Harford Mut. Ins. Co. v. Moorhead

• Citation: 578 A.2d 492,396 Pa.Super. 234
• Court: Superior Court of Pennsylvania
• Decision Date: 25 July 1990
• Parties: The HARFORD MUTUAL INSURANCE COMPANY, Appellant, v. Douglas P. MOORHEAD and Marlene B. Moorhead, His Wife, Individually and Trading and Doing Business as Presque Isle Wine Cellars, George A. Stevens and Carla Stevens, His Wife, Joseph Bordonaro and Rebecca Bordonaro, His Wife, Trading and Doing Business as Bordonaro's Fruit Stand, Ralph Gagliordi, Crosby & Baker Wine Makers Ltd., and Oak Barrel Wine Crafts, Oregon Specialty Co., Gateway Hardware Company, Sesol France and Schenley Distillers, Inc., Appellees.

Page 492

578 A.2d 492

396 Pa.Super. 234

The HARFORD MUTUAL INSURANCE COMPANY, Appellant, v. Douglas P. MOORHEAD and Marlene B. Moorhead, His Wife Individually and Trading and Doing Business as Presque Isle Wine Cellars, George A. Stevens and Carla Stevens, His Wife Joseph Bordonaro and Rebecca Bordonaro, His Wife, Trading and Doing Business as Bordonaro's Fruit Stand, Ralph Gagliordi, Crosby & Baker Wine Makers Ltd., and Oak Barrel Wine Crafts, Oregon Specialty Co., Gateway Hardware Company Sesol France and Schenley Distillers, Inc., Appellees.

Superior Court of Pennsylvania.

Argued Dec. 6, 1989.

Filed July 25, 1990.

Michael S. Jan Janin, Erie, for appellant.

William J. Kelly, Erie, for Douglas and Marlene Moorhead, appellees.

Before DEL SOLE, KELLY and HESTER, JJ.

KELLY, Judge:

In this opinion we are called upon to decide whether under a comprehensive general liability insurance policy, the duty to defend an insured from liability in a civil suit where the insured is sued on the basis of a "negligent failure to warn" is removed by a "Products Hazard" exclusion. We find that the duty to defend exists in this action, and affirm.

The underlying facts of this appeal were accurately set forth in the trial court opinion as follows:

The Moorheads operate a business known as Presque Isle Wine Cellars in North East, Pennsylvania, one of which business purposes is to sell wine making supplies, including a product called a sulphur strip. At some point it is alleged that Joseph Bordonaro, doing business as Bordonaro's Fruit Stand, purchased a supply of these sulphur strips from the Moorheads with the intent of resale. He, in turn, sold these strips to a customer, George Stevens, along with other supplies for making wine, which included one or more old wooden whiskey barrels. The sulphur strips purchased are apparently used in the wine making process to kill bacteria in or otherwise make ready the grape fermenting vessel. The strips are first ignited and then placed inside of the vessel to perform their task. When Stevens, on his own property, ignited his sulphur strips and placed them in the former whiskey barrel, the flames from the sulphur strip ignited preexisting explosive alcohol vapors within the barrel, causing the barrel to explode. As a result of this explosion, pieces of the barrel were blown in a number of directions, one of which was toward Ralph Gagliordi, an invitee of Stevens and Plaintiff in the Lawrence County action, who was struck and severely injured on the lower part of his leg.

The Moorheads have, as a result of their alleged sale of sulphur strips to Bordonaro, been joined as Additional Defendants to the underlying action which they assert entitles them to be defended by The Harford Mutual Insurance Company, ... as their insurer. They have at all relevant times been insured under a comprehensive general liability policy issued by The Harford covering their business operations.

Trial Court Opinion at 1-3.

Subsequently, Harford filed a declaratory judgment action seeking a determination of whether the insurance policy issued to the Moorheads covered the liability which may be incurred as a result of the instant suit, and derivatively, whether or not Harford owed a duty to defend the Moorheads in the underlying litigation. Each party thereafter filed summary judgment motions. The trial court agreed with the Moorheads and entered judgment in their favor. Harford later filed this timely appeal.

At the outset, we note that in reviewing orders granting summary judgment, our scope of review is limited. This Court has previously summarized the appropriate standard as follows:

A motion for summary judgment may properly be granted only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In passing upon a motion for summary judgment, the court must examine the record in the light most favorable to the nonmoving party. Moreover, it is clear that to survive a motion for summary judgment, the non-moving party may not rely merely upon the controverted allegations of the pleadings, but must set forth specific facts by way of affidavit, or in some other way as provided by the rule, demonstrating that a genuine issue exists.

