to property, (c) impaired property, (d) expected or intended injury, and (e) property
damage to “your product” and property damage to “your work.” Of these exclusions, we find that
Home Pride Cos., as discussed above, similarly applies to two exclusions raised by GMR: (c)
impaired property and (e) property damage to “your product” and “your work,” so we address
those first.
        As for impaired property, the damages to property belonging to Smith or others cannot be
repaired or restored by simply fixing the faulty workmanship (roof or chimney), as was the case
in Home Pride Cos., supra, where the court found simply replacing the faulty shingles would not
repair or restore the damage to the roof structures or buildings. Accordingly, as the court did in
Home Pride Cos., we conclude that the damage to the property of others alleged in this case cannot
be “impaired property.”
        As for property damage to “your product” and “your work,” Home Pride Cos., supra,
provides that “your work” exclusions “operate to prevent liability policies from insuring against
an insured’s own faulty workmanship, which is a normal risk associated with operating a
business.” Id., 268 Neb. at 538, 684 N.W.2d at 579. This explanation for “your work” exclusions
can be similarly applied to “your product” exclusions. These exclusions apply to the faulty
workmanship or faulty products of the insured. Property damage to property of others does not



                                                - 11 -
constitute damage to “your product” (goods manufactured, sold, handled, distributed or disposed
of by insured) or “your work” (work or operations performed by the insured or on his behalf, and
the materials furnished in connection with his work). We conclude the “your product” and “your
work” exclusions are not applicable when the property damage is to the property of others.
        We now address the remaining three exclusions GMR argues apply to Smith’s claims
against Fisher.
                               (i) Exclusion for Contractual Liability
        The provision excludes coverage for “property damage” “for which the insured is obligated
to pay damages by reason of the assumption of liability in a contract or agreement.” However,
“[t]his exclusion does not apply to liability for damages . . . [t]hat the insured would have in the
absence of the contract or agreement[.]”
        Fisher does not challenge the district court’s determination that the policy excluded
coverage with respect to Smith’s claims for breach of contract, and we agree that this exclusion
would preclude such coverage. Accordingly, we affirm the district court’s order as to Smith’s
claims against Fisher for breach of contract.
                                (ii) Damage to Property Exclusion
The language of this exclusions states:
               j. Damage to Property
               [Excludes coverage for] “[p]roperty damage” to: . . . (4) Personal property in the
       care, custody or control of the insured; (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.

We note that although subsection j.(4) of this exclusion appears to exclude coverage for personal
property damage under Fisher’s “care, custody or control,” there is an endorsement that modifies
subsection j.(4); and provides coverage for:
       [D]estruction of property of others (including the loss of use thereof), while in the care,
       custody or control of an insured or property as to which an insured for any purpose is
       exercising physical control, caused by an accident and arising out of the installation, repair,
       alteration or other operations of your business described by and covered by [the CGL
       policy].

This particular endorsement may potentially provide coverage for the damages alleged to be at
issue here. The limit of insurance under this endorsement for all property damage arising out of
any one occurrence is $5,000 (with a $250 deductible), with a $25,000 total aggregate limit per
policy year. The endorsement has an exclusion, which, among other things, excludes the cost of
repairing or replacing any work defectively or incorrectly performed or completed by an insured
or subcontractor.




                                                - 12 -
       There is also an endorsement that modifies subsections j.(5) and j.(6) of the “Damage to
Property” exclusion set forth above, which states:
       [W]e agree with you to pay at your request for “property damage” to property of others in
       the care, custody or control of an insured caused by an “occurrence” and arising out of your
       operations away from your insured premises.

