In 1988, the owners of Hayden farms hired James Krause. Krause, who presented himself as an expert in agricultural grafting, was to graft branches from a specially selected type fruit tree unto the rootstock planted by Hayden. The objective was to grow acres of several varieties of fruit trees. The rootstock was planted in ’88 and Krause was to perform the grafts in the spring of ’89.

The grafting was initially postponed to the fall of ’89 because the buds, in Krause’s custody, were damaged. Krause had to perform a second grafting job in the spring of ’90 because only a fraction of the grafts performed in the previous fall was successful. Krause was unable to do a new grafting in ’90. He stored the bud grafts improperly, ruining them, and Hayden hired another person. The second hire successfully grafted Hayden’s rootstock in the fall of ’90.

Because of the delays, Hayden sued Krause for substantial crop loss caused by his failing to complete the contracted work and for performing his work negligently. Hayden reported the claim to his insurer, Mutual of Enumclaw. Enumclaw refused to defend the claim and, after Hayden and Krause settled the claim for $500,000, denied payment. Enumclaw based its denial under its CGL policy exclusions. Enumclaw’s position was that it provided coverage for Property Damage except when it involves an insured’s work or product. Further, Krause assigned his policy rights to Hayden and the farm sued the insurer for damages and breach of contract. Both parties filed for declarative relief. The trial court granted a summary judgment in favor of Enumclaw, which bolstered its position by referencing their policy’s loss of use exclusion which also barred coverage for Hayden’s loss of potential income. Hayden filed an appeal and also added a complaint that the trial court was wrong to allow Enumclaw to add issues that were not part of its original argument. The appeals court found no error and also ruled in favor of Enumclaw, dismissing the suit. Hayden appealed again to the state’s Supreme Court.

Upon review, the Supreme Court examined both parties’ arguments as well as the pertinent policy language. The court affirmed the appeals court decision, finding that the loss details and the policy language did not create either an obligation to defend or pay for the excluded loss.

Dennis Hayden et al., Petitioner v. Mutual of Enumclaw Insurance Company, Respondent. WashSCt. No. 68096-5. Filed June 15, 2000. Affirmed. CCH Fire and Casualty Cases Paragraph 7242.