Cobbins v. General Acc. Fire & Life Assur. Corp., Ltd.

• Decision Date: 30 November 1972
• Docket Number: No. 45056,45056
• Citation: 290 N.E.2d 873,53 Ill.2d 285
• Court: Illinois Supreme Court
• Parties: Bernard COBBINS, Appellee, v. GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORPORATION, LTD., et al. Appeal of GENERAL ACCIDENT FIRE & LIFE INSURANCE CORPORATION, LTD.

Page 873

290 N.E.2d 873

53 Ill.2d 285

Bernard COBBINS, Appellee, v. GENERAL ACCIDENT FIRE & LIFE ASSURANCE CORPORATION, LTD., et al. Appeal of GENERAL ACCIDENT FIRE & LIFE INSURANCE CORPORATION, LTD.

No. 45056.

Supreme Court of Illinois.

Nov. 30, 1972.

Hinshaw, Culbertson, Moelmann, Hoban & Fuller, and Richard C. Bleloch, Chicago (D. Kendall Griffith, Chicago, of counsel), for appellant General Accident Fire & Life Assur. Corp.

William S. Keck, and Herman & Tannebaum, Chicago (Sidney Z. Karasik, Chicago, of counsel), for appellee.

DAVIS, Justice.

The overall issue in this case is whether there is insurance coverage for the insured, M. Fingerhut, d/b/a Coral Stores, assuming the truth of the allegations of the plaintiff's declaratory judgment complaint that in the operation of Coral Stores, Fingerhut negligently sold fireworks to the plaintiff, who subsequently suffered injury therefrom, while away from the store premises.

The plaintiff, Bernard Cobbins, 11 years of age, bought fireworks from the defendant, Fingerhut. Under the provisions of section 12 of the Fireworks Regulation Act (Ill.Rev.Stat.1963, ch. 127 1/2, par. 112), it was unlawful to sell fireworks to a child under the age of 12 years without the consent of the child's parents. The plaintiff took the fireworks (sparklers) to his yard, lit them, and suffered burns when a spark ignited his shirt.

The plaintiff sued Fingerhut in the circuit court of Cook County, alleging negligence on his part in the sale of such sparklers. Fingerhut tendered the defense to General Accident Fire & Life Assurance Corporation, Ltd. under his 'Owners', Landlords' and Tenants' Liability Insurance Policy.' General Accident refused to defend, and the plaintiff then brought this action seeking a declaration that General Accident was obligated under the provisions of the policy to defend and to pay any judgment recovered against Fingerhut. In his answer, Fingerhut joined in this prayer. The trial court held that there was no coverage under the policy for the liability sought to be imposed and granted General Accident's motion for summary judgment. Upon appeal, the appellate court reversed and remanded the judgment and held that there was coverage under the policy. (3 Ill.App.3d 379, 279 N.E.2d 443.) We granted leave to appeal.

The insurance policy is the standard type for Owners', Landlords' and Tenants' coverage. Under its provisions, five types of hazards may be insured: (1) 'Premises-Operations,' (2) 'Elevators,' (3) 'Structural Alterations, New Construction,' (4) 'Products-Completed Operations,' and (5) 'Contractual-Specified Types of Agreements.' Only the first hazard protection, 'Premises-Operations,' was purchased by Fingerhut. It clearly appears on the face sheet of the policy that no premiums were paid for coverage against any other type of hazard.

More narrowly, the issue becomes whether under the 'Premises-Operations' coverage, there is liability under the facts of this case when the injury in question was suffered by the plaintiff after he left the insured's premises. The defendant, Fingerhut, did not purchase coverage under division 4 hazard--' Products-Completed Operations.'

Under the insuring agreements, General Accident agreed to 'pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages * * * caused by accident and arising out of the hazards hereinafter defined.' The enumerated hazards are specifically defined:

'Division 1--Premises--Operations.

The ownership, maintenance or use of the premises, and all operations necessary or incidental thereto.

Division 4--Products--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 4 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;

(2) 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.'