Kerns v. Methodist Hospital, 393 Pa.Super. 533, ----, 574 A.2d 1068, 1069-70 (1990); Salerno v. Philadelphia Newspapers, 377 Pa.Super. 83, 88-9, 546 A.2d 1168, 1170-71 (1988) (citations omitted); Pa.R.C.P. 1035(d). Mindful of this standard, we turn to Harford's appeal.

Instantly, Harford contends that summary judgment was improperly granted because the policy established no duty to cover or defend the Moorheads for the precise claim asserted in the underlying litigation. Specifically, Harford maintains that the "Products Hazard" exclusion contained in the subject policy was intended to exclude coverage of an action brought against the insureds which alleged injuries sustained as a result of products sold by the Moorheads. Harford construes the exclusion to preclude coverage of "products liability" actions, and argues that despite the fact that the complaint contains only allegations of "negligence," the essence of the underlying complaint is one of products liability. Essentially, Harford contends that the decision to phrase the instant complaint under the guise of negligence was an exercise of mere semantical gamesmanship designed to circumvent the intent of the "Products Hazard" exclusion.

In response, the Moorheads argue that the terms of the instant "Products Hazard" exclusion do not unambiguously exclude a claim that the insured was negligent in failing to provide warnings or instructions. The Moorheads submit that the allegations of the instant complaint charge them with negligent conduct only, and as such, coverage and defense should be provided. The trial court embraced the Moorheads' arguments.

I. Duty to Defend

An insurer's duty to defend the insured is dependent upon the derivative question of coverage. It is well established that while an insurer is not required to defend an insured in every claim brought against it, an insurer must defend in any suit in which there exists actual or potential coverage. Gene's Restaurant v. Nationwide Ins., 519 Pa. 306, 308, 548 A.2d 246, 246 (1988); Gideon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 58, 188 A.2d 320, 321-22 (1963); Techalloy Co. v. Reliance Ins. Co., 338 Pa.Super. 1, 8, 487 A.2d 820, 824 (1984); see also D'Auria v. Zurich Ins. Co., 352 Pa.Super. 231, 234, 507 A.2d 857, 859 (1986). The terms of the policy must be compared to the nature of the allegations of the complaint, and a determination made as to whether, if the allegations are sustained, the insurer would be obligated to incur the expense of the judgment. Gene's Restaurant, supra, 548 A.2d at 246; see also Springfield Tp., et al. v. Indemnity Ins. Co. of North America, 361 Pa. 461, 64 A.2d 761 (1949); Donegal Mutual Ins. Co. v. Ferrara, 380 Pa.Super. 588, 552 A.2d 699 (1989); D'Auria v. Zurich Ins. Co, supra; Vale Chemical Co. v. Hartford Acc. & Indem., 340 Pa.Super. 510, 490 A.2d 896 (1985); Eastcoast Equipment Co. v. Maryland Casualty Co., 207 Pa.Super. 383, 218 A.2d 91 (1966).

A. Terms of the Policy

The policy the Moorheads purchased from Harford to protect themselves from potential lawsuits, commonly referred to as a comprehensive general liability insurance policy, provides that coverage shall extend to "all sums which the insured shall become legally obligated to pay as damages because of (a) bodily injury, or (b) property damage to which this insurance applies...." Policy rider at L6395(a) (Ed. 1-73). This broad declaration of coverage is limited, however, by exclusions found elsewhere in the policy, to wit:

It is agreed that such insurance as is afforded by the bodily injury liability coverage does not apply to bodily injury or property damage included within the completed operation hazard or the products hazard.

Policy rider GL21 04-0766 (emphasis added). The latter of these exclusions is more specifically defined in a separate paragraph as follows:

"Products Hazard" includes bodily injury and property 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.

Endorsement MP 00 90 (Ed. 07 77) (emphasis added). No other definitions of or references to the "Products Hazard" exclusion are offered.

In interpreting this policy, we must remember that foremost among insurance laws regarding the reviewing court's determination of policy coverage, remain the general rules of policy construction. To promote stability and predictability between parties in a contractual relationship, the common law has assigned to the courts the task of interpreting the intent of the parties. DiFabio v. Centaur Ins. Co., 366 Pa.Super. 590, 593, 531 A.2d 1141, 1142 (1987). Words of an insurance policy which are unambiguous and clearly reflect the intent of the parties should be construed according to their plain and ordinary meaning, and we should give effect to that language. See Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385 (1986); Standard Venetian Blind Co. v. American Empire Ins., 503 Pa. 300, 469 A.2d 563 (1983); Pennsylvania Manufacturers' Assn. Ins. Co. v. Aetna Casualty and Surety Ins. Co., 426 Pa. 453, 233 A.2d 548 (1967). However, overly-subtle or technical interpretations may not be used to defeat reasonable expectations of insureds. See Huffman v. Aetna Life and Cas. Co., 337 Pa.Super. 274, 486 A.2d 1330 (1984). Thus, where reasonably intelligent people could...