Hartford Acc. & Indem. Co. v. A.P. Reale & Sons Inc.

• Decision Date: 20 June 1996
• Court: New York Supreme Court — Appellate Division
• Parties: HARTFORD ACCIDENT & INDEMNITY COMPANY, Appellant, v. A.P. REALE & SONS INC. et al., Respondents, et al., Defendants.

Page 442

644 N.Y.S.2d 442

228 A.D.2d 935

HARTFORD ACCIDENT & INDEMNITY COMPANY, Appellant, v. A.P. REALE & SONS INC. et al., Respondents, et al., Defendants.

Supreme Court, Appellate Division,

Third Department.

June 20, 1996.

Thuillez, Ford, Gold & Conolly (Donald P. Ford Jr., of counsel), Albany, for appellant.

Fox & Charles (Edward Kowalewski Jr., of counsel), Clifton Park, for A.P. Reale & Sons Inc., respondent.

Before MERCURE, J.P., and WHITE, CASEY, PETERS and SPAIN, JJ.

WHITE, Justice.

Appeal from an order of the Supreme Court (Teresi, J.), entered December 22, 1995 in Albany County, which denied plaintiff's motion for summary judgment.

In May 1984, defendant A.P. Reale & Sons Inc. (hereinafter Reale) entered into a contract with defendant The Michael's Group Inc. as agent for defendant Juniper Hills Villas Inc. (hereinafter collectively referred to as Michael's Group) wherein it agreed to construct a sewage treatment facility in accordance with plans and specifications provided by defendant Harold Burger, a professional engineer. In conjunction therewith, Reale obtained a commercial general liability policy containing a broad form property damage endorsement from plaintiff. Subsequently, in 1989 Michael's Group commenced an action against Reale alleging that it breached the contract by failing to construct the sewage treatment facility in accordance with the plans and specifications. Ultimately, plaintiff disclaimed coverage and commenced this action seeking a declaration that it had no duty to defend or indemnify Reale. Following joinder of issue, Supreme Court, finding the policy ambiguous, denied plaintiff's motion for summary judgment and this appeal ensued. For the reasons that follow, we disagree with Supreme Court's determination and, accordingly, reverse.

The resolution of this appeal turns upon our interpretation of several exclusions included in the basic policy and endorsement. Exclusion (a) in the basic policy excludes from coverage any liability assumed by Reale under any contract or agreement except an "incidental contract". This exclusion, however does not apply to a warranty of fitness or the quality of Reale's products or a warranty that the work performed by or on behalf of Reale will be done in a competent manner. The broad form property damage endorsement expands the definition of "incidental contract" "to include any oral or written contract or agreement relating to the conduct of [Reale's] business". This policy language is seemingly made ambiguous by exclusion (n) in the basic policy excluding from coverage property damage to the name insured's products arising out of such products, and exclusion (2)(d)(iii) in the endorsement removing from coverage property not on premises owned or rented to the insured upon which restoration, repair or replacement has been made or is necessary by reason of faulty work thereon by or on behalf of the insured.

While we recognize that exclusion (a) seems to be contradicted by exclusions (n) and (2)(d)(iii), this apparent contradiction is negated by the application of the principle that policy exclusions are to be read seriatim and, if any one exclusion applies, there is no coverage since no one exclusion can be regarded as inconsistent with another (see, Jakobson Shipyard v. Aetna Cas. & Sur. Co., 775 F.Supp. 606, 612-613 (S.D.N.Y.), affd., 961 F.2d 387 (2nd Cir.); Rhinebeck Bicycle Shop v. Sterling Ins. Co., 151 A.D.2d 122, 126, 546 N.Y.S.2d 499; Zandri Constr. Co. v. Firemen's Ins. Co., 81 A.D.2d 106, 109, 440 N.Y.S.2d 353, affd. sub...