This endorsement states, however, that the insurer “shall have no duty whatsoever to defend claims
and/or lawsuits for which the only coverage provided is under this endorsement.” The limit under
this endorsement is $1,000 for each occurrence (with a $250 deductible), with a $5,000 aggregate
limit.
        In light of the endorsements noted, some of the “damage to property” owned by Smith or
others alleged to be at issue in Smith’s action may fall under these endorsements. Therefore,
GMR’s argument that the “Damage to Property” exclusion applies and should exclude coverage
is not consistent with the plain reading of the language contained in the endorsements to this
exclusion.
                           (iii) Expected or Intended Injury Exclusion
        This provision excludes coverage for “property damage” “expected or intended from the
standpoint of the insured.” GMR claims that Fisher could expect there would be a claim against
him for damages if he stopped construction and abandoned the property, or if he did not construct
the house in a workmanlike manner, or if he did not perform under the terms of the construction
contract. However, according to Fisher, the house was 90-percent complete and what was complete
was done properly. Further, Fisher claimed the leak occurred after he had stopped working on the
house. The damage to personal property from water leakage into the house was not something
Fisher expected or intended. This exclusion does not apply.
                            (c) Summary of Coverage and Exclusions
        The CGL policy covers “property damage” if the “property damage” is caused by an
“occurrence.” As in other standard CGL policies, the policy at issue here does not provide coverage
for faulty workmanship that damages only the resulting work product. But if faulty workmanship
causes property damage to something other than the insured’s work product, an unintended and
unexpected event has occurred, and coverage exists. See Auto-Owners Ins. Co. v. Home Pride
Cos., 268 Neb. 528, 684 N.W.2d 571 (2004). Some of Smith’s claims against Fisher regarding
damage to property owned by Smith or others may represent an unintended and unexpected
consequence of Fisher’s alleged faulty workmanship and go beyond damages to Fisher’s own work
product. Therefore, since some of Smith’s claims against Fisher properly allege an occurrence
within the meaning of the CGL policy, coverage exists.
        As for coverage exclusions, we agree that Smith’s claims against Fisher for a breach of
contract are not covered by the CGL policy. Further, any of Smith’s claims related to faulty
workmanship by Fisher are not covered. However, none of the other exclusions asserted by GMR
serve to exclude Smith’s allegations of damage to property owned by her or others, although, as
previously noted, the endorsements may limit the amount of coverage available.




                                              - 13 -
        As has become apparent, this court agrees, in part, and disagrees, in part, with the district
court’s interpretation of the CGL policy at issue. Therefore, we next address how this court’s
interpretation of the policy affects the district court’s order granting summary judgment on GMR’s
complaint for a declaratory judgment.
                                       3. SUMMARY JUDGMENT
         Both GMR and Fisher filed motions for summary judgment. As to their underlying requests
for relief, GMR had initiated the action seeking a declaratory judgment against Fisher and Smith
finding that the damages in Smith’s case against Fisher were (1) not for “personal and advertising
injury,” (2) not for “bodily injury,” (3) not for “property damage,” and (4) not the result of an
“occurrence.” GMR’s complaint also asked the court to declare that even if there were “property
damages” caused by an “occurrence,” they were not covered by the policy because of the
exclusions set forth in the policy, and therefore GMR had no duty to indemnify or defend Fisher
in the action brought by Smith. Fisher’s counterclaim asked the district court to “declare” that
GMR had a duty to provide coverage and defend Fisher as to Smith’s claims against him.
         The district court concluded there were no genuine issues of material fact and that GMR
was entitled to judgment as a matter of law; the court held that Fisher did not have coverage under
the CGL policy “for paying or defending the Smith suit.” The court dismissed Fisher’s
counterclaim.
         Summary judgment is proper when the pleadings and evidence admitted at the hearing
disclose that there is no genuine issue as to any material fact 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 of
law. Fokken v. Steichen, 274 Neb. 743, 744 N.W.2d 34 (2008).
         Based upon facts not in dispute, the district court interpreted the contract correctly, in part.
The court properly concluded that the damages in Smith’s case against Fisher were not for
“personal and advertising injury,” and were not for “bodily injury.” The court also correctly
concluded that Smith’s claims against Fisher for a breach of contract or faulty workmanship are
not covered by the CGL policy. There were no material facts in dispute precluding the court from
reaching these conclusions as a matter of law. The district court’s summary judgment order in
favor of GMR is affirmed as to these determinations.
         However, the district court erred, in part, in its interpretation of the CGL policy related to
property damage and whether or not there was an occurrence, as we have already discussed. As a
result, the court failed to consider the materiality of certain facts related to Smith’s claim of
damages to property owned by her or others. Although the district court acknowledged that
“Smith’s case against Fisher may involve property damage,” it did not consider the facts pertinent
to that property damage because it concluded that any such property damage must be caused by
an occurrence, and “[t]here seems to be no occurrence as defined by the policy[.]”
         Since this court has determined, as a matter of law, that Smith’s claims of damage to
property owned by her or others as a result of Fisher’s alleged faulty workmanship sufficiently
establishes an occurrence under the policy, the facts related to such damages are material and
cannot be determined on the present record. There remain issues of fact regarding what property
was actually damaged and whether or not the damage was the result of faulty workmanship by
Fisher. Therefore, summary judgment should not have been granted as to GMR’s request for an


