Gassaway v. Travelers Ins. Co.
| Decision Date | 31 March 1969 |
| Citation | 222 Tenn. 649,439 S.W.2d 605,26 McCanless 649 |
| Parties | , 222 Tenn. 649 Sam A. GASSAWAY and Wife, Dorothy H. Gassaway, Appellees-Complainants, v. TRAVELERS INSURANCE COMPANY and Travelers Indemnity Company, Appellants-Defendants. |
| Court | Tennessee Supreme Court |
Armstrong, Allen, Braden, Goodman, McBride & Prewitt, Memphis, for appellees-complainants, Newton P. Allen, Memphis, of counsel.
Chandler, Manier, Johnson & Harris, Memphis, for appellants-defendants, Carroll C. Johnson, Memphis, of counsel.
This suit involves the construction of a comprehensive general liability insurance policy under stipulated facts. In this opinion appellees, Sam A. Gassaway and wife, Dorothy H. Gassaway, will be referred to as complainants, and appellants, Travelers Insurance Company and Travelers Indemnity Company as defendants.
On May 17, 1954, V & M Homes, Inc., in the development of a residential subdivision in the City of Memphis, entered into a contract with the City which required the installation of certain drainage facilities by V & M Homes. In accordance with this contract V & M Homes laid an underground storm sewer which ran diagonally across Lot number 49 of said subdivision, and also installed on this lot an open-throat inlet to this storm sewer. It is agreed that these drainage facilities would not be visible to anyone examining this lot. On August 16, 1955, V & M Homes conveyed Lot number 49 by warranty deed to Mary L. Johnson. This deed does not mention the drainage facilities nor did V & M Homes disclose its existence to Mary L. Johnson. Mary L. Johnson constructed a house on this lot and on April 21, 1956, conveyed the house and lot to complainants. This deed of April 21, 1956, does not mention these drainage facilities and it is further stipulated neither the grantor nor the grantees at the time the deed was executed had any knowledge of these drainage facilities.
Complainants moved into this house and their first knowledge of these drainage facilities came in 1963 when the foundation began to settle to such an extent that serious damage to the house resulted. Upon investigation complainants found water had been discharged from these drainage facilities underneath the house causing the foundation to settle. Based upon these facts, complainants filed suit in the Circuit Court of Shelby County on June 30, 1964. A judgment obtained against V & M Homes was subsequently returned nulla bona. There were other parties named defendants in the Circuit Court suit but any action against them is not at issue in the case at bar.
Complainants filed the suit now before the Court in Chancery seeking to collect from defendants a money judgment previously obtained in the Circuit Court against Traveler's insured, V & M Homes. The chancellor found in favor of complainants. Defendants appealed.
During the period from May 17, 1954 to May 17, 1956, V & M Homes was insured by Travelers under comprehensive general liability policies containing the following language:
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 or property, including the loss of use thereof, caused by accident.
The chancellor found defendants' liability must depend upon the issues as determined in the Circuit Court. This is correct. Therefore, defendants' obligation to pay the Circuit Court judgment is to be measured by the insurance policy and the issues as determined in the Circuit Court. The first question presented for decision is whether the issues as determined in the Circuit Court support complainants' claim that the loss was by 'accident' as this word is used in the insurance policy. See Ritchie v. Anchor Casualty Co., 135 Cal.App.2d 245, 286 P.2d 1000 (1955).
The chancellor found the action in the Circuit Court was bottomed upon the failure of V & M Homes in the sale of the lot to disclose the existence of the drainage facilities and risk created thereby, and that such was an action in tort as opposed to an action in warranty. In this appeal, therefore, the complainants are arguing that the Circuit Court determined that V & M Homes had negligently failed to disclose the existence of the drainage facilities and that the risk created by this negligence was an accident within the meaning of the insurance policy.
Prior to taking up this question we think we should consider negligence as it relates to accident. We agree the negligent acts of an insured can be an accident as this word is used in insurance policies. In Royal Indemnity Co. v. Kuhr, 113 Ga.App. 39, 147 S.E.2d 23 (1966), the court on this point said:
The term 'accident' in liability insurance contracts generally does not include any injury deliberately and wilfully done, but generally covers injuries caused by negligence of the insured (citations omitted).
On this point the court in Massachusetts Bonding & Insurance Co. v. Orkin Exterminating Co., 416 S.W.2d 396 (Tex.1967), said:
We construe the term 'accident' as used in the policy to include negligent acts of the insured causing damage which is undesigned and unexpected.
Further on this point see 7A Appleman, Insurance, Law and Practice, Section 4492; Bundy Tubing Co. v. Royal Indemnity Co., 298 F.2d 151 (6th Cir. 1962).
The point here is that while negligent acts can and in fact often do support a claim of accident as this word is used in insurance policies, yet it does not follow that all negligent acts so support such claim. Accident and negligence are not synonymous terms. Albuquerque Gravel Products Co. v. American Employers Insurance Co., 282 F.2d 218 (10th Cir. 1960). The nature of the action, that is whether it be tort, contract or otherwise, may be a factor in determining if there has been an accident under a given factual situation, but the nature of the action does not per se control it. Whether the damages suffered resulted from an accident so as to make the insurer liable requires the examination of the entire factual situation.
Under the record in the Circuit Court it is apparent that the judgment therein obtained by complainants was upon the holding in Belote v. Memphis Development Co., 208 Tenn. 434, 346 S.W.2d 441 (1961). In Belote, Chief Justice Burnett noted that in this jurisdiction prior to the Belote holding as between vendor and vendee in the sale of real estate the doctrine of caveat emptor applied. Belote made an exception to this doctrine. In order for the complainants to recover in the Circuit Court on the theory of the failure to disclose in the sale of the lot they would have had to come within the exception made by Belote. The exception made by Belote is as follows:
A Vendor of land, who conceals or fails to disclose to his vendee any condition whether natural or artificial involving unreasonable risk to the person upon the land, is subject to liability for bodily harm caused thereby to the vendee and others upon the land with the consent of the vendee or his subvendee, after the vendee has taken possession, if
(a) the vendee does not know of the condition or risk involved therein, and (b) the vendor knows of the condition and the risk involved therein and has reason to believe that the vendee will not discover the condition or realize the risk. 208 Tenn. at 438, 346 S.W.2d at 442.
In the charge to the jury in the Circuit Court case the court said:
So if you find that the existence of the storm sewer and inlet on Lot 49 involved an unreasonable risk or harm to either Mrs. Johnson or to Mr. and Mrs. Gassaway, and if you find the representatives of V & M Homes, Inc. knew of the existence of either the sewer or inlet on Lot 49 and the risk created thereby to Mrs. Johnson or any subsequent purchaser, and that the representative of V & M Homes, Inc. had reason to believe that Mrs. Johnson neither knew now would discover such condition, V & M Homes was not entitled to assume that she would discover it, but instead, V & M Homes had the duty to disclose such condition to Mrs. Johnson, and if you find V & M Homes, Inc. did not disclose such condition to Mrs. Johnson and if such failure proximately caused damage to the subsequent purchasers,...
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