American States Ins. Co. v. Aetna Life & Cas. Co.
| Decision Date | 21 August 1978 |
| Docket Number | No. 3-277A57,3-277A57 |
| Citation | 177 Ind.App. 299,379 N.E.2d 510 |
| Parties | AMERICAN STATES INSURANCE CO. et al., Appellants-Plaintiffs, v. AETNA LIFE & CASUALTY COMPANY, Appellee-Defendant. |
| Court | Indiana Appellate Court |
Mary E. Davis, of Spahn, Atwater & Arko, DeDario, Katz & Rieckhoff, Elkhart, for appellants-plaintiffs.
John T. Mulvihill and Lawrence C. DiNardo, of Thornburg, McGill, Deahl, Harman, Carey & Murray, South Bend, for appellee-defendant.
In a prior action, Cheryl Craft Lantz and American States Insurance Co. recovered a judgment against John and Everett Geerts and the Geerts Brothers Greenhouse & Floral Shop for injuries and damages resulting from a fire in Lantz' home. The fire was caused by the ignition of a Christmas tree which had been flocked by Geerts. Geerts, Lantz, and American States instituted the present action to recover judgment amounts and defense costs from Aetna Life & Casualty Company, Geerts' insurance carrier. The court found that the insurance policy afforded Geerts no coverage as a matter of law. The court then granted Aetna's cross-motion for summary judgment. Finding no error, we affirm.
The original action for damages arose out of the following fact situation. In December 1966, Lantz employed Geerts, a florist, to flock a Christmas tree. Lantz testified that, when picking up and delivering the tree, Geerts represented that the flocking material was fireproof, that the tree did not need watering, and that lights could be placed safely on the tree. According to the stipulated facts, the chemical flocking substance actually increased the risk of fire and the resulting rate of combustion. On January 2, 1967, two weeks after delivery of the tree to Lantz' home, the flocking ignited. The resulting fire substantially damaged Lantz' real and personal property and burned her severely. Lantz received partial compensation for her property damage from her insurance carrier, American States.
Lantz and American States sought to recover their losses from Geerts. Geerts supplied Aetna, his insurance carrier, with notice of Lantz' claim as well as copies of the complaint. However, Aetna refused to defend the suit, claiming Geerts' insurance policy provided no coverage of the accident. Lantz and American States recovered judgments from Geerts in the amounts of $12,310 and $7,690, respectively.
Geerts instituted the present action, claiming Aetna breached its contract to defend the original action. Lantz and American States joined the action against Aetna, as judgment creditors and third party beneficiaries of the insurance contract. Geerts, Lantz and American States filed a motion for partial summary judgment on the issue of liability. Aetna filed a cross-motion for summary judgment.
Geerts' florist operations were covered by a manufacturers' and contractors' liability policy with Aetna. The policy was in effect from June 1966 through June 1969. Under the standard policy, Aetna offered to insure Geerts for liability caused by accident and arising out of four possible types of hazards:
(1) Premises Operations;
(2) Elevators;
(3) Independent Contractors; and
(4) Products (including completed operations).
Geerts elected to obtain coverage for liability caused by accidents arising only out of the "Premises Operations" hazard; he paid a premium commensurate with that limited risk.
The relevant sections of the policy are set forth as follows:
To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the hazards hereinafter defined.
Coverage B Property Damage Liability
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 and arising out of the hazards hereinafter defined.
"Definition of Hazards
Division 1 Premises Operations The ownership, maintenance or use of premises, and all operations.
Division 2 Elevators. . . .
Division 3 Independent Contractors. . . .
Division 4 Products (including completed operations) (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 premises owned, rented or controlled by the named Insured or on premises for which the classification stated in division 1 of item 3 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;
The court considered the policy and entered findings and rulings on the parties' motions for summary judgment. The court found that the accidental fire occurred after Geerts had completed flocking and delivering the tree and after the tree had been used by Lantz. The court further found that Geerts' activities with respect to the tree were completed operations, which had been completed prior to the fire. Under the facts before it, the court found no coverage under the insurance policy issued by Aetna to Geerts; therefore Aetna had no obligation to defend the original action or to pay the resulting judgment. Finally, after finding no insurance coverage as a matter of law, the court granted Aetna's motion for summary judgment.
On appeal, Geerts, Lantz and American States raise one central issue: 1 did Geerts' statements, made when delivering the flocked trees to Lantz, constitute a new operation or a negligent act which was covered by Geerts' contract of insurance with Aetna?
Appellants argue that Geerts' statements, which assured Lantz that the flocked tree was fireproof, needed no water, and could safely have lights, were insured acts under one of two theories: such representations constituted a new operation which was not completed prior to the fire in Lantz' home because of her reliance thereon; or such statements were independent acts of negligence covered by Division 1 Premises Operations (hereinafter referred to as "Premises Hazard") of the insurance policy.
Appellee Aetna maintains that Geerts' insurance policy covered accidents which occurred only on the premises of the floral shop or during ongoing operations. 2 However, in this case, the accident which caused damages occurred away from Geerts' premises, at a time After all operations (pick-up, flocking and delivery of the tree) had been completed. Such an accident was a hazard arising under Division 4 Products (including completed operations) (hereinafter referred to as "Products Hazard") of the policy. Geerts failed to elect such coverage and pay an additional premium. Therefore, he was not entitled to insurance coverage of the accidental fire in Lantz' home.
This court has not considered previously whether a negligent representation, which was made in conjunction with a sale or service and which contributed to an accident causing injury, is covered under a Premises Hazard clause. 3 However, numerous other courts have considered the same issue. There decisions constitute two disparate lines of cases.
One line of cases holds that Premises Hazard coverage applies only to accidents occurring on the insured's premises of during closely-related, day-to-day business operations. Cobbins v. General Accident Fire & Life Assurance Corporation, Ltd. (1972), 53 Ill.2d 285, 290 N.E.2d 873; Parma Seed, Inc. v. General Insurance Company of America (1972), 94 Idaho 658, 496 P.2d 281; Central Bearings Co. v. Wolverine Insurance Company (1970), Iowa, 179 N.W.2d 443; Ketona Chemical Corporation v. Globe Indemnity Company, 404 F.2d 181 (5th Cir. 1968); Tidewater Associated Oil Company v. Northwest Casualty Company (1959), 264 F.2d 879 (9th Cir. 1959); Smedley Company v. Employers Mutual Liability Insurance Company of Wisconsin (1956), 143 Conn. 510, 123 A.2d 755. Thus, excluded from coverage are accidents which occur away from the premises of the insured after operations have been completed.
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