Heyward v. American Casualty Co. of Reading, Pa.

• Decision Date: 02 March 1955
• Docket Number: Civ. A. No. 3583.
• Parties: A. R. HEYWARD, II, and C. D. Tucker, doing business as W. B. Guimarin & Company, Plaintiffs, v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Defendant.
• Court: U.S. District Court — District of South Carolina

129 F. Supp. 4

A. R. HEYWARD, II, and C. D. Tucker, doing business as W. B. Guimarin & Company, Plaintiffs, v. AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, Defendant.

Civ. A. No. 3583.

United States District Court, E. D. South Carolina, Columbia Division.

March 2, 1955.

Nelson, Mullins & Grier, Columbia, S. C., for plaintiffs.

Whaley & McCutchen, Roger M. Heyward, Columbia, S. C., for defendant.

WYCHE, Chief Judge.

This matter comes before me on defendant's motion to dismiss on the ground that the complaint fails to state a claim against the defendant upon which relief can be granted. The motion was heard upon the complaint filed in the present suit, to which was attached a copy of the complaint in the State Court, which the plaintiffs contend the defendant was under the duty to defend, the plaintiffs' answers to certain interrogatories interposed by the defendant and the insurance policy involved.

The defendant submits that the motion to dismiss should be treated as a motion for summary judgment and judgment given in favor of the defendant as there was no obligation on the insurer to defend the action in the State Court, which defendant claims alleged a claim not embraced within the policy provisions. Under Rule 12(b), Federal Rules of Civil Procedure, 28 U.S.C.A., where a motion to dismiss is founded upon the failure of the pleadings to state a claim upon which relief can be granted, and matters outside the pleadings are presented to and not excluded by the Court, the motion may be treated as one for summary judgment and disposed of as provided in Rule 56. Upon argument of the motion, plaintiffs' counsel stated that they had no objection to defendant treating the motion as one for summary judgment. Therefore, the motion will be considered as one for summary judgment for defendant.

The plaintiffs are heating and plumbing contractors. The defendant insurance company issued to the plaintiffs its comprehensive liability policy covering both personal injury and property damage. The plaintiffs are partners and for convenience will be referred to hereafter as the "plaintiff".

The Housing Authority for the City of Aiken, South Carolina, undertook to construct a large housing project. The plaintiff had one contract for the entire plumbing and heating portion of the project, and not merely one to construct the underground gas lines leading into dwelling unit 14-E, as defendant's counsel seem to assume in their argument.

Prior to the completion of the entire project, as the individual dwelling units became usable for occupancy, the Housing Authority rented them to tenants. Included in such list of rented dwellings was Apartment 14-E which was occupied by the Brantleys. Defendant has failed to show that the explosion which occurred in Apartment 14-E, and which injured Eddie Brantley, the plaintiff in the State Court suit, occurred before the entire project had been completed. Eddie Brantley brought a suit to recover damages for his personal injuries in the Court of Common Pleas for Aiken County, against the Housing Authority, all of the contractors and sub-contractors, including the plaintiff, as well as the sureties on the performance bonds given for the job.

The plaintiff delivered the suit papers to the defendant. The defendant refused to defend the action on behalf of the plaintiff or to pay any judgment recovered thereon although the plaintiff insisted that the policy in question covered this accident.

Plaintiff then brought this suit for declaratory judgment, asking the court to hold that defendant is obligated to plaintiff to defend the suit and to pay any judgment rendered therein within the limits of said policy. Since the present action was instituted the State Court action has been disposed of by way of settlement, to which the plaintiff contributed the sum of $4,200. The defendant insurance company was a party to the State Court action, participated in the settlement, and defendant has conceded that there is no question as to the reasonableness of the settlement.

The defendant filed a motion to dismiss upon two grounds, "(a) The work, out of which the State Court action is alleged to have arisen, had been completed by plaintiff, or its subcontractor, at the time of the accident, as set forth in said action, in which connection the policies of insurance set forth in the complaint herein provide: `This policy does not apply: * * * to * * * work completed by or for the named insured, out of which the accident arises.' (b) The provisions of the policies of insurance, as set forth in the complaint herein, with reference to the obligations of defendant to defend actions against plaintiff, expressly apply only to such actions alleging liability or damages for which plaintiff was protected under such policies of insurance."

