Arrigo's Fleet Service, Inc. v. Aetna Life & Cas. Co.

• Decision Date: 24 July 1974
• Docket Number: Docket No. 18549,No. 3,3
• Citation: 54 Mich.App. 482,221 N.W.2d 206
• Parties: ARRIGO'S FLEET SERVICE, INC., Plaintiff-Appellant, v. AETNA LIFE AND CASUALTY COMPANY, Defendant-Appellee
• Court: Court of Appeal of Michigan — District of US

Page 206

221 N.W.2d 206

54 Mich.App. 482

ARRIGO'S FLEET SERVICE, INC., Plaintiff-Appellant, v. AETNA LIFE AND CASUALTY COMPANY, Defendant-Appellee.

Docket No. 18549.

Court of Appeals of Michigan, Division No. 3.

July 24, 1974.

Released for Publication Aug. 28, 1974.

Leave to Appeal Denied Oct. 16, 1974.

Jack R. Sluiter, Garlington & Smiley, Wyoming, for plaintiff-appellant.

Grant J. Gruel, Jr., Grand Rapids, for defendant-appellee.

Before HOLBROOK, P.J., and T. M. BURNS, and SMITH,* JJ.

HOLBROOK, Presiding Judge.

Plaintiff is in the business of repairing trailers of large cargo trucks. On April 1, 1971, such a unit, owned by North American Van Lines, was brought to plaintiff's place of business. On the day before, the unit had been repaired for a broken hanger assembly connecting the axle to the body of the trailer, in Chicago, Illinois. The trailer was locked and the keys were in the possession of the driver. There were three locks on the trailer. An employee of the plaintiff began welding. Shortly thereafter, the driver left plaintiff's premises for coffee. Employees of plaintiff discovered smoke coming from the trailer. After trying to get into the trailer, but being unable to do so because of the fact that it was locked, they took a cutting torch and cut off a lock. After the first lock was cut out, they noticed that there were straps behind and were unable to gain access at that point. Therefore, they were forced to use a cutting torch on the rear doors of the trailer. As a result of this fire, the merchandise in the trailer was damaged. An action (Kent County Circuit Court #13813) was instituted by North American Van Lines, as subrogee of Ted and Virginia Zyck, against plaintiff in this action. North American prayed for judgment in the amount of $14,000 plus interest and costs. Plaintiff then filed the present action seeking a declaratory judgment that the defendant should defend in the action instituted by North American and that the defendant should be liable for any judgment which might be rendered against plaintiff. ¹

Plaintiff had purchased a policy of garage insurance from defendant which stated:

'The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as Damages because of

'bodily injury or

'property damage

to which this insurance applies, caused by an Occurrence and arising out of Garage operations, including only the Automobile hazard for which insurance is afforded as indicated in the declarations, 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.'

Thereinafter, a number of exclusions were set out. Exclusion (g) provided that: (the insurance did not apply)

'to Property damage to * * *

'(2) property in the care, custody or control of or being transported by the Insured or property as to which the Insured is for any purpose exercising physical control; * * *' ²

Defendant denies coverage on the basis of this exclusion.

Plaintiff had demanded a jury trial. It contended that the only care, custody and control that they had was over the trailer itself, I.e., not the contents within. ³ Defendant maintained that coverage was excluded in that the contents were under the physical control of the plaintiff. Defendant moved for summary judgment. The trial court granted a directed verdict (summary judgment). The court ruled that the issue was one for the court's decision and not for the jury, as there were no disputed facts and it found no ambiguity. The court relied upon the case of Appicelli Sales & Service, Inc. v. Citizens Mut. Ins. Co., 40 Mich.App. 287, 199 N.W.2d 242 (1972), lv. den. 388 Mich. 769 (1972). The court further stated that its determination would allow plaintiff to come to this Court for a ruling on the issue. Thus, we are faced with the determination of whether, as a matter of law, it can be said that on the basis of the exclusion defendant has no duty to defend on plaintiff's behalf or liability for any judgment rendered against plaintiff.

It is axiomatic that the purpose of insurance is to insure. See, for instance, Goswick v. Employers' Casualty Co., 440 S.W.2d 287, 289 (Tex.1969), wherein the Court stated: '(W)e must presume that the objective of the insurance contract is to insure, and we should not construe the policy to defeat that objective unless the language requires it'. We are mindful that insurance is vitally affected with the public interest. Ferguson v. Phoenix Assurance Co. of New York, 189 Kan. 459, 470, 370 P.2d 379, 387, 99 A.L.R.2d 118, 128 (1962).

