Bonell v. GENERAL ACCIDENT FIRE AND LIFE ASSUR. CORP.

• Decision Date: 06 November 1958
• Docket Number: No. 36375.,36375.
• Citation: 167 F. Supp. 384
• Court: U.S. District Court — Northern District of California
• Parties: Albert D. BONELL, individually, and Albert D. Bonell, doing business as Bonell Refrigeration Co., Plaintiff, v. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, Limited, an alien corporation, and Robert J. Bitts (realigned as plaintiff), Defendants.

167 F. Supp. 384

Albert D. BONELL, individually, and Albert D. Bonell, doing business as Bonell Refrigeration Co., Plaintiff, v. GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, Limited, an alien corporation, and Robert J. Bitts (realigned as plaintiff), Defendants.

No. 36375.

United States District Court N. D. California, S. D.

November 6, 1958.

Hardy, Carley & Thompson, Palo Alto, Cal., for plaintiff Bonell.

Crist, Peters & Donegan, Palo Alto, Cal., for plaintiff Bitts.

Bronson, Bronson & McKinnon, San Francisco, Cal., for defendant General Acc. Fire & Life Assur. Corp.

OLIVER J. CARTER, District Judge.

Robert J. Bitts commenced an action for personal injuries in the Superior Court of the State of California, in and for the County of Santa Clara, naming as defendants Albert D. Bonell, individually, and Albert D. Bonell, doing business as the Bonell Refrigeration Co. (which parties will be referred to hereinafter collectively as Bonell). Bonell called upon his insurer, the General Accident Fire and Life Assurance Corporation, Limited, to defend the action, in accordance with the terms of an insurance policy. The insurer refused to so defend. Bonell then commenced an action for declaratory relief in the same court, naming both Bitts and the insurer as defendants.

Upon the timely petition of the alien insurer, the action was removed to the United States District Court for the Northern District of California, under the provisions of 28 U.S.C. § 1441. As it appeared from the face of the complaint that both Bitts and Bonell were residents of California, a hearing was had upon the question of jurisdiction. At the hearing it was determined that the interests of Bonell and Bitts were identical with regard to the issue at bar, and that a proper alignment of the parties in this Court would place Bitts alongside Bonell as a party plaintiff.

The plaintiffs Bonell and Bitts are both residents of the State of California, the defendant is incorporated under the laws of the Empire of Great Britain, and the amount in controversy exceeds the sum or value of $3,000; accordingly, there is the requisite diversity of citizenship, and the jurisdiction of this Court is founded upon 28 U.S.C. § 1332. This action for declaratory relief is based upon the discretion granted to the Court by 28 U.S.C. § 2201.

According to the allegations contained in Bitts' complaint for personal injuries, Bonell sold to Bitts a used ice box, together with a disconnected used refrigerator unit. It is claimed that at the time of the sale Bonell knew, or should have known, that Bitts intended to assemble these pieces, and that Bonell knew, or should have known, that the refrigeration unit was in a dangerous condition, in that the unit contained a charge, under pressure, of sulphur dioxide. It is further alleged that Bonell failed to warn Bitts of this condition, in spite of his knowledge of the danger involved; and that as a proximate result of the negligence of Bonell, Bitts was injured when the sulphur dioxide gas contained in the refrigerator unit exploded while he was assembling it with the ice box.

The parties have stipulated that a certain insurance policy was in effect at the time of the alleged accident. The plaintiff Bonell has admitted that he is a dealer who sells, handles and distributes new and used refrigeration equipment in the ordinary course of business; that he sold the refrigeration unit in question to Bitts; that the occurrence giving rise to the injury occurred after Bonell had relinquished possession of the unit to Bitts; and that the aforementioned occurrence occurred away from premises owned, rented or controlled by Bonell.

The parties have made cross-motions for summary judgment under the provisions of Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. Inasmuch as there is no genuine issue as to any material fact in the matter at bar, it appears to the Court that, on the basis of the record before it, the question is ripe for summary judgment.

The question here involved is whether an "Exclusion of Products Endorsement," which the parties have stipulated was a part of the policy in effect at the time of the accident, is sufficient, as a matter of law, to relieve the insurer from the duty of defending the action for personal injuries. This endorsement reads as follows:

"Exclusion of Products Hazard

"It is agreed that the policy does not apply to the products hazard as defined therein.

"This endorsement is subject to all the agreements, conditions and exclusions of the policy unless such agreements, conditions and exclusions are expressly modified or expressly eliminated hereby * * *."

In the policy is contained the following language:

"(c) Products Hazard. The term `products hazard' shall mean

"(1) the handling or use of, the existence of any condition in or a warranty of any goods or products manufactured, sold, handled or distributed by or for the named insured, other than equipment rented to or located for use of others but not sold, if the accident occurs after the insured has relinquished possession thereof to others and away from premises owned, rented, or controlled by the insured or on premises for which the classification stated in section A(1) of the declarations or in the company's manual excludes any part of the foregoing; * * *"

The essence of the claim of the plaintiffs is that Bonell was under a duty to warn Bitts of the dangerous condition existing in the refrigeration unit. It is alleged that Bonell knew, or should have known, of the dangerous condition, and also that he knew, or should have known, that Bitts was inexperienced in assembling refrigeration equipment. Accordingly, the position of the plaintiffs is that Bonell failed to meet the standard of care required under such circumstances, and that the tortious act was committed at the time of the sale. Following this line of reasoning, they argue that they are not precluded by the "Exclusion of Products Endorsement" in the policy, because the wrongful act or failure to act occurred on Bonell's premises, before Bonell had relinquished possession of the equipment to Bitts, and not during the handling or use of the dangerous items. They conclude that the resultant injury to Bitts was but the proximate result of Bonell's initial tort.

On the other hand, the argument of the defendant insurer is that the "Exclusion of Products Endorsement" in its policy specifically covers the factual situation set out in the pleadings. The principal contention is that the point upon which liability depends is the place where the accident occurs, and that here the accident occurred after Bonell had relinquished possession of the equipment, on premises other than Bonell's, and while Bitts was handling or using the dangerous items.

A number of cases have been cited which discuss similar insurance clauses. In Standard Accident Insurance Co. v. Roberts, 8 Cir., 1942, 132 F.2d 794, the insured was in the business of the sale and installation of furniture and fixtures. He sold a refrigerator to one Primm, and installed it in Primm's residence. Shortly after the insured had completed the installation of the refrigerator, gas escaped from the refrigerator...