In the basic form of the policy the insurer agrees: "To pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of liability imposed upon him by law, or the liability of others assumed by him under written contract for damages, including damages for care and loss of services, because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person or persons, and arising out of such of the coverages hereinafter defined as are indicated by specific premium in Item 3 of the declarations; Coverage A — Automobile Bodily Injury Liability. Ownership, maintenance or use of any automobile including the loading or unloading thereof. Coverage B-Bodily Injury Liability other than Automobile. Any bodily injury hazard not otherwise excluded in the policy that does not come within Coverage A."

The policy further provides that the Company shall: "(a) defend in his name and behalf any suit against the Insured alleging such bodily injury, sickness, disease, including death resulting therefrom, or such injury to or destruction of property and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the Company shall have the right to make such investigation, negotiation and settlement of any claim or suit as may be deemed expedient by the Company;".

On page 2 of the policy, under the heading of "Exclusions", it is provided, "This policy does not apply: * * * (4) to injury to or destruction of (1) property owned, transported, occupied or used by or rented to the Insured, or (2) except with respect to liability of others for damages assumed under contract as is covered by this Policy and in the use of elevators or escalators, property in the care, custody or control of the Insured, or (3) any goods or products manufactured, sold, handled or distributed or premises alienated by the Named Insured, or work completed by or for the Named Insured, out of which the accident arises."

The policy contains an Endorsement which provides, "It is agreed that this policy does not apply to Products Liability * * * mentioned in Condition 3." Condition 3 of the policy reads as follows: "Definitions. * * * `Products liability' shall mean (1) With respect to goods or products, the handling or use of, the existence of any condition in or a warranty of goods or products manufactured, sold, handled or distributed by the Insured, other than equipment rented to or located for use of others but not sold, if the accident or occurrence takes place after the Insured has relinquished possession thereof to others and away from premises owned, rented or controlled by the Insured or on premises for which the classification stated in the Policy or in the Company's manual excludes any part of the foregoing; (2) Operations, if the accident or occurrence takes place after such operations have been completed or abandoned at the place of accident or occurrence thereof and away from premises owned, rented or controlled by the Insured, except (a) pick-up and delivery, (b) the existence of tools, uninstalled equipment and abandoned or unused materials and (c) operations for which the classification stated in the Policy or in the Company's manual specifically includes completed operations; provided, operations shall not be deemed incomplete because improperly or defectively performed or because further operations may be required pursuant to a service or maintenance agreement."

Two questions are presented, (1) Whether the policy covered the accident referred to in the State Court action; (2) Whether the insurer by its contract was required to defend the plaintiff against the action brought against him in the State Court.

The Exclusion relied upon by the defendant in the first ground of its motion to dismiss (Exclusion 4 on page 2 of the policy) refers exclusively to "Property Damage" and is not applicable since the suit in the State Court was for bodily injury rather than property damage. This Exclusion means that the policy will not protect the insured if he has to repair or replace some product or work which proved defective and caused an accident. The Exclusion has no reference to liability for damage to other property or personal injury arising out of such accident.

The defendant also contends that the accident was not covered by reason of the fact that the policy does not provide for "Products Liability".

It is true that the policy contains an endorsement that "this policy does not apply to Products Liability or to a Warranty of Goods or Products in accordance with the Definitions of `Products Liability' and of `Contract' mentioned in Condition 3."

The policy does not provide under the heading "Exclusions" that the policy does not apply under coverage (B) (the general and broad comprehensive liability provision for bodily injury), to liability with respect to which insurance is or can be afforded under the "Products Liability" section of the policy. This is the usual provision in most of the policies covering operations. See, for example, Standard Accident Ins. Co. v. Roberts, 8 Cir., 132 F.2d...