Insurance Co. of North America v. Sam Harris Constr. Co.

• Decision Date: 29 September 1978
• Docket Number: S.F. 23731
• Court: California Supreme Court
• Parties: , 583 P.2d 1335 INSURANCE COMPANY OF NORTH AMERICA, Plaintiff and Respondent, v. SAM HARRIS CONSTRUCTION COMPANY, INC., et al., Defendants and Appellants.

Page 292

149 Cal.Rptr. 292

22 Cal.3d 409, 583 P.2d 1335

INSURANCE COMPANY OF NORTH AMERICA, Plaintiff and Respondent, v. SAM HARRIS CONSTRUCTION COMPANY, INC., et al., Defendants and Appellants.

S.F. 23731.

Supreme Court of California.

Sept. 29, 1978.

Robert Lloyd, Stockton, for defendants and appellants.

Philip R. McCowan, Popelka, Allard, McCowan & Jones, San Jose, and Kirtland & Packard, Los Angeles, for plaintiff and respondent.

NEWMAN, Justice.

We are concerned here with a liability and indemnity insurance policy that covered defendants' airplane. Coverage G of the policy protected against liability for injury or destruction of property "arising out of the . . . maintenance . . . of the aircraft." The policy applied, however, only to "occurrences or accidents which happen during the policy period"; and the period stated was from September 3, 1971 to July 1, 1972. ¹

On April 19, 1972, after they had sold the plane, defendants cancelled their coverage and received a $626 premium refund for the balance of the policy period (April 19 to July 1). On April 21, in the possession of its new owner, the plane crashed and was destroyed.

The new owner sued, alleging that defendants "negligently . . . maintained, repaired, serviced, owned, sold and operated the aircraft . . .." Defendants requested that the insurer defend, whereupon the insurer filed this action for declaratory relief. The trial court ruled that there were no obligations under the policy because defendants were not insured at the time of the crash. The court relied on the rule that "the time of the occurrence of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed, but the time when the complaining party was actually damaged." (Remmer v. Glens Falls Indem. Co. (1956) 140 Cal.App.2d 84, 88, 295 P.2d 19, 21; Tijsseling v. General Acc. & Life Assur. Corp. (1976) 55 Cal.App.3d 623, 626, 127 Cal.Rptr. 681.)

1] In our view that rule is not applicable to this case. The issue here turns on the meaning of "occurrences or accidents . . . during the policy period." Those words differ from the words construed in Remmer and Tijsseling. Further, in those cases the policies themselves defined "occurrence" to mean an accident causing injury during the policy period. The policy here, however, defines neither "occurrences" nor "accidents." The meaning of the two words must, therefore, be ascertained by reference to the insured's reasonable expectation of coverage. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 267, 54 Cal.Rptr. 104, 419 P.2d 168.) Did that expectation include coverage for negligence maintenance during the policy period that caused an injury after the policy period had expired?

Defendants contend they purchased the policy with an expectation that the insurer would defend against suits based on "occurrences" as well as "accidents"; that negligent maintenance may reasonably be considered to be an occurrence; and that, because the policy covered "occurrences or accidents . . . during the policy period" the timing of the accident is not determinative.

The words "occurrences" and "accidents" are linked here by the conjunction "or", a term that usually introduces the second of two alternatives. Sometimes the two words are used synonymously. Here, however, they do not appear redundant. They rather suggest that accidents are distinguishable from occurrences.

"Occurrence" has been described as "the general word for anything that happens or takes place", as "something that occurs; event; incident". (Webster's New World Dict. (2d college ed. 1974) p. 984.) It could refer to damage-causing, nonaccidental events such as the theft, robbery, and pilferage that appear to be covered under the "All Risks Physical Damage Coverage" provisions of this policy. It could also refer, though, to acts implicitly included in Coverage G; e. g., negligent repairs that do not cause immediate injury but do result in a later accident.

"2] It is elementary in insurance law that any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer. . . . (I)f the doubt relates to extent or fact of coverage, whether as to peril insured against (citations), the amount of liability (citations) or the person or persons protected (citations), the language will be understood in its most inclusive sense, for the benefit of the insured." (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 437-438, 296 P.2d 801, 809-810.) We therefore rule that negligent maintenance of the plane within the policy period was an occurrence covered by the policy even though the accident caused thereby did not happen until after the policy period had expired.

