Hargis v. Maryland American General Ins. Co.

• Decision Date: 22 June 1978
• Docket Number: No. 5159,5159
• Citation: 567 S.W.2d 923
• Court: Texas Court of Appeals
• Parties: Curtis HARGIS et al., Appellants, v. MARYLAND AMERICAN GENERAL INSURANCE COMPANY, Appellee.

Page 923

567 S.W.2d 923

Curtis HARGIS et al., Appellants, v. MARYLAND AMERICAN GENERAL INSURANCE COMPANY, Appellee.

No. 5159.

Court of Civil Appeals of Texas,Eastland.

June 22, 1978.

Rehearing Denied July 13, 1978.

Bob Roberts, Byrd, Davis, Eisenberg & Clark, Austin, E. Barham Bratton, Austin, for appellants.

Royal H. Brin, Jr., Strasburger & Price, Dallas, for appellee.

BRADBURY, Justice.

This is an appeal from the granting of a summary judgment favoring Maryland American General Insurance Company against Curtis Hargis, Andrew W. Lucas, and Dallas Hermetic Company, Inc. We affirm.

Hargis and Lucas, as employees of Frymire Engineering Company, were injured May 22, 1968, when an air conditioning unit on which they were working exploded. About one year previous, the motor in the unit had been rewound by Hermetic. Hargis and Lucas sued Hermetic and other defendants and subsequently settled with all defendants except Hermetic. Judgments were then recovered for Lucas in the sum of $450,000 and for Hargis, $250,000 against Hermetic. They executed identical covenants not to execute against Hermetic, and in these cases, Maryland, insurance carrier for Hermetic, refused to defend. When the judgments became final, suit was filed by Hermetic, Hargis and Lucas against Maryland to recover the amounts of judgments, interest and attorney's fees.

In a summary judgment case, the judgment should be granted and if granted, should be affirmed, if the record establishes a right thereto as a matter of law. Gibbs v. General Motors Corporation, 450 S.W.2d 827 (Tex.1970).

Maryland's motion for summary judgment contended that as a matter of law it was not obligated to defend Hermetic because the policy exclusions relating to "completed operations hazard" and "products hazard" were applicable.

Such exceptions are as follows:

(1) Completed Operations

"Completed Operations hazard includes bodily injury and property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured. 'Operations' include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earliest of the following times:

(1) when all operations to be performed by or on behalf of the named insured under the contract have been completed;

(2) when all operations to be performed by or on behalf of the named insured at the site of the operation have been completed; or

(3) when the portion of the work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or sub-contractor engaged in performing operations for a principal as part of the same project. Operations which may require further service or maintenance work, or correction, repair, or replacement because of any defect or deficiency, but which are otherwise complete, shall be deemed completed."

(2) Products Hazard

"Products hazard is defined 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 relinquishment to others."

In Travelers Insurance Company v. Chicago Bridge & Iron Company, 442 S.W.2d 888 (Tex.Civ.App. Houston (1st Dist.) 1969, writ ref. n. r. e.), the court stated:

". . . Words used in an insurance contract are to be given their plain, ordinary, and generally accepted meaning unless consideration of the instrument itself shows them to have been used in a different sense. Western Reserve Life Ins. Co. v. Meadows, 152 Tex. 559, 261 S.W.2d 554 (1953). The rule of liberal construction in favor of the insured applies only when the contract is ambiguous and susceptible of more than one interpretation. Transport Ins. Co. v. Standard Oil Company of Texas, 161 Tex. 93, 337 S.W.2d 284 (1960). The contract must be enforced as made if the language used is plain and unambiguous. Home Ins. Co., New York v. Rose, 152 Tex. 222, 255 S.W.2d 861 (1953)."

Hermetic had rewound the motor for C-B Air Conditioning Company who picked it up and reinstalled it in the air conditioning unit at the Kona Inn Apartments. About a year later, the unit was giving trouble and someone at Kona Inn Apartments called Frymire Engineering Company and in response to the call, Hargis and Lucas were repairing it when it exploded. Hermetic, Hargis and Lucas argue that the exception in the policy relied on by Maryland is not applicable because Hermetic had not performed what it was to have performed; therefore, there was not a completed operation.

