Hurtig v. Terminix Wood Treating & Contracting Co.

• Decision Date: 21 December 1984
• Docket Number: No. 9521,9521
• Citation: 692 P.2d 1153,67 Haw. 480
• Court: Hawaii Supreme Court
• Parties: Bernard HURTIG and Helen Hurtig, Husband and Wife, Plaintiffs, v. TERMINIX WOOD TREATING & CONTRACTING CO., LTD., a Hawaii corporation, Terminix International, a Tennessee corporation, Rodney C. Aoki, Defendants, and TERMINIX WOOD TREATING & CONTRACTING, CO., LTD., Respondent and Third-Party Plaintiff-Appellee, v. HAWAIIAN INSURANCE & GUARANTY COMPANY LIMITED and United National Insurance Company, Limited both dba Hawaii Insurance Companies, Petitioners and Third-Party Defendants-Appellants.

Page 1153

692 P.2d 1153

67 Haw. 480

Bernard HURTIG and Helen Hurtig, Husband and Wife, Plaintiffs, v. TERMINIX WOOD TREATING & CONTRACTING CO., LTD., a Hawaii

corporation, Terminix International, a Tennessee

corporation, Rodney C. Aoki, Defendants, and TERMINIX WOOD TREATING & CONTRACTING, CO., LTD., Respondent and Third-Party Plaintiff-Appellee, v. HAWAIIAN INSURANCE & GUARANTY COMPANY LIMITED and United

National Insurance Company, Limited both dba

Hawaii Insurance Companies, Petitioners

and Third-Party Defendants-Appellants.

No. 9521.

Supreme Court of Hawai'i.

Dec. 21, 1984.

Syllabus by the Court

1. Insurance policies must be construed liberally in favor of coverage because they are contracts of adhesion.

2. A policy that excludes coverage for property damage to work performed only excludes loss confined to the insured's own work or work product.

John T. Komeiji, Honolulu (Bert T. Kobayashi, Jr., Honolulu, with him on supplemental brief; Kobayashi, Watanabe, Sugita & Kawashima, Honolulu, of counsel), for petitioners and third-party defendants-appellants.

Richard F. Dvonch, Honolulu (Law Offices of Vernon T. Tashima, Honolulu, of counsel), for respondent and third-party plaintiff-appellee.

Before LUM, C.J., and NAKAMURA, PADGETT, HAYASHI and WAKATSUKI, JJ.

HAYASHI, Justice.

Petitioners, Hawaiian Insurance & Guaranty Company, Limited and United National Insurance Company Limited (Insurers) filed for a writ of certiorari claiming error by the Intermediate Court of Appeals. We granted certiorari.

Defendant, Terminix Wood Treating & Contracting Co., Ltd. (Terminix) entered into a contract for the inspection and treatment for termites of the home owned by plaintiffs, Bernard and Helen Hurtig (Hurtigs). Some time after Terminix finished the treatment, the Hurtigs sued Terminix claiming that it failed to correctly perform the contract which had led to termite damage to the house. Terminix brought a third-party complaint against Insurers claiming that Insurers must defend and indemnify Terminix in the law suit. Terminix moved for summary judgment on the issue of Insurers coverage under the policy. The trial court granted the motion for summary judgment. The Intermediate Court of Appeals affirmed the trial court's decision.

Insurers claim that exclusion (o) of the insurance contract excludes coverage for the damage to the Hurtigs' house. Exclusion (o) provides that the insurance does not apply "to property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith...." Both the trial court and the Intermediate Court of Appeals were correct in holding that exclusion (o) does not provide for exclusion of coverage in this case.

It has long been recognized in this state that insurance policies must be construed liberally in favor of coverage because they are contracts of adhesion. Sturla, Inc. v. Fireman's Fund Insurance Co., 67 Haw. 203, ---, 684 P.2d 960, 964 (1984). Therefore, coverage exists under the policy unless the exclusions clearly provide otherwise. Exclusion (o) only excludes "property damage to work performed." Insurers claim that the work performed is a termite free home. They conclude that exclusion (o) excludes property damage to the home. We disagree.

Webster's Third New International Dictionary 1678 (unabridged ed. 1976) defines "perform" as, "to carry out an action or pattern of behavior: fulfill a threat or promise." The work that Terminix carried out was inspection of the house and application of chemicals. Terminix did not carry out a termite free house. Therefore, exclusion (o) must be held to only exclude damages to the inspection and application of chemicals. There was no damage to the inspection, application or the chemicals.

Further, we have previously interpreted exclusion (o) contrary to Insurers' interpretation. In Sturla, we said that when paragraph (a) which provides coverage for a breach of an implied warranty is " 'considered with exclusion ... [(o) in the instant case] it clearly appears that property damage claims of third persons resulting from the insured's breach of an implied warranty are covered unless the claimed loss is confined to the insured's own work or work product.' " 67 Haw. at ---, 684 P.2d at 965 (quoting Haugan v. Home Indemnity Co., 86 S.D. 406, 413, 197 N.W.2d 18, 22 (1972)). Thus, exclusion (o) only excludes loss confined to the insured's own work or work product. In Sturla, we held that there was no coverage because the loss sought was for the uneven fading of the carpet sold by Sturla, Inc. The "claimed loss [was] confined to the insured's own work or work product." Haugan, 86 S.D. at 413, 197 N.W.2d at 22.

In the present case, the claimed loss was not confined to Terminix's own work or work product. According to the contract, Terminix agreed to "inspect and treat subterranean termites...." The loss was not to the inspection or treatment. The loss exceeded the inspection and treatment and went to the home itself.

Affirmed.

NAKAMURA, Justice, dissenting, with whom WAKATSUKI, Justice, joins.

A scant six months ago, we said the "business risk" exclusions of a comprehensive general liability insurance policy "were clearly meant to negate coverage for the contractual liability of the insured 'as a source of goods or services ... to make good on products or work which is defective or otherwise unsuitable because it is lacking in some capacity.' Henderson, Insurance Protection for Products Liability and Completed Operations--What Every Lawyer Should Know, 50 Neb.L.Rev. 415, 441 (1971)." Sturla, Inc. v. Fireman's Fund Insurance Co., 67 Haw. 203, 208-09, 684 P.2d 960, 963 (1984). Thus, we ruled that Fireman's Fund was not obligated to defend a suit brought against Sturla, a carpet distributor, by a dissatisfied customer. The court now agrees with the Intermediate Court of Appeals that a policy with identical exclusions covers the liability of Terminix Wood Treating & Contracting Co., Ltd. "for damages caused by [an] inadequate performance of its [contractual] obligation to inspect and treat [Bernard and Helen Hurtig's house] against subterranean termites." Hurtig v. Terminix Wood Treating & Contracting Co., 5 Haw.App. 247, ---, 685 P.2d 799, 800 (1984). ¹ The distinction drawn by my colleagues between Sturla's failure to supply a carpet fit for its intended purpose and Terminix's non-fulfillment of a promise to eradicate ground termites escapes me, and I do not join in their opinion.

I.

Reading Exclusion (o) of a standard form comprehensive general liability insurance policy literally, the majority concludes Hawaiian Insurance & Guaranty Company, Limited and United National Insurance Company, Limited are responsible for the loss sustained by the Hurtigs when Terminix ...