Abco Tank & Mfg. Co. v. Federal Ins. Co., 59610

• Citation: 550 S.W.2d 193
• Decision Date: 10 May 1977
• Docket Number: No. 59610,59610
• Parties: ABCO TANK AND MANUFACTURING COMPANY, Appellant, v. FEDERAL INSURANCE COMPANY, Respondent.
• Court: United States State Supreme Court of Missouri

Page 193

550 S.W.2d 193

ABCO TANK AND MANUFACTURING COMPANY, Appellant, v. FEDERAL INSURANCE COMPANY, Respondent.

No. 59610.

Supreme Court of Missouri, en banc.

May 10, 1977.

A. L. Shortridge, Joplin, for appellant.

Paul H. Niewald, Kansas City, for respondent.

HENLEY, Judge.

This is a declaratory judgment action brought by an insured against its insurer. The judgment sought is one declaring that under its comprehensive general liability insurance policy the insurer is obligated to pay the cost of defense of insured and, within the limits of the policy, pay any judgment which may be recovered against insured in a pending action for property damages arising out of an explosion and fire at a facility installed by insured for another. From an adverse judgment, the insured appealed to the Court of Appeals, Springfield District. On recommendation of that court after submission but without opinion, the case was transferred here for decision.

The main question presented is whether, within the meaning of the policy as defined in its "completed operations hazard" provisions, installation of the facility was completed before or after the explosion and fire. ¹ If it was completed before the fire, the policy afforded no coverage because an endorsement excluded coverage for the hazards of completed operations. We hold that it was completed after the fire and reverse and remand.

In January 1971, Abco Tank and Manufacturing Company (hereinafter Abco) entered into a contract with Doane Feed Products Company hereinafter Doane) in which Abco agreed for a specified price to install at Doane's plant in Joplin, Missouri, a liquid propane standby heating facility so that Doane could continue production in its manufacturing plant during cold weather when its natural gas supply would be curtailed. In particular, Abco agreed: (1) "to furnish all necessary equipment, valves, piping, labor, painting, startup supervision to complete this installation"; (2) that "the installation, when completed, shall be capable of providing up to 25,000 cubic feet per hour of completely interchangeable gas-air mixture of approximately 1450 Btu per cubic foot at 45 to 50 PSI"; (3) that the vaporizer, one of the component parts to be furnished, would be capable of converting 500 gallons of liquid propane per hour into 65 PSIG of propane vapor while operating at an ambient temperature as low as -20o While Abco designed the standby facility, it did not design or manufacture any of the components employed in installing the facility. As to these component parts, Abco determined who could supply each and specified for the supplier what his component would be required to do and its capacity, but left it to the judgment of the supplier to furnish a component which would meet the requirements specified. The vaporizer, an integral part of the facility, was designed, manufactured and supplied by National Tank Company (hereinafter Natco).

Fahrenheit; (4) to furnish a certificate of property damage and other specified public liability insurance coverage; (5) "that the installation, when completed, and all equipment shall be warranted against defect for a period of one (1) year after date of completion."

A certificate of insurance was furnished Doane certifying that Federal Insurance Company (hereinafter Federal), the defendant in this case, had issued its comprehensive general liability insurance policy No. 7762-74-81 to Abco, as insured, covering property damage liability (and other coverage) for the period from April 16, 1971, to April 16, 1974. Pertinent provisions of the policy and endorsement are as follows:

"1. COVERAGE A BODILY INJURY LIABILITY

COVERAGE B PROPERTY DAMAGE LIABILITY

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.

EXCLUSIONS

This insurance does not apply:

(a) to liability assumed by the insured under any contract or agreement except an incidental contract; but this exclusion does not apply to a warranty of fitness or quality of the named insured's products or a warranty that work performed by or on behalf of the named insured will be done in a workmanlike manner ;" (emphasis supplied).

"(k) to bodily injury or property damage resulting from the failure of the named insured's products or work completed by or for the named insured to perform the function or serve the purpose intended by the named insured, if such failure is due to a mistake or deficiency in any design, formula, plan specifications, advertising material or printed instructions prepared or developed by any insured; but this exclusion does not apply to bodily injury or property damage resulting from the active malfunctioning of such products or work ;" (emphasis supplied).

"Coverage B The total liability of the company for all damages because of all property damage sustained by one or more persons or organizations as the result of any one occurrence shall not exceed the limit of property damage liability stated in the schedule as applicable to 'each occurrence.'

Subject to the above provision respecting 'each occurrence,' the total liability of the company for all damages because of all property damage to which this coverage applies and described in any of the numbered subparagraphs below shall not exceed the limit of property damage liability stated in the schedule as 'aggregate.' "(2) all property damage arising out of and occurring in the course of operations performed for the named insured by independent contractors and general supervision thereof by the named insured, including any such property damage for which liability is assumed under any incidental contract relating to such operations, but this subparagraph (2) does not include property damage arising out of maintenance or repairs at premises owned by or rented to the named insured or structural alterations at such premises which do not involve changing the size of or moving buildings or other structures;"

"completed operations hazard" includes bodily injury and property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured. 'Operations' include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earliest of the following times:

(1) when all operations to be performed by or on behalf of the named insured under the contract have been completed.

(2) when all operations to be performed by or on behalf of the named insured at the site of the operations have been completed, or

(3) when the portion of the work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.

Operations which may require further service or maintenance work, or correction, repair or replacement because of any defect or deficiency, but which are otherwise complete, shall be deemed completed.

"incidental contract" means any written (1) lease of premises, (2) easement agreement, except in connection with construction or demolition operations on or adjacent to a railroad, (3) undertaking to indemnify a municipality required by municipal ordinance, except in connection with work for the municipality, (4) sidetrack agreement, or (5) elevator maintenance agreement;"

"(The Attaching Clause need be completed only when this endorsement is issued subsequent to preparation of the policy.)

LIABILITY # 3

G 304

EXCLUSION

(Completed Operations Hazard and Products Hazard)

This endorsement modifies such insurance as is afforded by the provisions of the policy relating to the following:

COMPREHENSIVE GENERAL LIABILITY INSURANCE

This endorsement * * * forms a part of policy No. 7762-74-81 * * *.

It is agreed that such insurance as is afforded by the Bodily Injury Liability Coverage and the Property Damage Liability Coverage does not apply to bodily injury or property damage included within the Completed Operations Hazard or the Products Hazard."

All necessary components of the standby facility were assembled, connected and installed at Doane's plant in August, 1971. It was checked and the determination made that "everything was hooked up * * *, that there was a source of fuel, and that it was operable * * *." It was ready to be adjusted and tested under cold weather conditions. In October, it was checked and tested again, this time by Abco turning off the natural gas supply and starting up the standby system. From this, it was determined that all components were functioning. Adjustments were made at this time, but it was still too warm to make such adjustments, if any, as would be necessary for wintertime operation.

In November or December, 1971, before the...