Nationwide Mut. Fire Ins. Co. v. Allen, 8326SC683

• Decision Date: 01 May 1984
• Docket Number: No. 8326SC683,8326SC683
• Court: North Carolina Court of Appeals
• Parties: NATIONWIDE MUTUAL FIRE INSURANCE COMPANY and Nationwide Mutual Insurance Company v. John W. ALLEN, Freda P. Allen, Katheryn E. Palavid, Commonwealth Realty Development Corporation d/b/a Dutch Village Apartments, a corporation, and Lumbermens Mutual Casualty Company, a corporation.

Page 552

314 S.E.2d 552

68 N.C.App. 184

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY and Nationwide

Mutual Insurance Company v. John W. ALLEN, Freda P. Allen, Katheryn E. Palavid,

Commonwealth Realty Development Corporation d/b/a

Dutch Village Apartments, a corporation,

and Lumbermens Mutual Casualty

Company, a corporation.

No. 8326SC683.

Court of Appeals of North Carolina.

May 1, 1984.

Kennedy, Covington, Lobdell & Hickman by Wayne P. Huckel, Charlotte, for plaintiff-appellant.

Grier, Parker, Poe, Thompson, Bernstein, Gage & Preston by Irvin W. Hankins, III, Charlotte, for defendants-appellees, Katheryn E. Palavid, Commonwealth Realty Development Corporation and Lumbermens Mutual Casualty Company.

BRASWELL, Judge.

A fire occurred in the rented apartment of John and Freda Allen in the Dutch Village Apartments complex. The Allens had tenant-homeowner's insurance coverage with the plaintiff Nationwide Mutual Fire Insurance Company. Mrs. Allen was the owner of a 1973 Honda motorcycle. The other plaintiff, Nationwide Mutual Insurance Company, provided liability insurance coverage on the motorcycle before policy coverage expired on 10 October 1979. Defendant Katheryn E. Palavid leased an adjacent apartment to the Allens and her personal property was damaged by the fire. Defendant Commonwealth Realty Development Corporation, d/b/a Dutch Village Apartments, a Corporation, owned the apartment complex. Lumbermens Mutual Casualty Company was the fire insurance carrier for Ms. Palavid and Commonwealth Realty.

On 20 March 1980, a fire originated in the living room of the Allen apartment and damaged not only its interior, but the apartment structure, the adjacent apartments, and the contents of certain adjacent apartments. The plaintiffs sought a declaratory judgment to determine insurance coverage. The trial judge, based upon a finding of forty-five uncontested facts, concluded and adjudged as a matter of law that coverage was afforded under the policy of Nationwide Mutual Fire Insurance Company, that this company had a duty to provide a defense for the Allens in a related civil action, but that the policy excluded coverage for the fire damage to the interior of the Allen apartment itself and excluded any loss of use coverage of the Allen apartment. Damages were stipulated to be $7,575.26 to the Allen apartment and $46,951.33 to the other apartments.

The plaintiff, Nationwide-Fire, appeals. The defendants cross-assign error on the denial of coverage on the Allen apartment loss, but did not appeal. No mention of disposition is made in the final judgment as to plaintiff Nationwide Mutual Insurance Company, the earlier carrier on the Honda motorcycle.

The question plaintiff presents for review is whether it was reversible error for the trial court to fail to find and conclude that the homeowner's insurance policy excluded coverage for all the damages by fire. In a declaratory judgment action our standard of review is "to determine whether the record contains competent evidence to support the findings; and whether the findings support the conclusions." Insurance Co. v. Allison, 51 N.C.App. 654, 657, 277 S.E.2d 473, 475, disc. rev. denied, 303 N.C. 315, 281 S.E.2d 652 (1981); Baucom's Nursery Co. v. Mecklenburg Co., 62 N.C.App. 396, 303 S.E.2d 236 (1983). Here, because there were no exceptions to the findings of fact, we will be concerned only with the conclusions and questions of law.

What did the terms of the policy provide? Nationwide-Fire relies upon Exclusions 1.a. (2) and 2.d., quoted below, in its effort to avoid coverage.

SECTION II--EXCLUSIONS

This policy does not apply:

1. Under Coverage E--Personal Liability ...:

a. to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of:

* * *

* * *

(2) any motor vehicle owned or operated by, or rented or loaned to any Insured; but this subsection (2) does not apply to bodily injury or property damage occurring on the residence premises if the motor vehicle is not subject to motor vehicle registration because it is used exclusively on the residence premises or kept in dead storage on the residence premises; or

* * *

* * *

2. Under Coverage E--Personal Liability

* * *

* * *

d. to property damage to property occupied or used by the Insured or rented to or in the care, custody or control of the Insured or as to which the Insured is for any purpose exercising physical control.

On the other hand, the policy's personal liability coverage provides as follows:

Coverage E--Personal Liability.

This Company agrees to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay for damages because of bodily injury or property damage, to which this insurance applies, caused by an occurrence. This Company shall have the right and duty, at its own expense, to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, but may make such investigation and settlement of any claim or suit as it deems expedient.

For approximately six months prior to the fire on 20 March 1980, the Honda motorcycle had been stored on the patio to the Allen apartment. Because of mechanical damage in its last use, the Honda was now inoperable. The Honda was not registered, bore no license tag, and was not named or covered in any motor vehicle insurance policy. The last liability insurance policy on the Honda expired on 10 October 1979. Mrs. Allen was the owner.

Because 20 March 1980 was a rainy day, Mr. Allen was not working. On that day he decided to move the Honda motorcycle into the living room of the apartment, intending to charge the battery, to check the timing, and to inspect the motorcycle to determine what repairs might be needed. Those repairs would be performed at a later date either by him, if possible, or by a repair shop, so that the Honda could be sold and used. He had no repair parts available and did not intend to repair it that day.

In preparation for a work place, Mr. Allen placed a plastic cover over the carpet in the living room and newspapers over the plastic. Then he brought in the motorcycle, placing it over the newspaper and plastic. Prior to taking the Honda into the apartment Mr. Allen had drained 1 1/2 gallons of gas, but was unable to remove all of it from the main tank and was unable to remove any gas from the reserve tank. While inside the room he drained the oil from the motorcycle, placing it in a plastic milk carton upon the newspaper-covered plastic.

The battery was removed and activated to a trickle charger which was situated upon the newspaper-covered plastic. A portion of the gas tank was removed in order to examine the magneto. The motorcycle was supported by a kickstand, which was wet from exposure to the rain.

Mr. Allen placed a timing light, a bare light bulb in a socket, upon the fork of the front wheel and plugged the...