In Huron Bowl, Inc. v. Security Ins. Co. of New Haven, 14 Mich.App. 62, 65, 165 N.W.2d 265, 266--267 (1968), Judge J. H. Gillis wrote:

"Care and custody' connotes dominion over the property which need not attain actual possession. Birgbauer v. Aetna Casualty & Surety Co., 251 Mich. 614, 232 N.W. 403 (1930). It does imply, however, some temporary right of dominion over, or charge of the property albeit under the direction of another. See Bierman-Danzi Corp. v. Fireman's (Firemen's) Fund Insurance Co., 203 Misc. 119, 115 N.Y.S.2d 706 (N.Y.Mun.Ct.1952); Fox West Coast Theatres, Inc. v. Union Indemnity Company, 167 Wash. 319, 9 P.2d 78 (1932).' ⁴

In Zurich Ins. Co. v. Rombough, 384 Mich. 228, 232--233, 180 N.W.2d 775, 777 (1970), the Supreme Court quoted with approval language of Justice Tobriner from Gray v. Zurich Ins. Co., 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168 (1966), stating that the principles of interpretation of insurance contracts are contemporarily inherently involved in the doctrine of contracts of adhesion. On such a basis any doubts in the meaning of the terms of an insurance contract are to be resolved against the insurer and in favor of the insured. ⁵ The standard by which any contract of insurance is to be viewed is the understanding of an ordinary person. ⁶ Michigan Mutual Liability Co. v. Mesner, 2 Mich.App. 350, 353, 139 N.W.2d 913, 915 (1966). Exclusionary clauses in insurance policies are to be strictly construed against the insurer. Weaver v. Michigan Mutual Liability Co., 32 Mich.App. 605, 609, 189 N.W.2d 116, 118 (1971).

It has been said that the purposes of clauses of this type are to 1) avoid greater moral hazard as far as the insurance company is concerned, and 2) to eliminate the possibility that the insurance company may become the guarantor of the insured's workmanship. Elcar Mobile Homes, Inc. v. D. K. Baxeter, Inc., 66 N.J.Super. 478, 484, 169 A.2d 509, 512 (1961); Royal Indemnity Co. v. Smith, 121 Ga.App. 272, 275, 173 S.E.2d 738, 740 (1970). We point out that these purposes are well serviced by the language of the clause in that, read literally, it is broad enough and vague enough to be interpreted to exclude almost all instances which the average purchaser of this type of insurance might well expect to be covered. ⁷

This issue has only been twice previously before this Court. Anderson v. Brown, 21 Mich.App. 699, 176 N.W.2d 457 (1970), involved the construance of the same clause here in question. Plaintiff Anderson was a housing contractor. He had obtained an insurance policy from the Travelers Indemnity Insurance Company for comprehensive general liability protection. While working on the construction of a home, work upon which was being done by the individuals for whom the house was to be constructed, a fire occurred which destroyed the house. The insurance company denied coverage on the grounds that the property was within the care, custody or control of the insured and was property which the insured was exercising physical control over. Litigation by the owners of the home concluded in judgment against plaintiff Anderson. Thereafter, Anderson commenced an action for declaratory judgment which was tried before a jury. Before the close of proofs, however, the trial court granted defendant's motion for a directed verdict, ruling that the language of the policy was clear and unambiguous and excluded coverage. This Court reversed, remanded and wrote:

'Words that are clear in their meaning when standing alone in a contract often give rise to ambiguity when they are applied to a given set of facts, and this ambiguity in turn gives rise to a question of fact. Michigan courts recognize the following rule in regard to ambiguity, 53 Am.Jur., Trial, § 269, p. 228:

"(W)hile it is true as a general rule that the construction of written contracts belongs to the court and not the jury, there are nevertheless cases in which the ambiguous nature of the words used or an obscure reference to unexplained circumstances requires that the interpretation of the language be left to the consideration of the jury for the purpose of carrying into effect the real intention of the parties. It is for the jury to determine what is the agreement of the parties, where there is uncertainty in a written contract because of ambiguity or incompleteness, or technical words or terms of art. Likewise, where the nature of a contract is not clear, its interpretation may become a mixed question of law and fact, based upon the acts of the parties thereunder; and where a written contract has been modified by the practice under it, the question should be submitted to the jury under proper instructions.'

'and leave the interpretation of an insurance contract and its applicability to the facts to the jury. Clark v. Hacker, 345 Mich. 751, 76 N.W.2d 806 (1956); Barker v. Citizens' Mutual Fire-Insurance Co., 136 Mich. 626, 99 N.W. 866 (1904).

'(T)he jury could have reasonably...