Economy Mills of Elwell, Inc. v. Motorists Mut. Ins. Co.
| Decision Date | 29 November 1967 |
| Docket Number | Docket No. 2665,No. 3,3 |
| Citation | 8 Mich.App. 451,154 N.W.2d 659 |
| Parties | ECONOMY MILLS OF ELWELL, INC., Plaintiff-Appellee, v. MOTORISTS MUTUAL INSURANCE COMPANY, Defendant-Appellant |
| Court | Court of Appeal of Michigan — District of US |
Edward D. Wells, Cholette, Perkins & Buchanan, Grand Rapids, for defendant-appellant.
John J. Moskal, Fortino, Plaxton & Moskal, Alma, for plaintiff-appellee.
Before BURNS, P.J., and HOLBROOK and RYAN, * JJ.
Plaintiff corporation was in the general business of a grain elevator, which included the sale of grain and seeds. At all times herein the plaintiff was protected against liability arising out of damage to property caused by accident under an insurance contract with the defendant. This policy provided in part as follows:
'Coverages Limits of Liability
'C Property Damage Liability-- $10,000. each accident
Except Automobile $25,000. aggregate operations
$25,000. aggregate protective
$25,000. aggregate products
$25,000. aggregate contractual'
Defendant insurance company in the policy agreed: 'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident.'
In the exclusions part of the policy the following provision applies:
'This policy does not apply: * * *
'(f) under coverage C, to injury to or destruction of * * * (3) any goods or products manufactured, sold, handled or distributed or premises alienated by the named insured, or work completed by or for the named insured, out of which the accident arises.'
Under the heading, 'conditions,' the policy defines the term 'products hazard' as follows:
'The term 'products hazard' means
'(1) the handling or use of, the existence of any condition in or a warranty of goods or products manufactured, sold, handled or distributed by 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 division (a) of the declarations or in the company's manual excludes any part of the foregoing.'
The defendant insurance company in section 2, of the heading 'insuring agreements' of the policy also agreed as follows:
'Defense, Settlement, Supplementary Payments: As respects the insurance afforded by the other terms of this policy the company shall:
'(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even it such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient.'
While this policy was in effect, plaintiff sold certain cranberry seed beans to various individuals. Two of such customers started suit against plaintiff claiming that plaintiff breached certain implied warranties involved in the sales of said seed beans. The claimed product defect as alleged in the complaints of these 2 purchasers was to the effect that the beans were of a type not suitable to the growing season in Michigan, and as a result, even though properly planted and cared for did not flower, pod and mature. The damages claimed in these suits included various items of loss sustained in purchasing, planting, and cultivating a bean crop that did not mature, including the loss of use of the land for That year's growing season.
The plaintiff called upon defendant insurance company to defend these suits and upon defendant's refusal commenced suit in the Gratiot county circuit court for a declaratory judgment requiring defendant insurance company to defend the suits pending against plaintiff.
Plaintiff and defendant stipulated to an agreed statement of facts which stated among other things 'assuming the allegations in those complaints (against plaintiff) are true, the events complained of came about without the consent, knowledge, concert, acquiescence, or connivance of the plaintiff.' That the defendant in this action was given proper notice of the suits but refused to defend plaintiff against them, was also a part of the stipulated facts.
Plaintiff conceded in the trial court that under the terms of the policy there was no liability on the part of the defendant for the purchase price of the seed beans.
A pretrial conference was held and thereafter plaintiff moved for a summary judgment because there was no genuine issue of facts raised by the pleadings. The matter came on to be heard and defendant presented testimony.
After the hearing, the trial judge rendered a comprehensive and thorough opinion 1 concluding with the finding
1. 13 Wayne Law Review, No. 1, p. 2, A Note from the Bench.
'That the defect in the seed beans caused accidental injury to property for which the insurer could be liable and that under the terms of the policy it has an obligation to defend the claimants actions on behalf of its insured.'
Judgment was entered in accordance with the opinion on September 7, 1966. Defendant has appealed and presents one issue for review: Is a claim for damages against a seller for the loss suffered by a farmer by failure of seeds to mature as impliedly warranted, a claim for an accidental injury to property as is covered by a policy of insurance which protects the seller against claims for injury to property by accident arising out of a warranty of goods sold?
The fact that there was an implied warranty 2 made by plaintiff to the 2 purchasers of the seed beans, that the seeds would grow and mature, the purpose for which they were purchased, appears not to be in contest. However, defendant-appellant maintains that under the facts in this case there was no accident whereby there was injury to or destruction of property, including the loss of use thereof.
First, it must be determined if the facts justify the finding of the trial court that an accident occurred. Concerning this matter, the trial judge in his opinion stated as follows:
'Although the word 'accident' is of great importance in several provisions of the policy, no definition of what is meant by the use of the word appears in the policy. Presumably the word is used in the same sense that courts have found to be applicable in other products liability policies.
'Guerdon Industries, Inc., v. Fidelity & Casualty Company of New York (1963) 371 Mich. 12, 18 (123 N.W.2d 143), adopts with approval the definition of accident as found in 10 Couch on Insurance (2d ed.), § 41.6, p. 27 which states:
We agree with the findings of the trial judge and conclude that under the definition of an accident as found in the Guerdon Industries, Inc., case, supra, that the defect in the seed beans causing failure of the beans to mature was unforeseen, unexpected, and unintended and constituted an accident.
Next, we turn to the question, did the accident cause injury to or destruction of property, including the loss of use thereof? Defendant asserts that it did not and in support of its position cites 2 cases. First, the case of Bundy Tubing Company v. Royal Indemnity Co. (C.A. 6, 1962), 298 F.2d 151, which involved the sale of defective copper tubing by Bundy to a purchaser and used in a radiant heating system in a home. The tubing leaked and damaged household furnishings. Royal admitted liability for the damage to the furnishings and offered to pay for such loss. Other than for this loss, Royal denied liability and refused to defend Bundy on the ground and the exclusionary clause of the policy excluded coverage. 3 The principal damage claimed by the purchaser was for the cost of removing concrete flooring in which the defective tubing had been embedded, and the laying of new concrete in which to place the new tubing. As to this, Royal contended that the Old concrete had not been damaged in any...
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