Aetna Ins. Co. v. Lythgoe

• Decision Date: 31 October 1980
• Docket Number: No. 5261,5261
• Citation: 618 P.2d 1057
• Parties: AETNA INSURANCE COMPANY, Appellant (Third-Party Defendant), v. William LYTHGOE, dba Lythgoe Construction Company, Appellee (Third-Party Plaintiff).
• Court: Wyoming Supreme Court

Page 1057

618 P.2d 1057

AETNA INSURANCE COMPANY, Appellant (Third-Party Defendant), v. William LYTHGOE, dba Lythgoe Construction Company, Appellee (Third-Party Plaintiff).

No. 5261.

Supreme Court of Wyoming.

Oct. 31, 1980.

Houston G. Williams of Williams, Porter, Day & Neville, P. C., Casper, for appellant.

Donald R. Winship of Winship & Feeney, P. C., Casper, for appellee.

Before RAPER, C. J., and McCLINTOCK, THOMAS, ROSE and ROONEY, JJ.

THOMAS, Justice.

The question posed in this appeal is one of coverage to defend an insured under a liability insurance policy. More particularly, the case requires the selection and application of a "completed operations" clause from either an insurance policy issued to the appellee by the appellant or a renewal policy. The district court ruled in favor of coverage, and Aetna Insurance Company has appealed from that judgment. We will affirm the judgment of the district court.

A summary of the events leading to the coverage issue can be found in Brubaker v Glenrock Lodge International Order of Odd Fellows, Wyo., 526 P.2d 52 (1974). For our present purposes, it is sufficient to note that Katherine Brubaker instituted the action against Glenrock Lodge International Order of Odd Fellows. She sought to recover damages for injuries she suffered when a stairway collapsed while she was using it. She was a lessee of the basement of the lodge building. Glenrock Lodge International Order of Odd Fellows brought a third-party action against Lythgoe (appellee here) seeking to be indemnified by Lythgoe for any liability to Brubaker. Lythgoe had been employed by the lodge to do some carpentry work, which work included the relocation of the stairway. When Aetna Insurance Company refused to defend Lythgoe, he brought this third-party action to require Aetna Insurance Company to assume his defense or reimburse him for his expenses in defending the action.

As framed by the appellant, the issues on appeal are as follows:

"1. Was coverage afforded Lythgoe by Aetna under a policy of insurance under the facts of this case?

"(a) Was the operation 'completed'?

"(b) Which policy applies?

"(c) Are the key operative terms defined?

"(d) Are the exclusions of coverage clearly expressed?

"2. Was Aetna, in any event, obligated to defend Lythgoe on the Brubaker claim?"

The appellee in his brief presents a more detailed statement of his perception of the issues. Without reciting his position in detail, he claims that the provisions of the earlier policy govern over those of the renewal policy. He then urges the application of the "completed operations" exclusion clause in the earlier policy, but argues in the alternative that his operations had not been completed even under the renewal policy. In further defending the appeal, the appellee contends that the pleadings of the personal injury case which invoked the duty to defend came within the policy coverage and that there is no suggestion in the Brubaker personal injury complaint leading to relief for Aetna under the "completed operations" exclusion. He further urges that the doctrine of reasonable expectations should be adopted in the State of Wyoming. ¹

Aetna Insurance Company relies upon the proposition that Lythgoe's operations on the job out of which the personal injury claim by Mrs. Brubaker arose had been completed under the provisions of Policy Number CG 75 14 19. The language of the policy on which Aetna Insurance Company relies is as follows:

"Exclusions

"This insurance does not apply:

"(m) to bodily injury or property damage included within the completed operations hazard or the products hazard ;"

In the definitions section of that policy appears the following language:

" '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."

Lythgoe relies upon the language of policy MCL 27 20 80. In the Definition of Hazards section of that policy appears the following language:

"Division 4 Products Completed Operations.

