Johnson v. National Union Fire Ins. Co. of Pittsburgh, Pa.

• Decision Date: 10 April 1968
• Citation: 56 Misc.2d 983,289 N.Y.S.2d 852
• Parties: Mary L. JOHNSON and Edward Johnson, Plaintiffs, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant.
• Court: New York Supreme Court

Page 852

289 N.Y.S.2d 852

56 Misc.2d 983

Mary L. JOHNSON and Edward Johnson, Plaintiffs, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant.

Supreme Court, Trial Term, Nassau County, Part III.

April 10, 1968.

[56 Misc.2d 984] Hyman J. Greenberg, Jamaica, for plaintiffs, Frank E. Nowve, Flushing, of counsel.

Warburton & Connolly, Mineola, for defendant, Gerard A. Connolly, Mineola, of counsel.

MEMORANDUM

BERNARD S. MEYER, Justice.

Plaintiffs bring this action pursuant to Section 167(7) of the Insurance Law. They hold a judgment against Randy Homes, Inc. resulting from personal injury to plaintiff Mary Johnson incurred when the cellar stairs in a home erected by Randy Homes, Inc. pulled away from the wall. At the time of Mrs. Johnson's accident the home was owned by one Sidney Thaler, for whom Mrs. Johnson worked. Defendant issued to Randy Homes, Inc. a comprehensive general liability policy which a jury has found included an endorsement entitled 'Exclusion of Products Hazard' reading 'It is agreed that the policy does not apply to the products hazard as defined therein.' Contending that its policy did not cover the Johnson claim because of the 'completed operations' portion of the products hazard definition set forth in the policy, defendant, though notified of the Johnson action, refused to defend it. Randy Homes, Inc. obtained its own counsel and answered, but defaulted in appearance at the trial. Defendant concedes that its policy was in force on December 3, 1960, the day of Mrs. Johnson's accident, that it received notice of the Johnsons' action, and that its sole basis for disclaiming was lack of coverage. The answer admits, and the court finds, that on May 8, 1965 a copy of the judgment obtained by the Johnsons against Randy Homes, Inc. was served upon defendant as required by Insurance Law § 167(1)(b). Though the judgment held by plaintiffs was obtained after default by the insured, the insurance company-defendant cannot go behind the judgment and raise defenses going to the merits, Manard v. Hardware Mut. Cas. Co., 12 A.D.2d 29, 207 N.Y.S.2d 807. Plaintiffs, who stand in the shoes of Randy Homes in enforcing the policy, ibid., are, therefore, entitled to recover unless defendant's construction of the policy is correct. Both parties agree that interpretation of the policy is for the court.

The policy states in Item 2 that the 'Business of the named insured is Building Contractor.' Item 3 includes the statement that 'The insurance afforded is only with respect to such and so many of the following coverages as are indicated by specific premium charges. The limit of the company's liability against each such coverage shall be as stated herein, subject to all the terms of this policy having reference thereto', and under Coverage A--' Bodily Injury Liability' in the box for 'Limits of Liability' shows the typewritten figure '100,000= next to the printed words 'each person', the typewritten figure '300,000' next to the printed words 'each accident', and a blank in the space next to the printed words 'aggregate produces'. Under Item 4 of 'Declarations' in Schedule #1 appear boxes with printed subheads. Division (a) is entitled 'Premises--Operations'; division (c), 'Independent Contractors'; division (d) 'Products--Including Completed Operations'. Division (d) is left bank; in division (c) has been typed 'Construction operation--contractor (not railroads) excluding operations on board ships' and appropriate rating and premium data; in division (a) has been typed 'Contractors--Construction or erection executive supervisors exercising supervision through superintendents or foremen, no direct supervision' followed by appropriate rating and premium data; and on a separate line 'Model Homes', followed by separate rating and premium data, and on a further separate line 'Real Estate Agents--including completed operation--clerical and salesmen' followed by its own rating and premium data.

The 'Insuring Agreements' define 'Coverage A--Bodily Injury Liability' as follows: 'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person and caused by accident.' Mrs. Johnson's accident having occurred within the policy period and the judgment for her bodily injury being within the liability limits, defendant insurer is obligated to pay the judgment under the policy provisions so far recited. Defendant argues, however, that it is relieved of that liability by the fact that the 'Aggregate Products' space in Item 3 and the division (d) space it Item 4 have been left blank, by the endorsement reading 'It is agreed that the policy does not apply to the products hazard as defined therein', and by the definition of products hazard set forth in Paragraph 3(c) of the 'Conditions' of the policy. That definition reads as follows:

