McCollum v. Insurance Co. of North America, 1

• Decision Date: 25 March 1982
• Docket Number: No. 1,CA-CIV,1
• Citation: 644 P.2d 283,132 Ariz. 129
• Parties: Alvin McCOLLUM and Maxine McCollum, husband and wife; and Emmanuel Singer and Deborah Singer, husband and wife, Plaintiffs-Appellants, v. INSURANCE COMPANY OF NORTH AMERICA, a foreign corporation, Defendant-Appellee. 5235.
• Court: Arizona Court of Appeals

Page 283

644 P.2d 283

132 Ariz. 129

Alvin McCOLLUM and Maxine McCollum, husband and wife; and Emmanuel Singer and Deborah Singer, husband and wife, Plaintiffs-Appellants, v. INSURANCE COMPANY OF NORTH AMERICA, a foreign corporation, Defendant-Appellee.

No. 1 CA-CIV 5235.

Court of Appeals of Arizona, Division 1, Department B.

March 25, 1982.

Treon, Warnicke & Roush, P.A. by B. Michael Dann, Charles D. Roush, Linda K. Scott, Phoenix, for plaintiffs-appellants.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, P.A. by Calvin L. Raup, Richard J. Woods, Phoenix, for defendant-appellee.

OPINION

OGG, Judge.

The sole issue raised in this appeal is whether a general liability insurance policy issued by appellee, Insurance Company of North America (INA) to appellants, Alvin McCollum and wife and Emmanuel Singer and wife (Insureds), provides insurance coverage in a tort damage action brought against the insureds for loss of profits in certain land transactions.

In an underlying tort action filed against the insureds and others, it was claimed that Alvin McCollum and Emmanuel Singer, while employed by Consolidated Mortgage Corporation, made negligent representations to buyers of unimproved lots, which negligence caused diminution of the value to the lots. This complaint alleged that the insureds, in violation of their representations, failed to improve the property through the installation of roads, utilities, and recreational, medical and shopping facilities. The complaint further alleged that because of the failure to make the agreed improvements, the land never appreciated and no profits were ever realized by the lot buyers.

The insureds in turn filed their complaint against INA seeking a declaratory judgment with a finding that the INA general liability insurance policy provided coverage for the tort damage action and that INA had a duty to defend such action.

INA answered the insureds' complaint, denying any coverage under the insurance policy, and counterclaimed against its insureds, seeking a court determination that the INA insurance policy afforded no coverage to the tort claim and that INA owed no duty to defend such a claim.

Both parties filed motions for summary judgment, and the trial court granted INA's motion, expressly agreeing with INA's argument that the damages sought in the underlying tort action did not fall within the coverage of the policy. The insureds then filed this appeal. We affirm.

The insureds claim they are entitled to coverage and to have all such claims against them defended by INA. They rely on the liability portion of the policy, "Coverage E", as affording protection against "Liability for Personal Injury and Property Damage", in accordance with the following Insuring Agreement (Paragraph 1):

This Company agrees with the named Insured to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of personal injury, including death at any time resulting therefrom, sustained by any person or injury to or destruction of tangible property, including the loss of use thereof, caused by an occurrence, as defined herein, and arising out of the ownership, maintenance or use of the premises designated on Page 1 for the purpose specified thereon, and all operations necessary or incidental thereto. (emphasis added)

Paragraph 2(A) of Coverage E provides that INA will "(d)efend any suit against the Insured alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent ...." Paragraph 5 of B-Definitions defines "Occurrence" as follows:

The word "occurrence" as used in this section shall mean either an accident happening during the coverage period or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes personal injury or injury to or destruction of tangible property during the coverage period. All injury or damages arising out of such exposure to substantially the same general conditions shall be considered as arising out of one occurrence. (emphasis added)

The insureds argue that the allegations of negligent misrepresentations, coupled with the allegations of injuries suffered as a result thereof, come within the policy language covering "injury to or destruction of tangible property, including the loss of use thereof." INA argues that the loss of anticipated profits does not constitute injury to or destruction of tangible property, and therefore there is no coverage afforded to the insureds.

We agree with the position of INA that under the terms of the specific insurance policy under consideration there can be no coverage without an "occurrence" resulting in physical damage to property. The INA policy defines an "occurrence" as "an accident happening during the coverage period or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes personal injury or injury to or destruction of tangible property during the coverage period." The record is devoid of any suggestion that an accident occurred which resulted in physical damage to the property. The plain fact is that there was no "occurrence" at all; nothing happened, including the promised appreciation in the land value.

The insureds, in furtherance of their claim for insurance coverage, rely upon a series of cases involving damages to agricultural land or to the crops grown thereon when a defective or improper seed or the wrong fertilizer was sold which resulted in a diminished crop yield. St. Paul Fire and Marine Insurance Company v. Northern Grain Company, 365 F.2d 361 (8th Cir. 1966) (where the court held there was insurance coverage for a diminution in value of a wheat crop where insured sold wrong wheat seed). In Wells Labberton v....