Elcar Mobile Homes, Inc. v. D. K. Baxter, Inc.

• Decision Date: 30 March 1961
• Docket Number: No. A--786,A--786
• Citation: 169 A.2d 509,66 N.J.Super. 478
• Parties: ELCAR MOBILE HOMES, INC., a corporation of the State of Indiana, Plaintiff-Respondent, v. D. K. BAXTER, INC., a corporation of the State of New Jersey, Defendant-Third Party Plaintiff-Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation, Third Party-Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 478

66 N.J.Super. 478

169 A.2d 509

ELCAR MOBILE HOMES, INC., a corporation of the State of

Indiana, Plaintiff-Respondent, v. D. K. BAXTER, INC., a corporation of the State of New

Jersey, Defendant-Third Party Plaintiff-Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation,

Third Party-Defendant-Respondent.

No. A--786.

Superior Court of New Jersey Appellate Division.

Argued Oct. 5, 1960.

Decided March 30, 1961.

Eugene Tighe, Jr., Atlantic City, for D. K. Baxter, Inc. (Green & Tighe, Atlantic City, attorneys).

James L. Cooper, Atlantic City, for Hartford Accident & Indemnity Co., etc. (Arkus & Cooper, Atlantic City, attorneys).

No appearance for Elcar Mobile Homes, Inc.

Before Judges PRICE, GAULKIN and SULLIVAN.

The opinion of the court was delivered by

GAULKIN, J.A.D.

Elcar Mobile Homes, Inc. (Elcar) sued D. K. Baxter, Inc. (Baxter) in the Atlantic County District Court for damages allegedly caused to one of Elcar's house trailers while Baxter was removing paint from the surface of the trailer by sandblasting. Baxter filed a third-party complaint against Hartford Accident & Indemnity Company (Hartford) claiming that Hartford was obliged, under its policy issued to Baxter, to defend the action by Elcar and to pay any judgment Elcar might recover. Hartford denied liability. Hartford then served notice of motion for summary judgment 'on the ground that there exists no genuine issue as to any material fact and that * * * Hartford * * * is entitled to the judgment as a matter of law. At the time of the hearing of said motion, Third Party Defendant shall rely upon the statement under oath of John Louis Crist * * *.' The trial judge entered summary judgment in favor of Hartford, and Baxter appeals.

Neither the notice of motion for summary judgment nor the order granting summary judgment indicates upon what grounds the judgment was sought or granted. However, the parties agree that it was granted because the policy contains the following exclusion:

'This policy does not apply

'(j) under coverage D, to injury to or destruction of (1) property owned or occupied by or rented to the insured, or (2) except with respect to liability under sidetrack agreements covered by this policy, property used by the insured; or (3) except with respect to liability under such sidetrack agreements or the use of elevators or escalators at premises owned by, rented to or controlled by the named insured, property in the care, custody or control of the insured or property as to which the insured for any purpose is exercising physical control, or (4) any goods, products or containers thereof 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; * * *.'

The policy is a fearsome document of 11 pages, with varying sizes and styles of printing and typing. Hartford issued a certificate summarizing the coverage afforded by the policy as 'Manufacturers' and Contractors' Bodily Injury Liability; Manufacturers' and Contractors' Property Damage Liability; Owners' or Contractors' Protective Bodily Injury Liability; Owners' or Contractors' Protective Property Damage Liability; Automobile Bodily Injury Liability; Automobile Property Damage Liability.'

Although the United States Supreme Court was speaking of a different type of policy in Calmar Steamship Corporation v. Scott, 345 U.S. 427, 73 S.Ct. 739, 97 L.Ed. 1125 (1953), what it said there (345 U.S. at p. 432, 73 S.Ct. at p. 742, 97 L.Ed. at p. 1132) is apt here:

'Construing such conglomerate provisions requires a skill not unlike that called for in the decipherment of obscure palimpsest texts. * * * One envies not merely the perceptiveness of Lord Mansfield in matters of commercial law but his genial means of informing himself. We cannot resort to the elastic procedure by which Mansfield sought enlightenment at dinners with 'knowing and considerable merchants,' nor have we any Elder Brethren of Trinity House to help us.'

Cf. Ferrante v. Detroit Fire and Marine Insurance Co., 125 F.Supp. 621, 623 (D.C.S.D.Cal.1954); Weil v. Pennsylvania Fire Ins. Co., 58 N.J.Super. 145, 155 A.2d 781 (App.Div.1959).

Coverage D, to which the above quoted exclusion applies, is as follows:

'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury or destruction of property, including the loss of use thereof, caused by accident.'