Since the buyer's complaint against defendants alleged such an occurrence, the insurer had a duty to defend the action. (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at pp. 276-277, 54 Cal.Rptr. 104, 419 P.2d 168.)

The judgment is reversed and the cause remanded to the trial court with directions to enter judgment for defendants declaring the insurer's duty in accord with the views expressed herein.

BIRD, C. J., and TOBRINER and MOSK, JJ., concur.

RICHARDSON, Justice, dissenting.

I respectfully dissent. The aircraft liability policy involved in this case expressly applied only to those "occurrences or accidents" which happen during the policy period. The damages for which indemnity is sought herein concededly were incurred in a plane crash occurring after the policy had terminated. The accident allegedly resulted, however, from the insured's negligence in maintaining and repairing the aircraft During the policy period. Did the insured's alleged negligence constitute an "occurrence" within the meaning of the policy, so that coverage would extend to damages incurred after the policy had terminated? I do not believe so and conclude that, under the circumstances in this case, the insured could not reasonably have expected such coverage. Accordingly, I would affirm the trial court's judgment in the insurer's favor.

I amplify briefly on the majority's recitation of the facts and respective contentions.

Defendant (the insured) owned and operated the subject airplane in the course of its general contracting business. The policy in question was an aircraft owners liability policy covering the period from September 3, 1971, to July 1, 1972. On April 19, 1972, the insured informed plaintiff carrier that the subject airplane should be deleted from the policy. (Apparently, by this time defendant had sold the aircraft to a third party.) Plaintiff, responding to defendant's request, prepared and sent to defendant an endorsement cancelling coverage and simultaneously returned to defendant the unearned premium of $626 for the period from April 19, 1972, to July 1, 1972. On April 21, 1972, while being operated by the new owner, the plane crashed on takeoff and was destroyed.

The new owner filed suit against defendant insured, asserting theories of misrepresentation, design defects, and negligence in maintaining, servicing and repairing the aircraft. The insured tendered defense of the suit to plaintiff, who thereupon filed the present declaratory relief action against defendant to determine whether it was legally obligated to provide a defense and indemnify defendant for any damages awarded in the foregoing action. The trial court, following an extensive review of the applicable authorities, ruled in plaintiff's favor.

The subject policy covered both physical damage to the plane, whether or not in flight, as well as bodily injury and property damage liability "arising out of the ownership, maintenance or use of the aircraft as described in this policy." Under Condition 1, it was provided that "This policy applies only to Occurrences or accidents which happen during the policy period and within the United States of America, its territories or possessions, Canada or Mexico or while enroute between points within these geographical limits." (Italics added.)

Plaintiff carrier, relying upon the foregoing language, contends that since the accident of April 21, 1972, occurred after the insured had deleted the plane from the policy, no liability coverage then existed. Defendant insured, on the other hand, argues that its own alleged negligence in maintaining the aircraft may properly be considered an "occurrence" which happened during the policy period. The trial court ruled for plaintiff and held that the term "occurrences or accidents" necessarily referred to those unexpected, fortuitous events (i. e., crashes, collisions, fires, etc.) which, during the policy period, produce the damage for which recovery is sought.

I agree with the reasoning of the trial court which in its memorandum opinion stated: "Defendant contends . . . that the loss was caused by an occurrence or accident arising out of the ownership, maintenance, or use of the aircraft with no limitation as to policy period or any other period of time. (P) Under this theory, defendant would, in effect, be covered in perpetuity. The parties to the insurance contract certainly had no such intention. The argument simply overlooks the language of the policy which relates to indemnification for any loss . . . arising out of the ownership, maintenance, or use of the aircraft as described in the policy . . ., and when coverage was terminated on April 19, 1972, the aircraft was not described in this policy when the accident occurred on April 21, 1972."

The trial court observed that it is a general rule in this and other states that "the time of the occurrence of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed, But the time when the complaining party was actually damaged." (Italics added, Tijsseling v. General Acc. etc. Assur. Corp. (1976) 55 Cal.App.3d 623, 626, 127 Cal.Rptr. 681; Remmer v. Glens Falls Indem. Co. (1956) 140 Cal.App.2d 84, 88, 295 P.2d 19; se...