Home Ins. Co. v. Pinski Bros., Inc.
| Decision Date | 04 January 1971 |
| Docket Number | No. 11869,11869 |
| Court | Montana Supreme Court |
| Parties | The HOME INSURANCE COMPANY, a Corporation, Plaintiff and Respondent, v. PINSKI BROS., INC., a Corporation, et al., and Kenneth K. Knight and A. Andrew Van Teylingen, co-partners, doing business as Knight & Van Teylingen, Defendants and Appellants. Kenneth K. KNIGHT, Counterclaimant and Appellant, v. The HOME INDEMNITY COMPANY, a Corporation, Involuntary Plaintiff and Defendant to Counterclaim and Respondent. |
Jardine, Stephenson, Blewett, Weaver and Jack L. Lewis, Jack L. Lewis argued, Scott & Linnell, Wayne E. Linnell argued, Great Falls, for appellants.
Hughes & Bennett, Loble, Picotte & Loble, Alan F. Cain argued, Helena, Alexander, Kuenning & Hall, John C. Hall argued, Smith, Emmons & Baillie, Church, Harris, Johnson & Williams, Great Falls, for respondents.
Action by subrogated insurer of property damage loss against the architects and mechanical contractor whose negligence allegedly caused such loss. One of the architects counterclaimed against his liability insurer seeking to establish insurance coverage with a duty to pay and defend. From a summary judgment for insurer that the architects' liability policy did not provide coverage and dismissal of the architect's defense and counterclaim based thereon, the architects appeal.
A single issue is determinative of this appeal: Does the comprehensive liability policy of the architects insure them for the liability claimed in the subrogated insurer's complaint against them? We hold that it does as to Count I in the complaint in the present posture of the case; and that it does not as to Counts II and III of the complaint.
Plaintiff in the original action is The Home Insurance Company who allegedly paid off a property damage loss of approximately $135,000 resulting from a boiler explosion at the old Montana Deaconess Hospital in Great Falls and claims subrogation to the rights of the hospital against those responsible. Defendants remaining after various dismissals by the district court are (1) Pinski Bros., Inc., the mechanical contractor on the hospital remodeling project wherein the boiler explosion allegedly occurred, and (2) the architects on the project, Kenneth K. Knight and A. Andrew Van Teylingen, co-partners, doing business as Knight and Van Teylingen.
The complaint of Home Insurance, the subrogated insurer, alleges negligence on the part of the architects resulting in the boiler explosion and the resulting property damage loss in three counts: I. negligent design, supervision, and inspection of the hot water heating system by the architects; II. breach of contract and warranty in that the architects contracted to sell to the hospital a hot water heating system not then in existence which, when delivered and put to use by the hospital, was not sound or merchantable; and III. breach of contract and warranty by the architects in contracting to manufacture the hot water heating system which, when delivered to the hospital, was not fit for the purpose intended.
Following filing and service of the complaint the architects tendered defense of the action to The Home Indemnity Company with whom the architects carried policy # PGA6-71-56, herein identified as the comprehensive liability policy. Thereafter Home Indemnity refused this tender. The architects then filed their answer containing, among other things, a separate "Twelfth Defense, Counterclaim and Setoff" by one of the architects, Kenneth K. Knight. Therein Knight alleged that insurance coverage was afforded under the architects' comprehensive liability policy, that such coverage constituted a defense, and that Home Indemnity was liable for the costs and expenses, including attorneys' fees, incurred in defending the action and prosecuting the Counterclaim and Setoff.
Home Insurance and Home Indemnity separately replied to the architects' Answer and answered the Counterclaim and Setoff. Neither alleged or separately pleaded as affirmative defenses any conditions, exceptions, or exclusions of coverage under the comprehensive liability policy. It is agreed that Home Insurance and Home Indemnity are one and the same corporate entity, the latter being a wholly owned subsidiary of the former. Neither affirmatively alleged or specifically pleaded that Home Indemnity was not authorized to write an architect's malpractice policy in Montana nor anything relating to its filing of rates and forms with the State Insurance Commissioner.