COMPLETED OPERATIONS

Plaintiffs cite Fidelity and Casualty Company of New York v. Horton & Horton Custom Works, Inc., 462 S.W.2d 613 (Tex.Civ.App. Fort Worth 1971, writ ref. n.r.e.) in support of their contention that the operation was not completed because Hermetic had failed to perform a substantial requirement essential to the intended function of the motor. The facts and the policy provisions in that case are distinguishable from those in the case at bar. Their insurance company contended an exclusionary clause applied, which provided:

" 'This policy does not apply: * * * under coverages B and D, to injury to or destruction of * * * property in the care, custody or control of the insured (Horton) * * * as to which the insured for any purpose is exercising physical control, * * * or (to) work completed by or for the named insured, out of which the accident arises.' (Emphasis supplied)."

"Work completed" was not defined in that case, but is defined in the case at bar. The definition of "completed operations" in the instant case and the lack of such definition in Horton is a distinguishing factor.

Other cases cited by plaintiffs are Hardware Mutual Casualty Co. v. Schantz, 186 F.2d 868 (5th Cir., 1951) and Daniel v. New Amsterdam Casualty Company, 221 N.C. 75, 18 S.E.2d 819 (1942). The cited cases are distinguishable from the instant case because there was no definition of "completed operations" or the definition given was substantially different from the definition in the instant case.

The position of Maryland is summed up in Green v. Aetna Insurance Company, 397 F.2d 614 (5th Cir. 1968) wherein the leading Texas cases are discussed and exclusionary clauses similar to the ones in this case are construed. The court stated:

"We are Erie (Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188) bound to follow Texas law which on the facts here is not difficult to ascertain. We rely principally upon two Texas cases to support our view. They are Pan American Insurance Company v. Cooper Butane Company, 157 Tex. 102, 300 S.W.2d 651 (1957), and Maryland Casualty Company v. Knorpp, 370 S.W.2d 898 (Tex.Civ.App.1963) (writ ref'd n.r.e.). We rely also on our earlier opinion on the first appearance of this case here. (Footnote 1, supra.) See also, Pan American Insurance Company v. White, no writ history, 321 S.W.2d 337 (Tex.Civ.App.1959).

We first outline the analysis of Cooper as it was articulated by Judge Brown in writing for this court in the earlier appearance here of the case sub judice:

1) Liability under the policy 'is a matter of contract upon which contract principles apply'.

2) 'Policy provisions excluding liability for damages occurring after an assured's activity has ceased are perfectly valid.'

3) The plain meaning of language comparable to that of '(2) operations' (of the policy in suit, supra) 'excludes occurrences taking place after operations have been completed'.

4) 'Premises Operations' hazard does not encompass 'damages growing out of failures occurring away from premises owned, rented, or controlled by the assured and happening after operations have been completed * * *.'

5) 'Operations' need not be tied to a product which is manufactured, sold, handled or distributed in order to make the 'completed operations' section of the Products Liability hazard operative.

While it is true that the Texas Supreme Court in Cooper dealt only with questions of whether 'operations' had been 'completed,' that court recognized, we think clearly, that if the operations had been 'abandoned,' the same result would be reached. It stated:

If the insured had wished coverage for liability for damages growing out of accidents occurring after operations had 'been completed or abandoned at the place of occurrence thereof and away from premises owned, rented or controlled by the insured' it should have purchased coverage against hazard No. 4, 'Products'. It did not do so.

Knorpp, supra, adds strength to our views with respect to what Texas courts have held. The court there held 'Division 4 Products Completed Operations' has to do with liability after relinquishment for use (370 S.W.2d p. 903). We quote further from that opinion:

Additionally, the separate categories being mutually exclusive, coverage is not afforded under 'Division 1 Premises Operations' if the basis upon which liability is asserted occurred after operations were relinquished for use because such coverage under the policy is afforded under 'Division 4 Products Completed Operations,' a category not purchased. Had the building not been relinquished for use the accident would not have occurred because storage would not have begun in the building. (p. 904) (Emphasis supplied).

* * * a careful study of the form and design of the policy reveals that it was written to cover, among others, two particular situations. First, that which arises when an accident occurs while the assured is engaged in the actual work of the business for which he has purchased coverage. Having...