Immediately following the 'Definition of Hazards' are the 'Exclusions' provisions of the policy, under which Division 4--the 'Products-Completed Operations'--is an expressly excluded hazard, if only the division 1 hazard is insured. While this court has not previously had before it the question of whether a negligent sale of a product, which subsequently injures a person off the premises of the insured, comes within the coverage under division 1--' Premises-Operations'--or under division 4--'Products-Completed Operations'--a number of other courts have considered the identical or substantially similar issue. They have arrived at diametrically opposite conclusions.

One line of cases holds that the 'Premises-Operations' hazard applies only to those situations wherein the injury occurs on the premises. (Smith v. Maryland Casualty Co. (1967), 246 Md. 485, 229 A.2d 120; Bitts v. General Accident & Life Assurance corp. (9th Cir. 1960), 282 F.2d 542; Farmers Cooperative Soc. No. 1 v. Maryland Casualty Co. (Tex.Civ.App.1969), 135 S.W.2d 1033; Hultquist v. Novak (1938), 202 Minn. 352, 278 N.E. 524.) The other line of cases holds that there may be recovery under division 1--'Premises-Operations'--notwithstanding that the injury occurs off the premises. Atkins v. Hartford Accident & Indemnity Co. (1967), 7 Mich.App. 414, 151 N.W.2d 846; Brant v. Citizens Mutual Automobile Insurance Co. (1966), 4 Mich.App. 596, 145 N.E.2d 410; St. Paul Fire and Marine Insurance Co. v. Coleman (8th Cir. 1963), 316 F.2d 77; Lessak v. Metropolitan Casualty Ins. Co. (1958), 168 Ohio St. 153, 151 N.E.2d 730.

The first line of cases adopts the view that the 'products' hazard division specifically covers injuries caused by accidents resulting from goods sold if the accident occurs after the possession of the goods has been relinquished to others, and if the accident occurs away from the premises in question. At the same time, such injuries are specifically excluded from the coverage under division 1, for operations on of from the premises. The determining factor for the coverage under the 'products' hazard division and, hence, the resulting exclusion under division 1 is not the negligent cause, but the occurrence of the accident itself. Critical to recovery under the 'products' hazard division is both the time of the accident as it relates to possession of the goods, and place as it relates to premises. Bitts v. General Accident Fire & Life Assurance Corp. (9th Cir. 1960), 282 F.2d 542, 543--544.

The other line of cases is supported by varying rationale: It is the 'cause' of the injury that is determinative and the wrongful or negligent sale is the proximate cause. Such sale is the 'use of the premises,' or an operation incidental thereto, and, hence, there is coverage. Under this rationale the courts have held that since there is no reference in the policy to the place where the accident occurs under division 1, the place of the accident is thus immaterial. (Lessak v. Metropolitan Casualty Ins. Co. (1958), 168 Ohio St. 153, 158, 151 N.E.2d 730, 734; St. Paul Fire and Marine Insurance Co. v. Coleman (8th Cir. 1963), 316 F.2d 77, 80.) Other courts have found the existence of two 'accidents'--the first being the wrongful sale and the second being the resulting injury. By reason of the first 'accident' on the premises, the courts have found coverage. Atkins v. Hartford Accident & Indemnity Co. (1967), 7 Mich.App. 414, 418--419, 151 N.W.2d 846, 848; Brant v. Citizens Mutual Automobile Insurance Co. (1966), 4 Mich. App. 596, 599--600, 145 N.E.2d 410, 412.

We find the reasoning of the first line of cases more persuasive and realistic in their interpretation of the insurance contract. An insurance contract, like any other, is to be interpreted from an examination of the complete document and not an isolated part. (Martindell v. Lake Shore Nat. Bank (1958), 15 Ill.2d 272, 283, 154 N.E.2d 683; Chicago Home for Girls v. Carr (1921), 300 Ill. 478, 483, 133 N.E. 344.) In determining whether the 'Premises-Operations' hazard includes coverage where an injury results off the premises from a product sold by the insured, it is necessary to read all of the hazard definitions and the specific exclusions together.

When read together, division 1, 'Premises-Operations,' seems to clearly cover a factual situation which is distinct and separate from division 4, 'products-Completed Operations.' Division 1 covers hazards relating to the premises, such as a person slipping on a loose floor tile, a stock boy dropping a heavy box on a person, or a waitress spilling hot coffee on a customer. The hazards are such that the resulting injury is generally apparent. Division 4 covers hazards not so readily apparent as between the...