Delaware County Const. Co. v. Safeguard Ins. Co.

• Decision Date: 23 March 1967
• Citation: 228 A.2d 15,209 Pa.Super. 502
• Parties: DELAWARE COUNTY CONSTRUCTION COMPANY v. SAFEGUARD INSURANCE COMPANY, Appellant.
• Court: Pennsylvania Superior Court

228 A.2d 15

209 Pa.Super. 502

DELAWARE COUNTY CONSTRUCTION COMPANY v. SAFEGUARD INSURANCE COMPANY, Appellant.

Superior Court of Pennsylvania.

March 23, 1967.

Melvin G. Levy, Chester, for appellant.

James C. Brennan, Chester, for appellee.

Before ERVIN P.J., and WRIGHT, WATKINS, MONTGOMERY, JACOBS, HOFFMAN and SPAULDING, JJ.

HOFFMAN Judge.

This action arises out of a policy of insurance issued by Safeguard Insurance Company (Safeguard) to Delaware Construction Company (Delaware) insuring the latter for, inter alia, bodily injury liability. The facts follow:

Wilson's Hauling (Wilson) leased a crane, together with its operator and oiler, to Delaware. Delaware, in turn, leased the crnae to United Engineers and Construction, Inc. (United). On December 31, 1957, Joseph W. Kelly, an employee of United was working on a building then under construction, when he sustained fatal injuries as a result of an accident arising out of the use of the crane.

Kelly's Estate subsequently instituted suit in the United States Court for the Eastern District of Pennsylvania for damages arising from the wrongful death of Kelly. The suit was filed originally against Wilson alone, but thereafter, both Delaware and United were brought in as third-party defendants. United then filed a cross-claim against Delaware based on an indemnity provision in Delaware's agreement with United. This provision stated that Delaware would 'save the lessee (United) harmless and indemnify him for every expense, liability or payment by reason of any injury to any person or persons, including death, or by reason of any damage to property, suffered through any act or omission of the lessor (Delaware) or any one directly or indirectly employed by him in the prosecution of the work covered by this order.'

After suit was instituted in the District Court, Delaware called upon Safeguard to represent Delaware's interests in the action, including the claim for indemnification by United. Safeguard notified Delaware that it would not represent Delaware as to United's cross-claim, since the policy specifically excluded coverage for any liability assumed by Delaware under contract. Safeguard did, however, undertake Delaware's defense in the District Court action in all other respects. At trial, Delaware retained private counsel to defend against United's cross-claim.

During the trial in the District Court a settlement was effected. Under the terms of the settlement, Safeguard contributed the sum of $3500, in consideration for which it obtained for Delaware a complete release of all claims by the Kelly Estate. Delaware, in its own right, paid the sum of $5000 for which it received from United a complete release of all claims arising out of United's cross-claim for indemnification.

Subsequently, Delaware instituted this action against Safeguard to recover the sum it had paid in settlement of the United cross-claim together with costs and counsel fees in that action. The lower court found that Safeguard wrongfully disclaimed coverage, and that Delaware was entitled to recover $5,750.00 under the policy issued to it by Safeguard. Judgment was entered in that amount, and this appeal followed.

It is agreed by the parties that the basic issue here involved is whether the terms and conditions of the insurance policy provided coverage to Delaware for liability assumed by contract.

The statement of coverage in the policy upon which Delaware bases its claim provides:

'Coverage B--Bodily Injury Liability--Except Automobile

'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 and caused by accident.'

Under 'Exclusions,' the policy provides:

'This policy does not apply:

'(a) To liability assumed by the insured under any contract or agreement except under coverages B and D, (1) a contract as defined herein or (2) * * *' (Emphasis supplied).

Delaware argues that this provision excludes liability assumed by the Insured except liability arising under coverages B and D. Since 'Coverage B' is the coverage here involved, Delaware concludes that the exclusion should not apply.

Safeguard argues, on the other hand, that this provision excludes coverage under any contract or agreement except liability under coverages B and D arising from a 'contract' as defined in the policy. Both parties agree that the agreement by which Delaware was to indemnify United was not such a 'contract'. ^[1]

In deciding this question we are guided by the rule of construction, most recently re-enunciated by us in Masters v. Celina Mutual Insurance Company, 209 Pa.Super. 111, 115, 224 A.2d 774 (1966). This rule requires that 'all provisions of an insurance contract * * * be read together and construed according to the plain meanign of the words involved, so as to avoid ambiguity While at the same time giving effect to all of its provisions.' (emphasis added). See Newman v. Massachusetts Bonding & Ins. Company, 361 Pa. 587, 65 A.2d 417 (1949); Smith v. Cassida, 403 Pa. 404, 169 A.2d 539 (1961).

The difficulty with Delaware's construction is that it is intelligible only if we ignore the enumeration of two categories which immediately follow the phrase 'under coverages B or D'. These clauses are '(1) a contract as defined herein or (2) (a second clause, which is irrelevant in this case).' It is certainly our duty, in interpreting this contract, to give effect to these provisions also.

The correctness of the interpretation proposed by Safeguard would have been apparent had a comma been inserted after the word 'except'. Under such circumstances, the phrase 'under coverages B and D' would be clearly understood to mean that this policy does not apply to liability assumed by the insured under any contract or agreement except a contract as defined herein when the liability arises under coverages B and D.

The instant case is similar to Richter v. Com. Cas. Co., 93 Pa.Super. 28 (1928).

The policy in that case...