J & S Enterprises, Inc. v. Continental Cas. Co.

• Decision Date: 05 July 1991
• Docket Number: No. 90CA0648,90CA0648
• Citation: 825 P.2d 1020
• Parties: J & S ENTERPRISES, INC., a Colorado corporation, d/b/a Borg's Children's Cottage, Jim Percival, individually, d/b/a Borg's Children's Cottage, and Sharon Percival, Plaintiffs-Appellants, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellee. . I
• Court: Colorado Court of Appeals

Page 1020

825 P.2d 1020

J & S ENTERPRISES, INC., a Colorado corporation, d/b/a Borg's Children's Cottage, Jim Percival individually, d/b/a Borg's Children's Cottage, and Sharon Percival Plaintiffs-Appellants, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellee.

No. 90CA0648.

Colorado Court of Appeals Div. I.

July 5, 1991.

Rehearing Denied Aug. 8, 1991.

Certiorari Denied March 10, 1992.

Raphael M. Solot, Denver, for plaintiffs-appellants.

White and Steele, P.C., John M. Lebsack, Denver, for defendant-appellee.

Opinion by Judge DUBOFSKY.

Plaintiffs, J & S Enterprises, Inc., d/b/a Borg's Children's Cottage, and Jim and Sharon Percival, appeal a summary judgment entered in favor of defendant, Continental Casualty Company (Continental). We affirm.

In June 1987, the owners of Southglenn Mall initiated a renovation of that facility by a private contractor. In the course of the renovation, ceilings were torn and asbestos particles were scattered into various parts of the mall. One of the businesses affected by the asbestos release was a retail store owned by J & S, a corporation owned by the individual plaintiffs.

On June 25, 1987, the State Health Department issued an order to the Southglenn Mall management and its renovation construction company which had the effect of closing the mall and the businesses in it. Plaintiffs claim that as a direct result of the asbestos release, they were significantly damaged because of loss of property and income.

At the time of these events, plaintiffs had in effect an insurance policy with Continental. That insurance policy provides in relevant part:

"Perils insured. We provide property and income coverage against loss from all hazards of accidental direct physical loss subject to the provisions contained in this policy."

. . . . .

"Perils not insured ...

"(10) Contamination, dampness of atmosphere, change of temperature, corrosion or rust."

Plaintiffs initiated this lawsuit to obtain compensation for property and income losses arising from the asbestos release. Continental moved for summary judgment claiming that because of the above-quoted portions of the policy covering Perils Not Insured, plaintiffs' claims were not covered.

The evidence in support of the summary judgment motion consisted of plaintiffs' answers to interrogatories and an affidavit of an industrial hygienist with expertise in asbestos testing. The affidavit indicated that the affiant had tested plaintiffs' place of business in July 1987 and determined that asbestos fibers were present and that the fibers resulted from the renovation work on the Southglenn Mall. The affidavit further stated that the asbestos contained in the acoustical ceiling material did not constitute a hazard while the acoustical ceiling materials were in place and the asbestos was undisturbed. Finally, the affidavit indicated the asbestos fibers present in plaintiffs' business would not have caused a loss or damages to plaintiffs if the asbestos had been removed pursuant to an accepted abatement procedure prior to the renovation.

Plaintiffs' affidavit strongly indicated that it was the careless or accidental conduct of the persons responsible for the renovation which caused the claimed losses.

The trial court granted Continental's motion for summary judgment and determined that the above-quoted Perils Not Insured provision excluded coverage in this matter.

I.

Plaintiffs assert that there is a conflict between the language in the insurance contract dealing with perils insured and the language under perils not insured. Because of that asserted conflict, plaintiffs argue that coverage should be found to exist by application of the principle that conflicting or ambiguous terms of an insurance policy are to be construed against the insurer. On the other hand, defendant argues that the language of the contract is clear and unambiguous and that, therefore, the trial court correctly determined there was no coverage. We agree with defendant.

Plaintiffs' affidavit indicates that the asbestos which caused the business damage resulted from the contractor's conduct in carrying out the renovation. It appears, therefore, that the initial or efficient cause of the loss that resulted from bringing the asbestos into the business came from an accidental, direct physical event which is covered under the Perils Insured provision of the policy.

This provision states, however, that the Perils Insured coverage is subject to other provisions contained in the policy. Hence, the above-quoted provisions of the section specifying Perils Not Insured operates to limit coverage.

Here, the evidence demonstrated that asbestos particles disseminated throughout the mall and throughout plaintiffs' business. The intermixing of asbestos particles in this manner constitutes contamination as that term is used in the quoted section on Perils Not Insured. See American Casualty Co. v. Myrick, 304 F.2d 179 (5th Cir.1962); Hartory v. State Automobile Mutual Insurance Co., 50 Ohio App.3d 1, 552 N.E.2d 223 (1988); Auten v. Employers National Insurance Co., 722 S.W.2d 468 (Tex.App.1986).

Plaintiffs primarily argue that there is a conflict between the policy sections titled Perils Insured and Perils Not Insured. They argue that the Perils Insured provision purports to cover all losses from hazards of accidental, direct physical loss whereas the provision on Perils Not Insured restricts insurance coverage if the damage occurs because of factors described in that section. The Perils Not Insured section does not, however, state that its limitations are applicable if the initiating cause of the loss is an accidental, direct physical event rather than contamination.

Plaintiffs urge us to hold that if, as here, the initial damage arises from an accidental cause which is different from the causes listed in the exclusionary contamination clause then there is coverage under the Perils Insured provision of the policy. We decline to do so.

In Kane v. Royal Insurance Co., 768 P.2d 678 (Colo.1989), our supreme court analyzed a policy with very similar language to this one. In Kane, the insurance company covered "all risks of direct physical loss" subject to limitation provisions contained elsewhere in the policy. The limitation provisions excluded coverage for "loss" which was caused by, resulting from, contributed to or aggravated by a "flood." In Kane, the court stated:

"[T]he 'efficient moving cause' rule set forth in [Koncilja v. Trinity Universal Insurance Co., 35 Colo.App. 27, 528 P.2d 939 (1974) ] does not control our decision in this case. We believe that the 'efficient...