Karadis Bros. Painting Co. v. Pennsylvania Nat. Mut. Cas. Ins. Co.

• Decision Date: 20 June 1972
• Citation: 292 A.2d 42,119 N.J.Super. 446
• Parties: KARADIS BROS. PAINTING CO., Inc., Plaintiff, v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, an insurance corporation of the State of Pennsylvania, et al., Defendants.
• Court: New Jersey Superior Court

Page 446

119 N.J.Super. 446

292 A.2d 42

KARADIS BROS. PAINTING CO., Inc., Plaintiff, v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, an insurance corporation of the State of Pennsylvania, et al., Defendants.

Superior Court of New Jersey Chancery Division.

June 20, 1972.

John Montis, Trenton, for plaintiff.

Richard I. Wood, Trenton, for defendant Pennsylvania National Mutual Casualty Insurance Company (Lewis, Siegel & Wood, Trenton, attorneys).

David A. Parker, Mount Holly, for defendants Skyclimber, Inc., and Western Gear Corporation (Parker, McCay & Criscuolo, Mount Holly, attorneys).

Frank P. Addas, Jersey City, for defendant Moulton Ladder Co. (James & Addas, Jersey City, attorneys).

Michael N. Kouvatas, Haddonfield, for defendant Anne J. Smythe, administratrix ad prosequendum of the estate of John Patrick Smythe, deceased.

SEIDMAN, J.C.C. (temporarily assigned).

Plaintiff, Karadis Bros. Painting Co., Inc. (Karadis), brings this declaratory judgment action to determine whether a policy of liability insurance issued to it by defendant Pennsylvania National Mutual Insurance Company (insurer) obligates the insurer to defend a third-party complaint in a lawsuit how pending in the Law Division, and to pay, within the limits of coverage, any judgment that may be rendered therein against the insured.

Other defendants, whose involvement will appear hereinafter, are Skyclimber, Inc.; Western Gear Corporation; Moulton Ladder Co.; and Anne J. Smythe, administratrix Ad prosequendum of the estate of John Patrick Smythe, deceased.

Counsel have agreed to submit the issues to the Court for determination on the basis of the pleadings and memoranda of law.

These proceedings are the outgrowth of a death action instituted in the Law Division, Burlington County. The complaint in that suit relates, in substance, that, on October 17, 1969, John Patrick Smythe, an employee of Karadis, a contractor engaged to paint a water tower in Willingboro, was working on a scaffold attached to a mechanized hoist; and that, allegedly because of negligence in the design and manufacture of the hoist and in its maintenance, the scaffold collapsed, causing Smythe to fall to his death. It is asserted that Karadis was utilizing at the time a motor hoist device leased from Moulton Ladder Co. and manufactured and distributed by Skyclimber, Inc., a subsidiary of Western Gear Corporation. The complaint charges Skyclimber, Inc., Western Gear Corporation, and Moulton Ladder Co. with negligence and breach of warranty. In addition, it is alleged that Moulton Ladder Co. failed to inspect, maintain and repair the hoisting device. Karadis was not joined as a defendant, presumably because the decedent was its employee.

In their answer, Skyclimber, Inc., and Western Gear Corporation crossclaimed against Moulton Ladder Co. for contribution under the Joint Tortfeasors Act and for indemnification both on the theory of 'vicarious liability' and under a written 'hold harmless' agreement.

Moulton Ladder Co. filed a third party complaint seeking indemnification from Karadis for any adverse judgment that might be recovered in the lawsuit. The first two counts are based upon 'hold harmless' provisions of the rental agreement between it and Karadis. The third count claims a breach by Karadis of its alleged contractual obligation to supply insurance coverage for the lessor.

The existence of a general liability policy is not disputed; however, the insurer denies coverage and refuses to defend the third party complaint on the ground that the obligations if any, of its insured to indemnify Moulton Ladder Co. are contractual ones excluded from the policy.

On September 30, 1969, Moulton Ladder Co. and Karadis executed a 'Rental Contract and Receipt Form ' whereby Skyclimber hoisting equipment was leased to Karadis to be used at a location described as 'Willingboro Water Tank.' The equipment consists of motorized hoisting devices attached to each side of a scaffold and operating on suspended wire ropes fastened to the top of the structure.

Among the terms and conditions contained in the rental agreement are two paragraphs which provide, in pertinent part, as follows:

3. The lessee agrees to maintain said machinery and equipment in the condition as when delivered to it by lessor, usual wear and tear excepted, and to pay all claims and damages arising from defects therein or from the use or handling of said machinery and equipment, whether from injuries to persons or property and to pay for all damages to the equipment except the usual and ordinary wear and tear during the life of this contract . . .