The policy described Baxter's 'Premises--Operations' as 'Painting, Decorating or Paper Hanging N.O.C.--including shop operations. Painting ship hulls, steel structures or bridges to be separately rated. * * * Cleaning or Renovating Outside Surfaces of Buildings. * * * Paint Mfg.'

The 'Statement Under Oath of John Louis Crist' mentioned in the notice of motion, and upon the basis of which the trial judge entered summary judgment, shows the following facts. Elcar was in the house trailer sales business. It had upon its lot a number of trailers, one of which had to be refinished to satisfy a purchaser. This required the removal of the old paint. Baxter was hired to do it by sandblasting. Crist was an executive of Baxter. He came to Elcar's premises with two men (Cole and a helper), where he was met by a representative of Elcar (Dietz), who pointed out the trailer that was to be sandblasted. The trailer was on wheels, but Crist said 'it could be moved by their (Elcar's) equipment, not ours. Our equipment was too small.'

The trailer had already been 'masked,' but more masking was needed. Crist sandblasted a 2 2 section of the trailer as 'a sample blast,' which was approved by Dietz. Crist then told Cole 'to go ahead, to finish masking and sandblast the trailer.' Crist said he showed Cole 'a sample of what I had done, and then I made him do part of the back in my presence before I left.' After watching Cole for a while, Crist shut off the compressor, told Cole 'This is the way I want you to continue to do the trailer,' and departed.

The alleged damage was the 'buckling' of the metal, which gave it a wavy appearance. Crist said:

'Q. Have you had experience of metal buckling before upon use of the sandblasting equipment? A. No, not too much in that respect * * * that is one reason I had actually made the first shot, the first section in Mr. Dietz's presence, and then also instructed my foreman to go ahead and sandblast a section for me. * * *'

Baxter sandblasted the front, back and sides of the trailer. The damage was discovered after the job was finished.

Since these were the only facts before the trial court upon the motion for summary judgment, Baxter contends that the trial court erred in holding that the trailer was in the 'care, custody or control' of Baxter, or that Baxter 'was exercising physical control' over it, citing Boswell v. Travelers Indemnity Co., 38 N.J.Super. 599, 120 A.2d 250 (App.Div.1956). Respondent, on the other hand, argues that the trial court was correct, citing Condenser Service & Engineering Co., Inc. v. American Mutual Liability Insurance Co., 58 N.J.Super. 179, 155 A.2d 789 (App.Div.1959); Pompeii v. Phoenix Assurance Company of New York, 7 Misc.2d 846, 166 N.Y.S.2d 619 (Cty.Ct.1957), affirmed 7 A.D.2d 806, 181 N.Y.S.2d 152 (App.Div.1958), and the annotation in 64 A.L.R.2d 1242--1255 (1958).

When the 'care, custody or control' portion of the exclusion was before this court in Boswell, we said 'Such words are inherently ambiguous * * *.' In that case we held (38 N.J.Super. at pp. 605, 606, 607, 120 A.2d at pp. 253, 254) that

'In such a case, the courts will take into consideration the apparent object or purpose of the insurance and, along with the context of the policy, the subject matter of the insurance, the situation of the parties, and the circumstances surrounding the making of the contract. * * *

'Exclusion clauses are strictly construed against the insurer, especially if they are of uncertain import. An insurer may, of course, cut off liability under its policy with clear language, but it cannot do so with that dulled by ambiguity. As with the provisions of the policy as a whole, so also with the exceptions to the liability of the insure(r), the language must be construed so as to give the insured the protection which he reasonably had a right to expect; and to that end any doubts, ambiguities and uncertainties arising out of the language used in the policy must be resolved in his favor.

'Since insurance contracts are phrased by the insurer, it is for the insurer to make them so clear that they contain no ambiguity as to their meaning; otherwise they must be construed most strongly against the insurer.'

In an article in the January 1959 Insurance Law Journal, page 7, entitled 'Care, Custody or Control Exclusions,' F. D Cooke, Jr., an insurance company superintendent of claims, tells us (page 9) that:

'There are several different reasons for such an exclusion in the policy. Fundamentally, were it not for the exclusion there would be a greater moral hazard as far as the insurance company is concerned. It also eliminates the possibility of the insured making the insurance company a guarantor of its workmanship.

'The liability policy contemplates payment generally in situations where the ordinary degree of care is the measure of liability. The premium is determined on that basis. Liability for damage to property in charge of or in the care, custody or control of the injured Where there is a bailment is controlled by different rules of law, and as a practical result the hazard is greatly increased.' (Emphasis ours.)

The reference to 'greater moral hazard' appears to apply only to those sections of the exclusion clause which deal with 'property owned or occupied by or rented to the insured, or * * * used by the insured'--i.e., property with reference to which the insured might benefit by falsely claiming that it had been damaged by 'accident,'...