National Hills Shopping Center, Inc. v. Liberty Mut. Ins. Co.

• Decision Date: 02 May 1977
• Docket Number: No. 75-2772,75-2772
• Parties: NATIONAL HILLS SHOPPING CENTER, INC., Plaintiff-Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 655

551 F.2d 655

NATIONAL HILLS SHOPPING CENTER, INC., Plaintiff-Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant-Appellee.

No. 75-2772.

United States Court of Appeals Fifth Circuit.

May 2, 1977.

George H. Connell, Jr., Atlanta, Ga., for plaintiff-appellant.

Ben Kingree, Atlanta, Ga., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before GOLDBERG and HILL, Circuit Judges, and KERR, ^* District Judge.

JAMES C. HILL, Circuit Judge.

This is an appeal by National Hills Shopping Center, Inc. ("National Hills") and its insurer, Insurance Company of North America ("INA") from a summary judgment granted by the district court in favor of appellee, Liberty Mutual Insurance Company ("Liberty Mutual"). We affirm.

The facts are not in dispute. National Hills is a corporation whose business is the operation, maintenance and leasing of certain improved real estate known as National Hills Shopping Center, in Augusta, Georgia. National Hills White Store, Inc. ("White Store") leases from National Hills one of the stores in the shopping center, for use in its business, which is the operation of a department store. On July 9, 1968, a roof of the shopping center above the leased store premises collapsed, resulting in damage to the goods of White Store. The resulting damage claim, after suit in state court, was satisfied by National Hills and its insurer, INA.

At all material times, White Store was the named insured ¹ in a policy of "blanket public liability" insurance issued by Liberty Mutual. In that policy, Liberty Mutual agreed:

To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law or assumed by him under contract for damages arising out of the business of the named insured stated in the declarations, but only insofar as such damages result from

(a) injury to or destruction of property accidentally caused . . ..

The policy declarations specified that the "Named Insured's Business Is: Department Stores." The Liberty Mutual policy designating White Store as the "named insured," further provided:

The unqualified word "insured" wherever used in this policy includes not only the named insured but also . . .

(b) the owner or lessor . . . of premises rented to or leased to or occupied by the named insured with respect to injury arising out of that part of such premises occupied by the named insured.

Since National Hills was the owner and lessor of the building premises which were leased to and occupied by the named insured (White Store), it claims protection and indemnity from Liberty Mutual as an additional insured under the clause. ² Thus, appellants National Hills and INA assert that National Hills was entitled to Liberty Mutual's protection with respect to the claims of White Store for the damage done as a result of the roof collapse.

This contention was referred to by the district judge when he observed, "such a construction of that policy would have the anomalous effect of calling upon the defendant (Liberty Mutual) to provide liability coverage to the shopping center (National Hills) for demands made against it by (Liberty Mutual's) named insured."

Liberty Mutual refused to provide coverage to National Hills for this incident, asserting that the loss was not among those protected by the insuring agreement and, further, that, even if it were, such a loss was expressly excluded by other provisions of the policy.

The order of the district court amply analyzes the choice of law issues which might be presented in this case, and will not be restated here. The parties, in brief and oral argument, appear to agree, correctly, that the issues should be resolved by application of Georgia law. Erie Railway Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

In Georgia, construction of insurance contracts begins with the premise that a policy must "be construed so as to carry out the true intention of the parties. All other rules of contract interpretation and construction are subservient to that principle . . .." Tennessee Corp. v. Hartford Accident and Indemnity Co., 463 F.2d 548, 551 (5th Cir. 1972). Also, the contract must be viewed as a whole and in light of the usual rules of construction of contracts generally. Ga.Code Ann. § 56-2419; Ranger Insurance Company v. Culberson, 454 F.2d 857 (5th Cir. 1971), cert. denied, 407 U.S. 916, 92 S.Ct. 2440, 32 L.Ed.2d 691; Parris & Son v. Campbell, 128 Ga.App. 165, 196 S.E.2d 334 (1973). And, although "words of exclusion in insurance policies should be given small tolerance when insurance companies choose words of imprecision," Ranger Insurance Company v. Culberson supra, at 864, it is equally axiomatic that:

While an ambiguous insurance contract will be liberally construed in favor of the insured, one which when construed reasonably and in its entirety, unambiguously and lawfully limits the insurer's liability cannot be expanded beyond what is fairly within its plain terms (emphasis in original).