                                                 - 14 -
order declaring that the damages in Smith’s case against Fisher were not the result of an occurrence
and were not for property damage. Accordingly, those portions of the district court’s order: (1)
holding there was no occurrence, (2) holding that Fisher has no coverage under the policy “for
paying or defending the Smith suit,” and (3) dismissing Fisher’s counterclaim, are reversed and
vacated, and we remand the matter to the district court for further proceedings.
                          4. DEPOSITIONS FROM NEMAHA COUNTY CASE
        GMR provided notice to Fisher that in support of its motion for summary judgment, it
intended to offer depositions from the Nemaha County lawsuit. Fisher filed a motion in limine to
exclude those depositions, and he assigns error to the district court’s decision denying his motion
and allowing the depositions. Although resolution of this issue is not particularly necessary given
our decision, we nevertheless address it for the sake of completeness.
        Neb. Rev. Stat. § 25-1332(1) (Supp. 2017) states: “The evidence that may be received on
a motion for summary judgment includes depositions, answers to interrogatories, admissions,
stipulations, and affidavits.” Although Fisher acknowledges that the statute “is not specific on what
types of depositions should be considered as evidence,” he suggests that “depositions from other
cases involve different issues, theories of the case, strategies employed and different attorneys,”
and that they “exceed the proper scope of the summary judgment statute.” Brief for appellant at
11. He suggests it is problematic when the depositions at issue were obtained by an attorney hired
by GMR to defend Fisher in the Nemaha County action, and then used by GMR in the present case
in an attempt to deny coverage and a defense for Fisher.
        In a civil case, the admission or exclusion of evidence is not reversible error unless it
unfairly prejudiced a substantial right of the complaining party. O’Brien v. Cessna Aircraft Co.,
298 Neb. 109, 903 N.W.2d 432 (2017). We fail to see how the deposition testimony unfairly
prejudiced Fisher. The underlying facts in the Nemaha County action are relevant to a
determination of coverage under the CGL policy. And as noted by GMR, the witnesses had
personal knowledge of the facts stated, the facts in the deposition would be admissible in evidence,
and the witnesses were competent to testify as to the matters involved. The district court did not
abuse its discretion by admitting the depositions from the Nemaha County case for the purpose of
considering GMR’s motion for summary judgment in the present matter.
                                        VI. CONCLUSION
        For the reasons set forth above, we affirm the district court’s ruling that it had subject
matter jurisdiction over the action for a declaratory judgment, and its ruling allowing the use of
depositions from the Nemaha County case in support of GMR’s motion for summary judgment.
We affirm the order granting summary judgment in favor of GMR regarding the damages in
Smith’s case against Fisher not being damages for “personal and advertising injury,” or “bodily
injury.” We also affirm the summary judgment order as to the district court’s conclusion that
Smith’s claims against Fisher for breach of contract or faulty workmanship are not covered by the
CGL policy.
        We reverse and vacate those portions of the district court’s summary judgment order: (1)
holding there was no occurrence, (2) holding that Fisher has no coverage under the policy “for




                                               - 15 -
paying or defending the Smith suit,” and (3) dismissing Fisher’s counterclaim. The matter is
remanded for further proceedings.
                                    AFFIRMED IN PART, AND IN PART REVERSED AND VACATED,
                                    AND CAUSE REMANDED FOR FURTHER PROCEEDINGS.




                                           - 16 -
