Landress Auto Wrecking Co., Inc. v. U.S. Fidelity & Guar. Co.

• Decision Date: 31 January 1983
• Docket Number: No. 81-7824,81-7824
• Citation: 696 F.2d 1290
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: LANDRESS AUTO WRECKING COMPANY, INC., Plaintiff-Appellee, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant-Appellant.

Page 1290

696 F.2d 1290

LANDRESS AUTO WRECKING COMPANY, INC., Plaintiff-Appellee, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant-Appellant.

No. 81-7824.

United States Court of Appeals Eleventh Circuit.

Jan. 31, 1983.

James P. Green, Mobile, Ala., for defendant-appellant.

Edward T. Hines, Brewton, Ala., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Alabama.

Before RONEY and CLARK, Circuit Judges, and TUTTLE, Senior Circuit judge.

TUTTLE, Senior Circuit Judge:

The insurer, United States Fidelity and Guaranty Company ("USF&G"), appeals from the finding of a federal magistrate that USF&G is compelled under the terms of an insurance contract to represent the insured, Landress Auto Wrecking Company, Inc. ("Landress"), in a tort action for negligence filed against Landress by a third party. We find that the events giving rise to the insured's alleged liability fall within the unambiguous language of an exception to the policy's coverage; therefore, we reverse the finding of the magistrate and order that judgment be entered for the insurer.

I. THE FACTS

Elliot Sharon began doing business as Landress Auto Wrecking Company in Bonifay, Florida in 1968. Landress is engaged in the purchase and dismantlement of wrecked automobiles and the sale of used auto parts. USF&G issued comprehensive liability insurance policies to Landress in May, 1969, and May, 1978. Both policies were executed in the State of Florida.

In 1969, Raymond Lowery of the Golden Motor Company in Brewton, Alabama, observed a Landress employee using a "tow dolly" to attach a disabled car to the rear of another vehicle. ¹ Lowery asked Sharon where he had acquired the dolly, and Sharon agreed to obtain a similar dolly for Lowery. Sharon subsequently contacted King's Welding, the manufacturer of the original dolly, and asked the proprietor to produce a second dolly. Landress acquired the dolly for $200 and sold it to Golden Motors for $250. ²

Golden Motor Company in turn rented the dolly to a Mr. Rodney Hawkins. On June 3, 1978, nine years after the delivery by Landress, Hawkins was towing an automobile with the dolly when the automobile disengaged from the towing vehicle and collided with another automobile. Two passengers in the other car, Matthew Livingston, an infant, and his mother, Linda Livingston, were injured.

The Livingstons filed a civil suit in Alabama state court against numerous defendants, including Landress. The complaint alleged that Landress had delivered the dolly to Golden Motor in defective condition and that this and other negligent acts of Landress were a proximate cause of the injuries suffered by the Livingstons.

USF&G declined to enter the Livingston action on behalf of Landress, and Landress filed this action seeking a declaratory judgment that USF&G has a contractual duty under the insurance policy to defend Landress and pay any judgment entered against it. The parties filed a consent to proceed before a U.S. magistrate. On August 24, 1981, the magistrate, finding that Landress' delivery of the dolly was not within an exception to the policy's coverage, ruled that USF&G was obligated to defend Landress. This judgment was affirmed by the district court. This appeal followed.

II. APPLICABLE LAW

The parties do not dispute the magistrate's finding that this action is controlled by Florida law. Therefore, in considering the scope of the exceptions to this insurance policy, we must bear in mind the following well-established principles of Florida insurance law.

An insurance policy should be construed in its entirety, and, if reasonably possible, given the construction which reflects the intent of the parties. New York Life Insurance Co. v. Kincaid, 136 Fla. 120, 186 So. 675, 677 (Fla.1939); King v. Sturge, 113 So.2d 257, 258 (Fla.App.1969). When the language of a policy is unclear or confusing, the language should be construed against the insurer. Fireman's Fund Insurance Co. of San Francisco v. Boyd, 45 So.2d 499, 501 (Fla.1950); Beasley v. Wolf, 151 So.2d 679, 680 (Fla.App.1963). However, if the language of a policy is clear and unambiguous, it should be accorded its natural meaning. Pafford v. Standard Life Insurance Co. of Indiana, 52 So.2d 910, 911 (Fla.1951); New Amsterdam Casualty Co. v. Addison, 169 So.2d 877, 880 (Fla.App.1965). The policy of strict construction against the insurer should not be used to add meaning to clear and unambiguous language. Rigel v. National Casualty Co., 76 So.2d 285, 286 (Fla.1954); Miller Electric Co. of Florida v. Employer's Liability Insurance Corp., 171 So.2d 40, 43 (Fla.App.1965).

III. THE SCOPE OF THE POLICY'S COVERAGE

A. Introduction

The insurance policy in effect at the time of the accident, No. ICC A 83775, provided comprehensive liability protection to Landress. It is undisputed, however, that Landress did not pay for and did not expect protection for either of two separate options, "Completed Operations" coverage and "Products Hazard" coverage. ³ These categories, therefore, represent exceptions to the general coverage of the policy, and if the insurer is able to show that the events preceding the injuries to Matthew and Linda Livingston fall within the plain language of either of these exceptions, USF&G is not bound to defend Landress and is entitled to a judgment in its favor.

B. The Products Hazard Clause

As mentioned, it is stipulated that Landress waived "Products Hazard" protection. In the definitions section of the policy, "Products Hazard" is defined as

Bodily injury and property damage arising out of the named insured's products or reliance upon a representation or a warranty made any time with respect thereto, but only if the bodily injury or property damage occurs away from the premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others.

The only issue regarding this portion of the insurance contract is whether the tow dolly transferred from Landress to Golden Motor Company in 1969 constituted one of the "named insured's products."

In the same section of the policy, "Named Insured's Products" is defined as

Goods or products manufactured, sold, handled or distributed by the named insured or by others trading in his name, including any container thereof, (other than a vehicle), but "Named Insured's Products" shall not include a vending machine or any property other than such container, rented to or located for use of others but not sold.

Therefore, the determinative question is whether this tow dolly was a "good or product manufactured, sold, handled or distributed by [Landress]."

In finding the above language ambiguous, the magistrate relied on a pair of Florida cases holding that products hazard exclusions are ambiguous as applied to an insured service company's installation of certain goods. Miller Electric Co. v. Employer's Liability Assoc. Corp., 171 So.2d 40 (Fla.App.1965); New Amsterdam Casualty Co. v. Addison, 169 So.2d 877 (Fla.App.1964). In each of these cases, an insurer was ordered to defend an insured electrical contractor in a suit for negligent installation despite the contractor's express waiver of joint "Products-Completed Operations" coverage. The magistrate below concluded that Landress' transfer of the dolly to Golden Motor constituted a "service" function, thereby triggering the application of the above precedents.

We find these cases inapplicable to the situation before us. First, in the Miller and New Amsterdam cases, the Products Hazard and Completed Operations clauses were merged into a single clause...