Ranger Insurance Company v. Columbus-Muscogee Aviation, Inc., 130 Ga.App. 742, 745, 204 S.E.2d 474, 476 (1974). See also Cherokee Credit Life Insurance Co. v. Baker, 119 Ga.App. 579, 168 S.E.2d 171 (1969); Fireman's Fund Indemnity Company v. Mosaic Tile Company, 101 Ga.App. 701, 115 S.E.2d 263 (1960). Consequently, the court has "no intention of stretching for ambiguity when it is not there." Ranger Insurance Company v. Culberson, supra, at 860. See also Shaw v. State Farm Mutual Automobile Insurance Company, 107 Ga.App. 8, 129 S.E.2d 85 (1962).

We must examine the policy in view of the circumstances of the loss and the foregoing controlling principles of law.

Basically, an insurance contract such as the one involved here defines the risks which the underwriting insurance company agrees to assume and the persons or entities entitled to protection against such defined risks.

The precise definition of risks and insureds may be accomplished in two steps. An insuring clause or perils clause may broadly define the perils to be assumed by the underwriters. If, within the parameters thus set out there are specific perils not to be covered, or particular circumstances under which protection is not to be provided, those refinements are made by exclusion. The district court held that National Hills had not shown that the incident for which it sought coverage was among the insured perils and, applying the then latest expression from the courts of the forum state, further held that, even if the incident gave rise to a claim encompassed by the insured perils, an exclusion applied so as to deny coverage.

The Property of the Several Insureds.

At least in passing, it may not be inappropriate to illuminate the issue of exclusion. The protection afforded under the policy extends to more than one entity. The named insured, White Store, is provided protection against the defined risks. So, also, is National Hills as owner and lessor to the named insured.

There is a giveth and a taketh away feature in a policy such as this, ultimately resulting in the expression of the rights of each or all insureds. The insuring agreement defines the perils against which protection is to be afforded. Certain perils which may arise within those parameters are not, however, to be covered. These are expressed in certain exclusions. Pertinent to our labors today is the one in the policy under investigation stating that:

This Policy does not apply;

(e) to injury to or destruction of (1) property owned or occupied by or rented to the insured, or (2) except with respect to liability under sidetrack agreements covered by this policy, property used by the insured, or (3) except with respect to liability under such sidetrack agreements or the use of elevators or escalators at premises owned by, rented to or controlled by the named insured, property in the care, custody or control of the insured for any purpose in exercising physical control, or (4) any goods, products or containers thereof manufactured, sold, handled or distributed or premises alienated by the named insured, or work completed by or for the named insured, out of which the accident arises.

By endorsement, it was further provided that:

It is agreed that such insurance as is afforded by the policy with respect to injury to or destruction of property also applies to injury to or destruction of property of others rented to, leased or occupied by the named insured.

It is further agreed that the insurance afforded by this endorsement shall be excess insurance over any valid and collectible direct loss insurance issued to the named insured and covering the property injured or destroyed.

It is further agreed that Exclusion (e) is amended accordingly. (emphasis supplied).

The damage forming the basis for the claim against National Hills was, clearly, to property "in the care, custody and control of" the named insured, White Store. However, it was not so situated with respect to National Hills, the "additional insured" who is claiming coverage. Liberty Mutual argues that, White Store obviously being an "insured," no covered claim can arise out of or result from damage to its property. Its position is that the exclusion applies as if it were written to exclude claims resulting from damage to property "in the care, custody or control of (any) insured." National Hills asserts that the intent of the parties to the contract is that, where there are, as here, several who qualify as insureds, they must be treated severally and not collectively to the end that coverage will be excluded with respect to property in the care, custody and control of the insured seeking protection under the policy, but not with respect to property thus situated vis-a-vis strangers to the claim even though, under other circumstances, they might have been insureds.

National Hills buttresses this assertion by calling...