"(2) operations, including any act or omission in connection with operations performed by or on behalf of the named insured on the premises or elsewhere, whether or not goods or products are involved in such operations, if the accident occurs after such operations have been completed or abandoned and occurs away from premises owned, rented or controlled by the named insured ; provided, operations shall not be deemed incomplete because improperly or defectively performed or because further operations may be required pursuant to an agreement; provided further, the following shall not be deemed to be 'operations' within the meaning of this paragraph: (a) pick-up or delivery, except from or onto a railroad car, (b) the maintenance of vehicles owned or used by or in behalf of the insured, (c) the existence of tools, uninstalled equipment and abandoned or unused materials and (d) operations for which the classification stated in division 1 of item 4 of the declarations specifically includes completed operations." (Emphasis added.)

The Exclusions section of this policy, which was the earlier of the two policies provides:

"This policy does not apply:

"(c) under division 1 of the Definition of Hazards, and under coverage C, to (1) the Independent Contractors Hazard or (2) the Products Completed Operations Hazard;"

There is no question that the second policy states on its face that it is a renewal of the policy upon which Lythgoe relies. From the record, it appears that Lythgoe directed to Aetna Insurance Company a Request for Admissions, which included the following request:

"1. The endorsement page of Aetna Policy Number CG-75-14-19, a copy of which is attached hereto (this endorsement provided coverage for completed operations), was never a part of Aetna Policy Number MCL-27-20-80."

The Answer to Request for Admissions by Aetna Insurance Company with respect to their request quoted above states:

"1. Defendant admits that the endorsement page to Policy No. CG-75-14-19 attached to said request was never a part of Policy No. MCL-27-20-80 provided, however, that CG-75-14-19 was a renewal of MCL-27-20-80." (Emphasis added.)

With respect to which policy should be looked to as the controlling one in this factual situation, we espouse the language of the United States Court of Appeals for the Tenth Circuit:

" * * * When a renewal policy is issued, it is presumed, unless a contrary intention appears, that the parties intended to adopt in the renewal policy the terms, conditions and coverage of the expiring policies." Pearl Assur. Co. v. School Dist. No. 1 In San Miguel County, Colo., 10 Cir., 212 F.2d 778, 782 (1954).

This language was quoted with approval by the United States Court of Appeals in Government Employees Insurance Company v. United States, 10 Cir., 400 F.2d 172 (1968). In this latter case the court also noted that:

" * * * (I)t is the general rule that an insurance company is bound by the greater coverage in an earlier policy where the renewal contract is issued without calling to the insured's attention a reduction in policy coverage. * * * " Government Employees Insurance Company v. United States, supra, 400 F.2d at 175.

This same proposition is found in Noyes Supervision, Inc. v. Canadian Indemnity Company, 487 F.Supp. 433 (D.Colo.1980); Giles v. St. Paul Fire & Marine Insurance Company, 405 F.Supp. 719 (N.D.Ala.1975); Commercial Insurance Company v. American and Foreign Insurance Association, 370 F.Supp. 345 (D. Puerto Rico 1974); and Industro Motive Corporation v. Morris Agency, Inc., 76 Mich.App. 390, 256 N.W.2d 607 (1977).

In 17 Couch on Insurance 2d, § 68:63, p. 699 (Lawyers Cooperative Publishing Co. 1967), can be found the consistent propositions that unless the insurer calls to the attention of the insured changes in the coverage or conditions of the policy the insured has a right to presume that they are the same as those in the policy renewed even in light of the failure of the insured to examine the policy. The obligation is with the insurer to specifically inform the insured of the changes in the terms of the policy which is a renewal policy. To the same effect are cases cited in Annotation 91 A.L.R.2d 546 (1963), and this view apparently represents a clear majority rule. All of these statements are consistent with the principle of liberal construction of insurance policies in favor of the insureds. From the record, there is no dispute between the parties that when the second policy was issued, Lythgoe's attention was not, by correspondence or otherwise, specifically directed to the adjustment in language relating to completed operations.

Our disposition of this case, then, is premised upon language from W. N. Leslie, Inc. v. Travelers Insurance Company, 264 S.C. 408, 215 S.E.2d 448 (1975), in which the court said at 215 S.E.2d...