5. . . . the lessee agrees to hold the owner, manufacturer and dealer as lessor harmless from any claim of whatsoever kind or nature as a result of the use of the above enumerated equipment . . . In no event shall the lessor be liable for contingent or consequential damages nor shall the lessor be liable for any damages arising out of or by reason of faulty, improper or negligent use of the equipment. This hold harmless agreement shall encompass any claims arising from either or both personal injury and property damages caused as a result of the use or storage of this equipment both by the employer of the lessee or any third parties and the lessee also agrees to hold the lessor harmless from any and all claims arising out of or in connection with the active or passive use or storage of the lessor's equipment while in the possession or control of the lessee or its agents, servants or employees . . .

Another provision in the agreement requires the lessee to protect the lessor with full insurance 'to cover damage occasioned by fire, theft, flood, explosion, accident, act of God, or any other cause that might occur during the life of this lease.'

It is evident that a resolution of the problem in this case turns on whether the claims asserted against Karadis in the third-party complaint, clearly contractual in origin, are encompassed within the insuring agreements of the liability policy involved herein. The policy provisions are quite complex and must be examined carefully in order to focus attention on what is actually a rather narrow issue. The applicable portions are summarized as follows:

1. The insuring agreement: It is to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury caused by an occurrence.

2. Exclusion: The policy does not apply to liability assumed by the insured under any contract or agreement Except an incidental contract.

3. Incidental contract: Such contract means, among others, an Elevator maintenance agreement.

4. Elevator: This is defined as 'any hoisting or lowering device to connect floors or landings, whether or not in service, and all appliances thereof including any car, platform, shaft, hoistway, stairway, runway, power equipment and machinery; but does not include an automobile servicing hoist, or a hoist without a platform outside a building if without mechanical power or if not attached to building walls, or a hod or material hoist used in alteration, construction or demolition operations, or an inclined conveyor used exclusively for carrying property or a dumbwaiter used exclusively for carrying property and having a compartment height not exceeding four feet.'

It is not unusual for liability insurance policies to exclude from coverage liability assumed by an insured under a contract not defined in the policy, generally one in which the insured agrees to indemnity to save harmless a third party. See Annotation, Scope and effect of clause in liability policy excluding from coverage liability assumed by insured under contract not defined in policy, such as one of indemnity', 63 A.L.R.2d 1122, § 1. However, the exclusion clause does not preclude coverage, even though some sort of liability is assumed by contract, where the insured would have been liable regardless of his contractual undertaking. United States Fidelity & Guaranty Co. v. Virginia Engineering Co., 213 F.2d 109, 63 A.L.R.2d 1114 (4 Cir. 1954); Lumbermen's Mutual Cas. Co. v. Town of Pound Ridge, 362 F.2d 430 (2 Cir. 1966); Larson Construction Co. v. Oregon Automobile Ins. Co., 450 F.2d 1193 (9 Cir. 1971); Abajian v. Aetna Casualty & Surety Co., 232 F.Supp. 710 (D.Vt.1964); Home Insurance Co. v. Southport Terminals, Inc., 240 So.2d 525 (Fla.Ct.App.1970); Aetna Casualty & Surety Co. v. Starrett, 102 Ga.App. 278, 115 S.E.2d 641 (Ct. of App.1960); Board of Trade Livery Co. v. Georgia Cas. Co., 160 Minn. 490, 200 N.W. 633 (Sup.Ct.1924); O'Dowd v. American Surety Co. of N.Y., 3 N.Y.2d 347, 165 N.Y.S.2d 458, 144 N.E.2d 359 (Ct. of App.1957); Modern Scaffold Co. v. Karell Realty Corp., 28 A.D.2d 581, 279 N.Y.S.2d 436 (App.Div.1967); A. T. Morris & Co. v. Lumber Mut. Casualty Ins. Co., 163 Misc. 715, 298 N.Y.S. 227 (Mun.Ct.1937); Labberton v. General Cas. Co. of Am., 53 Wash.2d 180, 332 P.2d 250 (Sup.Ct.1958).

See also Ohio Cas. Ins. Co. v. Flanagin, 44 N.J. 504, 520--522, 210 A.2d 221 (1965); Hackensack Water Co. v. General Accident, etc., Ltd., 84 N.J.Super. 479, 484, 202 A.2d 706 (App.Div.1964).

Liability assumed by a contract not defined in the policy is excluded from coverage under such exclusion clause where the contractual obligation was one which would not have been independently imposed upon...