American Emp. Ins. Co. v. Knox-Tenn Equipment Co.
| Citation | 52 Tenn.App. 643,377 S.W.2d 573 |
| Decision Date | 06 May 1963 |
| Docket Number | KNOX-TENN |
| Parties | AMERICAN EMPLOYERS INSURANCE COMPANY, Appellee, v.EQUIPMENT COMPANY, Appellant, and Tom Jenkins, d/b/a Jenkins and Jenkins Floor Covering Company, Appellee. |
| Court | Court of Appeals of Tennessee |
Ambrose, Wilson & Saulpaw, Knoxville, for appellant.
J. H. Doughty, Robert R. Campbell, and Hodges, Doughty & Carson, Knoxville, for appellee, American Employers Insurance Co.
Carey E. Garett, Knoxville, for appellee Tom Jenkins, d/b/a Jenkins & Jenkins Floor Covering Co.
This case involves the construction of the products liability provision of what is designated as a general-automobile liability policy (comprehensive form) issued by the plaintiff below, American Employers Insurance Company, in favor of the defendant below, Knox-Tenn Equipment Company. The Circuit Judge, sitting without a jury, and hearing the case upon discovery depositions read as evidence together with exhibits thereto rendered a judgment unfavorable to the appellant, Knox-Tenn Equipment Company.
The defendant below, Tom Jenkins, d/b/a Jenkins and Jenkins Floor Covering Company, had the subcontract to lay a hardwood floor in the new gymnasium of the Meigs County High School at Decatur, Tennessee. The contract called for a special type hardwood floor to be laid over a concrete slab and affixed to the concrete slab by a special and patented system known as the Loxit system. Under the Loxit system a large number of metal channels are affixed to the concrete. This is done by laying the channels on the concrete, leveling them with shims, then drilling 1/4 inch holes in the concrete through holes indicated and stamped on the metal channels; into these holes are driven hollow lead cylinders or anchors and then large nails or studs with broad heads are driven into the lead anchors, thereby expanding them and causing them to fit tightly against the concrete. The heads of the studs hold the channels down. After the channels are affixed to the concrete the tongue and groove hardwood floor is then laid over and perpendicular, or at right angles, to the channels. Small metal fasteners or clips, which fit snugly into the channels and overlap the tongue on the flooring are driven up against the flooring thereby fastening it tightly against the channels.
Jenkins, the subcontractor, used about fourteen diamond tip bits with which to drill the holes in the concrete. These diamond tip bits were purchased from the defendant, Knox-Tenn Equipment Company. Knox-Tenn ordered them from the manufacturer, E. J. Longyear Company.
After the floor was completed it buckled in several places and part had to be removed and reinstalled at a substantial expense to the subcontractor, Jenkins. On reinstallation carbon tip bits bought from another supplier were used by Mr. Jenkins. There has been no further trouble with the floor since that time.
Jenkins filed suit against Knox-Tenn Equipment Company for $3,300.00 damages averring that the diamond tip bits which were sold to him were too large; that as a result of the larger holes in the concrete the lead sleeves did not expand sufficiently to hold the floor tight. Changes in air moisture then caused the floor to buckle.
The defendant, Knox-Tenn Equipment Company, notified its insurer, the plaintiff, American Employers Insurance Company, to defend the suit brought by Jenkins. American Employers Insurance Company refused and filed its suit for declaratory judgment against Knox-Tenn Equipment Company and Jenkins. Jenkins was enjoined from proceeding with his suit against Knox-Tenn until American Employers Insurance Company's suit for declaratory judgment had been heard and settled.
Mr. Alfrey, office manager and salesman for Knox-Tenn Equipment Company, learned that Jenkins' subcontract called for the use of the Loxit system in laying the gymnasium floor. After making inquiry of several sources he learned that the system required a 1/4 inch bit to bore the holes in the concrete. Mr. Jenkins had never completely laid a Loxit system floor and did not know the exact type or size drill bit necessary. The manufacturer of the Loxit system did not sell drill bits and made no recommendation as to the type drill bit to use. The Loxit system only called for 1/4 inch holes in the concrete.