The architects demanded a jury trial in their pleadings. The issues relating to the architects' insurance coverage were severed from the other issues for separate trial without a jury. The architects filed motions to dismiss and for summary judgment on the issue of liability against Home Insurance on all counts of negligence and on the "Twelfth Defense, Counterclaim, and Setoff". Home Indemnity filed a motion for summary judgment on the architect's counterclaim for costs, attorneys' fees and damages. The district court denied the architects' motion to dismiss the separate counts in the complaint of Home Insurance and the architect's motion for summary judgment on the issue of liability contained in the complaint and "Twelfth Defense, Counterclaim, and Setoff". At the same time the district court ordered a non-jury trial "for the sole and exclusive purpose of determining the question of whether the Home Indemnity Company was authorized by the State Insurance Commissioner to write Professional Errors and Omissions Insurance" during the time in question.
Pursuant to the district court's order, this non-jury trial was held on March 4, 1970. At the conclusion thereof, the district court took the motion for summary judgment by Home Indemnity under advisement.
On March 25, 1970, the court entered its findings of fact, conclusions of law, and order for summary judgment. The findings of fact were that Home Insurance and Home Indemnity were one and the same corporate entity; that neither was authorized to write nor did write architect's malpractice policies; that Home Indemnity issued a comprehensive liability policy to the architects covering the period of time in question; that prior to and during the time in question architect Knight carried an architect's malpractice policy with another company for which he paid premiums substantially in excess of those paid for the comprehensive liability policy; that both policies were sold to architect Knight by the same insurance agency; and that the architects did not purchase or pay any premium for products hazard insurance.
From these findings of fact the district court entered the following conclusions of law: the comprehensive liability policy was not ambiguous and the court could construe its coverage as a matter of law; that the comprehensive liability policy was not an architect's malpractice policy; that there was no meeting of minds that architect Knight was buying or Home Indemnity was issuing an architect's malpractice policy; that neither Home Insurance nor Home Indemnity had authority to write or charge for architect's malpractice insurance and it would be against public policy to permit any policy issued by them or premiums collected to be treated as or for architect's malpractice coverage; that the alleged negligence of the architects contained in the Home Insurance complaint against them fall within products hazard coverage which the architects did not purchase or pay a premium for; that the architects have no claim against Home Indemnity under the comprehensive liability policy and it provides no defense to the claims of Home Indemnity against the architects; that there is no genuine issue of material fact and Home Indemnity is entitled to summary judgment as a matter of law.
The order of the district court, in effect, granted summary judgment to Home Indemnity against the architect on all issues of insurance coverage and liability thereunder, dismissed the "Twelfth Defense, Counterclaim, and Setoff", and ordered the subrogation action of Home Insurance against the architects to continue. The architects appeal from this order of the district court of Cascade County.
It is apparent that absent insurance coverage in the comprehensive liability policy for the negligence alleged in the Home Insurance complaint, the architects have neither a coverage defense to such complaint nor a coverage counterclaim against Home Insurance. Thus the underlying issue on appeal is the coverage afforded the architects under such comprehensive liability policy with respect to the negligence alleged in the Home Insurance complaint.
The architects contend that they are insured for the negligence alleged under "Coverage D" or "Coverage L" in the comprehensive liability policy. Other conditions, exclusions, and endorsements in the policy are involved in their argument but their basic claim of coverage is bottomed on these two coverage provisions.
It is noted at the outset that the comprehensive liability policy here involved does not contain an overall insuring agreement covering the entire policy, but contains separate insuring agreements for the separate coverages.
The basic insuring agreement for "Coverage D" in the policy provides:
"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."
Endorsement # 6 excludes from this coverage "the products hazard" as defined therein. Thus, although it is undisputed that the architects here did not purchase nor possess "products hazard" nor "products liability" coverage, the definition of "products hazard" becomes important in determining the exclusions from "Coverage D" which coverage the architects did purchase and carry.
As defined in the policy,...
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