Harris, Jolliff & Michel, Inc. v. Motorists Mut. Ins. Co.

• Decision Date: 28 January 1970
• Citation: 255 N.E.2d 302,21 Ohio App.2d 81
• Parties: , 50 O.O.2d 171 HARRIS, JOLLIFF & MICHEL, INC., Appellee, v. MOTORISTS MUTUAL INS. CO., Appellant.
• Court: Ohio Court of Appeals

Page 81

21 Ohio App.2d 81

255 N.E.2d 302, 50 O.O.2d 171

HARRIS, JOLLIFF & MICHEL, INC., Appellee, v. MOTORISTS MUTUAL INS. CO., Appellant.

Court of Appeals of Ohio, Third District, Union County.

Jan. 28, 1970.

Syllabus by the Court

1. The word, 'property,' as used in a contractor's policy of liability insurance excluding liability for injury or destruction of property owned or occupied by or rented to insured 'or (2) * * * property in the care, custody or control of the insured or property as to which the insured for any purpose in exercising control * * *,' is, in a situation involving real estate, inherently ambiguous; and, where damage to a building is concerned, it may be interpreted so as to require care, custody, control, possession or occupation of the entire building by the contractor-insured for such exclusion to be applicable.

2. Where exception, qualifications or exemptions are introduced into an insurance policy, a general presumption arises to the effect that that which is not clearly excluded from the operation of such contract is included in the operation thereof.

3. Where the meaning of language in an insurance policy is ambiguous, it is construed liberally in favor of the insured and strictly against the insurer.

4. Where there is an ambiguity in an exclusion clause in an insurance policy, that meaning which excludes the least is necessarily the most liberal construction for the insured.

Joseph B. grigsby, Marysville, and David F. Allen, Richwood, for appellee.

Sebastian, Fais, Durst & Marsh, Columbus, for appellant.

COLE, Judge.

This case arises as an appeal on questions of law from a judgment of the trial court on a petition for declaratory judgment and mandatory injunction. There is little dispute as to the factual situation, and the basic issue involved is simply whether the defendant insurance company is required to defend an action brought against the plaintiff and to pay any judgment rendered in such action, or whether the situation comes within the terms of a certain exclusion contained in the policy.

The plaintiff corporation is a contractor which entered into a contract in 1966 with Divino Bros., Inc., to make certain additions and improvements to a building belonging to the latter corporation. The existing building was used for a wholesale produce business and consisted of certain office and warehouse space. To this the contractor proposed to add certain additional office and warehouse space as well as to alter some of the existing facilities. A portion of the work was to be done by Divino Bros., Inc., themselves or by other contractors hired by them, but the bulk of the construction was covered by the contract with the plaintiff. The Divino Bros., Inc., however, remained in operation during the remodeling and construction.

Plaintiff was, during the period of construction, covered by a policy of liability insurance issued by the defendant. Under the insuring agreement appeared:

'Coverage C-Property Damage.

'Liability-Except Automobile: 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.'

There are, however, exclusions, among which appears the following:

This policy does not apply:

'* * *

'(i) under coverage C, to injury to or destruction of (1) property owned or occupied by or rented to the insured, or (2) * * * property in the care, custody or control of the insured or property as to which the insured for any purpose is exercising physical control * * *.'

On November 17, 1966, a fire occurred on the premises damaging both the old building and the additions and improvements which were partially completed. Plaintiff's workmen were working in one of the new sections at the time. Ohio Farmers Insurance Company insured Divino Bros., Inc., and, having paid for the damage, took subrogation and then sued plaintiff for payment, alleging the damages were the result of negligence of its employees. In turn, plaintiff has requested defendant defend the claim and asks herein for a declaratory judgment both as to the duty to defend and the duty to pay any judgment within the policy limits of coverage. The defendant, however, says that there is no coverage, as the matter comes under the exclusion to the policy set forth above.

The court below found that there was coverage and ordered the defendant 'to defend the action by Ohio Farmers Insurance Company and pay any sum which the insured shall become legally obligated to pay as a result of such action.' The defendant appeals, setting forth several assignments of error, all of which are predicated, in essence, upon the contention that the cited exclusion applies. We shall deal with all assignments of error as encompassed in this basic issue: does the exclusion bar coverage under the facts herein involved?

The 'care, custody or control' exclusion is a common feature of contractors' liability policies, and there has been considerable litigation as to its meaning and operation. In 62 A.L.R.2d at page 1242 et seq., appears an extended annotation dealing with these cases. It is noteworthy that there is both authority that the clause is inherently amgibuous and that it is clear and unambiguous. In Ohio the case of Innis v. McDonald, 150 N.E.2d 441, 77 Ohio Law Abst. 417, affirmed in 150 N.E.2d 447, 77 Ohio Law Abst. 424, held as applied to the facts in that case the language was ambiguous. The court was there concerned with the application of the clause to real property, and, irrespective of its meaning when a piece of personal property is concerned, we agree with the court there that, as applied to the problem of real estate, there is a basic ambiguity in the clause. See also Falls Sheet Metal Works v. U. S. F. & G. Co., 17 Ohio App.2d 209, 245 N.E.2d 733.

It may well be true that as to a piece of machinery or equipment there is no ambiguity in the word 'property.' The unit would be the item of personalty which was in fact damaged. However, where real estate is concerned several meanings may be given to the term:

1. The specific area of damage: i.e., a wall, a doorway, a window.

2. A subdivision of the building: i. e., a room damaged, a wing damaged, a new addition, etc.

3. The entire structure which sustained injury: i. e., the warehouse, the residence, the factory, etc.

Defendant, in its argument, takes the position that two is the proper meaning-that the new addition was in the plaintiff's care, custody or control (legal or physical) and that, therefore, the exclusion applies. However, if either of the other meanings is given a totally different result follows.

If the first meaning is given, we would have to examine the legal and physical relationship of the plaintiff to each specific area of damage, to the loading dock, to the rear wall, to the heating unit, to the common wall, etc. On the other hand, if the third meaning be given, then we must examine the legal and physical relationship of the plaintiff to the entire structure taken as a unit. Thus there is, in our opinion, a basic ambiguity in that differing meanings with differing results may be attributed to the word 'property' in the clause. Is the property involved the rear wall, the added warehouse room, or the whole building?

Where an ambiguity appears in an insurance contract the Ohio law is clear. In Munchick v. Fidelity & Casualty Co., 2 Ohio St.2d 303, 209 N.E.2d 167, the first paragraph of the syllabus reads as follows:

'A contract of insurance prepared and phrased by the insurer is to be construed liberally in favor of the insured and strictly against the insurer, where the meaning of the language used is doubtful, uncertain or ambiguous. * * *'

In Home Indemnity Co., v. Plymouth, 146 Ohio St. 96, 64 n.E.2d 248, the second paragraph of the syllabus is as follows:

'Where exceptions, qualifications or exemptions are introduced into an insurance contract, a general presumption arises to...