Mr. Alfrey ordered a 1/4 inch diamond tip drill bit from the E. J. Longyear Company as a sample or demonstration bit. This bit was received by Knox-Tenn Company on November 2, 1960, and delivered immediately to Mr. Jenkins. Mr. Jenkins used the sample drill bit in a limited way and found it apparently satisfactory. On January 30, 1961, Mr. Jenkins authorized Mr. Alfrey to order four additional bits like the sample bit. Mr. Alfrey placed the order but before the new bits were received Mr. Jenkins wore out the first bit which had been furnished him and he authorized Mr. Alfrey to increase the order from four to thirteen new diamond tip 1/4 inch bits.
The proof indicates that it is a matter of general knowledge in the building trade that a 1/4 inch drill bit is usually a little larger in diameter than .250 inch. However, there seems to be no prevailing understanding in the building trade as to the maximum tolerance allowable for a 1/4 inch bit. The sample drill bit which Knox-Tenn ordered from the Longyear Company had an actual diameter measurement of .262 inch and this measurement was printed on the price list and/or other literature furnished by the Longyear Company.
On January 30, 1960, when Knox-Tenn Company ordered the additional drill bits, the Longyear Company had already published a new price list and accompanying literature which showed the diameter of the new drill bits to have a tolerance of .295 inch. However, Knox-Tenn Company had not received the new price list and new information at the time it ordered the new drill bits for Mr. Jenkins. All of the additional bits were received by the Knox-Tenn Company, delivered to Mr. Jenkins and used by him without any knowledge or suspicion on the part of either Knox-Tenn Company or Jenkins that the new drill bits bore any larger tolerance than .262 the size of the demonstration bit which was first furnished Mr. Jenkins. The new drill bits were ordered and received by Knox-Tenn Company simply as 1/4 inch bits.
After the floor buckled a micrometer was placed on the several used drill bits and they ran in size from .282 inch to .292 inch. Mr. Jenkins contended that the extra size of the drill bits was responsible for the anchors or sleeves not being driven tightly into the holes in the concrete. The looseness of the anchors or sleeves allowed the floor to buckle. The new price list and literature of Longyear Company showing the new size or tolerance of the drill bits to be .295 inch were not received by Knox-Tenn Company until after the drill bits had been received and delivered to Jenkins. The attention of officials of Knox-Tenn Company was not directed toward the increase in size until after the floor had buckled and the micrometer showed the increased size of the drill bits.
It is significant to note that at no time prior to the buckling of the floor was any mention made by any of the parties as to the matter of miscrometer tolerances in the installation of the Loxit system of flooring. The specifications prescribed by Loxit Systems, Inc. did not mention it nor did the specifications for the Meigs County High School contract provide for precise tolerances on the installation of the flooring. The only reference in any of the specifications to the measurement of the diameter of the bits, stud and anchor assembly, or the holes themselves is in the Loxit catalog which refers to the prepared holes in the metal channels as being 1/4 inch in diameter.
Assuming that Mr. Jenkins can prove all of these facts above stated in his suit against Knox-Tenn Company in Circuit Court of Knox County the question presented to this court on this appeal is whether or not American Employers Insurance Company is obligated to defend the suit on behalf of Knox-Tenn Company and to pay the judgment if cast in the lawsuit.
The pertinent provisions of the policy are as follows:
'Coverage D--Property Damage Liability--Except automobile. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident.
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'This policy does not apply:
'(a) to liability assumed by the insured under any contract or agreement except under coverages B and D, (1) a contract as defined herein or (2) as respects the insurance which is afforded for the Products Hazard as defined, a warranty of goods or products;
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'(c) under coverages B and D, to any obligation for which the insured may be held liable in an action on a contract or an agreement by a person not a party thereto:
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'3. Definitions.
(g) Products Hazard. The term 'products hazard' means: (1) goods or products manufactured, sold, handled or distributed by the named insured or by others trading under his name, if the accident occurs after possession of such goods or products has been relinquished to others by the named insured or by others trading under his name and if such accident occurs away from the premises owned, rented or controlled by the named insured or on premises for which the classification stated in division (a) of the declarations excludes any part of the foregoing; provided, such goods or products shall be deemed to include any container thereof, other than a vehicle, but shall not include any vending machine or any property, other than such container, rented to or located for use of others but not sold.
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'5. Limits of Liability. Coverages C and D. The limit of property damage liability stated in the declarations as applicable to 'each...
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