Commercial Union Assur. Co. v. Glass Lined Pipe Co., Inc.

• Decision Date: 29 June 1979
• Citation: 372 So.2d 1305
• Parties: COMMERCIAL UNION ASSURANCE COMPANY, a division of Commercial Union Insurance Company of New York v. The GLASS LINED PIPE COMPANY, INC., a corporation. 78-206.
• Court: Alabama Supreme Court

Page 1305

372 So.2d 1305

COMMERCIAL UNION ASSURANCE COMPANY, a division of Commercial Union Insurance Company of New York v. The GLASS LINED PIPE COMPANY, INC., a corporation.

78-206.

Supreme Court of Alabama.

June 29, 1979.

Bert P. Taylor of McDaniel, Hall, Parsons & Conerly, Birmingham, for appellant.

Alexander W. Jones, Jr. of Pritchard, McCall & Jones, Birmingham, for appellee.

BEATTY, Justice.

This is an appeal by Commercial Union Assurance Company from a declaratory judgment which held that Commercial Union was obliged by a policy of insurance to defend The Glass Lined Pipe Company, Inc. in an action brought in Minnesota against it. We reverse and remand.

The policy in question was of a type described as a Comprehensive General Liability Insurance, insuring against bodily injury and property damage liability. Under those coverages the contract recites:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies caused by an occurrence . . .

An "occurrence" is defined in the policy as:

(A)n accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured; . . .

"Property damage" is defined in the policy as:

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period. . . .

One of the general liability hazards insured against was a "products hazard," defined in the policy as including:

(P)roperty damage arising out of the named insured's products or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others.

The policy also expressed certain exclusions from liability:

This insurance does not apply:

(p) to damages claimed for the withdrawal, inspection, repair, replacement, or loss of use of the named insured's products or work completed by or for the named insured or of any property of which such products or work form a part, if such products, work or property are withdrawn from the market or from use because of any known or suspected defect or deficiency therein;

The Minnesota action arose out of the construction of a sewage disposal plant. Hayes Contractors, Inc. was a subcontractor on that job installing pumps, valves, pipe, hangers, supports and related mechanical systems. Hayes used cast iron pipe supplied by American Cast Iron Pipe Company which, under Hayes' directions, sent the pipe to Glass Lined for installation of a glass lining inside the pipe according to a purchase order from Hayes which was accepted by Glass Lined. Following shipment of this pipe and installation of a portion of it, a dispute arose over the quality of the glass lining. Ultimately Hayes sued Glass Lined for damages based upon negligence, breach of warranties, and injuries to business reputation. The damages claimed were amounts of money to compensate Hayes for costs of transportation, relining the pipe, and exemplary damages.

Commercial Union declined to defend the Minnesota action, and Glass Lined brought this suit for declaratory relief. The trial court decided, among other things, that Exclusion (p), excluding damages for certain events when the insured's products or work or property are withdrawn from the market or use, was inapplicable because the subject matter was not withdrawn by the Insured ; and that the defendant, Commercial Union, was obligated to defend Glass Lined in the Minnesota action and to pay any judgment against Glass Lined arising from the negligence and/or the breach of warranties claims.

The defendant insurance company has appealed from that decree on the ground that the evidence undisputedly establishes that the claims asserted by the plaintiff are specifically excluded under the policy.

Initially we recite some pertinent language from Aetna Insurance Co. v. Pete Wilson Roofing & Heating Co., 289 Ala. 719, 723, 272 So.2d 232, 235 (1973):

The law in Alabama is clear that insurance companies have the right, in the absence of statutory provisions to the contrary, to limit their liability and write policies with narrow coverage . . . . It is also true that the courts must enforce insurance contracts as written and cannot defeat express provisions in a policy, including exclusions, by judicial interpretation. . . . (citations omitted) (Cf. Westchester Fire Ins. Co. v. Barnett Millworks, Inc., Ala., 364 So.2d 1137 (1978))

In Aetna the subject matter of the suit was a roof constructed and unconditionally guaranteed by a subcontractor. Subsequently the roof leaked and the subcontractor was sued. His contractual liability carrier denied coverage under a policy exclusion identical to (p) here. Because the complaint claimed damages resulting from the Contractor's repair and replacement of the roof constructed by the insured subcontractor, this Court held that an exclusion ((p) here) specifically applied because the roof in question was the subcontractor's "product."

In its criticism of the aptness of Aetna to this case, the plaintiff notes that the policy in Aetna was a contract liability policy rather than a products liability policy as is the case here. It is true that the cause of action in Aetna was based upon a contractual liability policy, whereas the claim against the plaintiff here is based upon a Comprehensive general liability policy. The decision in Aetna, however, was not governed by the type of policy but rather upon the language of the specific exclusion contained in the policy.

Were the damages claimed in the Minnesota suit "for the withdrawal, inspection, repair, replacement, or loss of use of the named insured's products or work...