'(c) PRODUCTS HAZARD. The term 'products hazard' means

'(1) goods or products manufactured, sold, handled or distributed by the named insured or by others trading under his name, if the accident occurs after possession of such goods or products has been relinquished to others by the named insured or by others trading under his name and if such accident occurs away from premises owned, rented or controlled by the named insured or on premises for which the classification stated in division (a) of the declarations excludes any part of the foregoing; provided, such goods or products shall be deemed to include any container thereof, other than a vehicle, but shall not include any vending machine or any property, other than such container, rented to or located for use of others but not sold;

'(2) operations, if the accident occurs after such operations have been completed or abandoned and occurs away from premises owned, rented or controlled by the named insured; provided, operations shall not be deemed incomplete because improperly or defectively performed or because further operations may be required pursuant to an agreement; provided further, the following shall not be deemed to be 'operations' within the meaning of this paragraph: (a) pick-up or delivery, except from or onto a railroad car, (b) the maintenance of vehicles owned or used by or in behalf of the insured, (c) the existence of tools, uninstalled equipment and abandoned or unused materials and (d) operations for which the classification stated in division (a) of the declarations specifically includes completed operations.'

Operations by Randy Homes, Inc. at the premises where Mrs. Johnson's injury occurred had been completed and the house transferred to Mr. Thaler prior to Mrs. Johnson's accident. If only the first two clauses of subdivision 2 of the 'products hazard' definition are considered, the accident is excluded from coverage by the plain and unambiguous wording of the policy, Berger Bros. Elec. Motors v. New Amsterdam Cas. Co., 293 N.Y. 523, 58 N.E.2d 717, 156 A.L.R. 1281. However, the policy must be considered as a whole and, under familiar principles, for the insurer to benefit from the exclusion the burden is upon it to show (1) that it would be unreasonable for the average businessman reading the policy to conclude that the accident was covered and (2) that its own construction was the only one that could fairly be placed on the policy, Sincoff v. Liberty Mut. Fire Ins. Co., 11 N.Y.2d 386, 230 N.Y.S.2d 13, 183 N.E.2d 899; Vito v. General Mut. Ins. Co., 15 A.D.2d 289, 223 N.Y.S.2d 431, app. denied 11 N.Y.2d 645, 228 N.Y.S.2d 102, 182 N.E.2d 62. Plaintiffs argue that ambiguity, which must be resolved in favor of coverage, exists because (1) the two clauses appear not as a 'completed operations' exclusion but as part of the definition of 'products hazard', and (2) the third clause of the definition creates an exception to the exclusion. The court agrees that there is coverage.

Significant in the construction of the policy are the facts that it is denominated a comprehensive general liability policy, Sincoff v. Liberty Mut. Fire Ins. Co., 11 N.Y.2d 386, 391, 230 N.Y.S.2d 13, 16, 183 N.E.2d 899, 902; National Screen Serv. Corp. v. United States Fidelity & G. Co., 2 Cir., 364 F.2d 275, 279--280, cert. den. 385 U.S. 958, 87 S.Ct. 394, 17 L.Ed.2d 304 and that, as already stated, the 'products hazard' definition aside, the terms of the policy encompass an accident such as Mrs. Johnson's. The question then is whether the average businessman would understand from the policy as a whole that coverage of an accident such as Mrs. Johnson's had been excluded by the subsequent provisions and endorsements.

By the weight of authority, the endorsement excluding 'products hazard' and the definition of that phrase quoted above are not sufficiently clear to exclude from coverage the completed operation of a contractor who sells no product. As to injuries caused by the contractor's work occurring during the policy period there is coverage notwithstanding that the injury occurs after the contractor has completed his operations, becauses it is reasonable for such a contractor to conclude that both subdivisions of the products hazard definition relate only to products:--Insurance Co. of N.A.V. Electronic Purification Co., Cal., 63 Cal.Rptr. 382, 433 P.2d 174 (swimming pool cleaner); Miller Elec. Co. of Fla. v. Employers Liability Assur. Corp., 171 So.2d 40 (Fla.App.) (electrical contractor); New Amsterdam Casualty Company v. Addison, 169 So.2d 877 (Fla.App.) (electrical contractor); Maretti v. Midland National Insurance Co., 42 Ill.App.2d 17, 190 N.E.2d 597 (fireworks exhibitor); Kendrick v. Mason, 234 La. 271, 99 So.2d 108 (sewer line installer); Morris v. Western Casualty & Surety Co., 421 S.W.2d 19 (Mo.App.) (plumbing, heating and electrical contractor); Rafiner Elevator Works v. Michigan Mut. Liab. Co., 392 S.W.2d 240 (Mo.) (elevator service contractor); Kissel v. Aetna Casualty & Surety Co., 380 S.W.2d 497 (Mo.App.) ...