Neuman v. Travelers Indem. Co.

• Decision Date: 21 May 1974
• Docket Number: No. 233,233
• Citation: 271 Md. 636,319 A.2d 522
• Parties: Jaye NEUMAN et al. v. The TRAVELERS INDEMNITY COMPANY.
• Court: Maryland Court of Appeals

Page 636

271 Md. 636

319 A.2d 522

Jaye NEUMAN et al. v. The TRAVELERS INDEMNITY COMPANY.

No. 233.

Court of Appeals of Maryland.

May 21, 1974.

W. Lee Harrison, Towson (Cooper C. Graham, Towson, on the brief), for appellants.

Austin W. Brizendine, Towson, for appellee.

Argued before MURPHY, C. J., and SINGLEY, SMITH, DIGGES, LEVINE and ELDRIDGE, JJ.

SMITH, Judge.

In this case we are obliged to determine whether damages, for which appellants, Jaye Neuman et al. (the Neumans), were held liable to their tenant, were covered by a policy issued by appellee, The Travelers Indemnity Company (Travelers).

The Neumans owned a building on Asphalt Street in Baltimore described as 'a one story masonry block warehouse.' National Glass & Distributing, Inc. (National Glass), was the tenant of the Neumans under a lease for a five-year term beginning on October 1, 1967. On November 27, 1969, Travelers issued a general liability policy of insurance covering various properties of the Neumans, including the subject property. It provided protection to the Neumans for, among other things, their liability for 'property damage . . . caused by an occurrence.' An occurrence was defined as 'an accident . . . which results, during the policy period, in . . . property damage neither expected nor intended from the standpoint of the insured.' 'Property damage' was defined as meaning 'injury to or destruction of tangible property.' On June 21, 1970, during the term of that policy, a wall of the leased warehouse collapsed, allegedly from a structural defect. A considerable amount of the inventory of National Glass was destroyed.

National Glass sued the Neumans. Count 1 of the declaration alleged improper design and construction on the part of the Neumans and their agents insofar as the wall and the roof of the building were concerned. It claimed damages in the amount of $29,740.50 for the increased rental it was obliged to pay for other quarters for the remainder of the original term of its lease. Each succeeding count in the declaration incorporated the allegations of prior counts. Count 2 claimed $296.25 for increased shipping costs by virtue of the fact that National Glass was obliged to ship its orders for a period of time from locations outside Maryland. Count 3 claimed $4,640.70 for loss of profits during the time National Glass was unable to fill orders from its regular customers. Count 4 claimed $919.26 for 'certain sums of money for travel expenses and other out-of-pocket expenses for consulting engineers and in-house engineers which it would not had to have paid had not the building collapsed due to the (Neumans') breach.' Count 5 claimed gross negligence on the part of the Neumans and sought $200,000.00 damages. Count 6 claimed $200,000.00 in punitive damages. No claim was made for damage to the inventory. It is strongly implied by the Neumans that National Glass was protected against that damage by its own policy with Travelers and that it has been paid. That has nothing to do with the determination of the questions here presented, however.

Suit was filed by National Glass on April 28, 1971. Travelers initially assumed defense of the suit against the Neumans, pursuant to the policy terms. It notified the Neumans, however, on June 1 that they might wish to retain additional counsel at their own expense since the amount claimed was in excess of the policy limits. On August 6, personal counsel for the Neumans were notified by Travelers that it was directing its attorney to strike his appearance in the case because the 'action (arose) out of damage to property which (was) owned by the insured (which was) specifically negated from any coverage in the policy.' ¹ A copy of that notification was sent by Travelers to the Neumans. The claim of National Glass against the Neumans was settled for $9,500.00. Then the Neumans brought this action for a declaratory judgment and to recover the sums said to be due from Travelers to the Neumans under the policy as a result of this incident. The trial judge (Raine, J.) said:

'Insurance policies must be strictly construed against the company that drafted the policy, this proposition cannot be denied. However, where terms of a policy are unambiguous they are to be accorded their natural and ordinary meaning. Unfortunately for the plaintiffs there is no reasonable construction, however strict, that will avail the plaintiff. The suit by the tenant that led to the liability imposed by the settlement agreement was for the breach of the covenant in the lease to provide a tenantable building. When the tenant was forced to move after the wall collapsed it was required to pay a higher rental and sustained a loss of profits occasioned by the interruption of business. It was for these elements of damage that the plaintiff settled. The obligation of the insurer was to pay all sums that the insured became liable for because of 'property damage.' Property owned by the insured was excepted and the term 'property damage' was defined as injury to tangible property. There are cases from other states, mostly involving tax statutes, that expand the definition of tangible property but the natural and ordinary definition is that tangible property is corporeal, i. e., such property as may be seen, weighed, measured and estimated by the physical senses. 73 C.J.S. Property Section 5. Tangible property is contrasted with choses in action and other incorporeal property rights. The loss of profits and the loss of the right to occupy a building do not fall within the definition of tangible property. There are cases holding that when an insurer undertakes to defend a suit against the insured an estoppel or waiver may arise. There was no prejudice to the plaintiff resulting from the withdrawal of insurance counsel and the mere filing of a plea followed by a withdrawal from the case is not the same as conducting a full defense. The facts of this case do not justify a holding of waiver or estoppel. In any event, there is no need to decide whether a waiver or estoppel was present for it is well settled that these principles will not lead to an extension or coverage. A policy condition or some irregularity on the part of the insured may be the subject of a waiver or an estoppel but they will not extend the insurance contract beyond its defined limits. A/C Electric Company v. Aetna Insurance Company, 251 Md. 410, 419, 247 A.2d 708 and cases there cited, particularly American Auto Insurance Company v. Master Building Supply Company, 179 F.Supp. 699.

'The plaintiffs are entitled to no relief against the defendant and this Court will so decree.'

This was an action at law. The last docket entry prior to the order of appeal was that on August 31, 1973, reflecting filing of the memorandum opinion of the court. A judgment for costs in favor of the defendant against the plaintiff should have been entered. We shall treat the memorandum opinion of the trial judge as the declaratory judgment and as including a direction for entry of a judgment for costs.

Two questions are presented by the Neumans. They first contend that the trial judge erred in his finding that the loss was not covered by the policy. They then argue that, by having assumed the defense of the action by National Glass against the Neumans, Travelers is estopped from raising the defense of non-coverage.

I

The principles for interpreting insurance policies in Maryland are well known and have been stated many times. See, e. g., C & H Plumbing v. Employers Mut., 264 Md. 510, 287 A.2d 238 (1972), and Gov't Employees Insur. v. DeJames, 256 Md. 717, 261 A.2d 747 (1970). In the latter case, Judge Singley said for the Court:

'It is well settled that in interpreting insurance contracts, words are to be given their customary and normal meaning. . . . Absent ambiguity the construction of the contract remains within the province of the court and Maryland has not adopted the rule, followed in many jurisdictions, that an insurance policy is to be most strongly construed against the insurer . . .. If the language of an insurance contract is ambiguous, however, construction is for the jury . . . and the ambiguity is to be resolved against the company which prepared the policy and in favor of the insured . . ..' Id. at 720, 261 A.2d at 749. (Citations omitted.)

The Neumans here contend that the leasehold interest of National Glass was tangible property. From this they reason that Travelers is liable under the terms of its policy for the damages sustained by National Glass for which it sued the Neumans since those losses all stem from injury to the building leased by National Glass and thus from damage to its leasehold interest.

The lease of National Glass was for a term of years. Accordingly, it was a chattel real. A chattel real is personal property and subject to all the rules of law governing personal property except as modified by express legislation. This is true even with respect to a lease for 99 years, notwithstanding the fact that such lease is renewable forever. Holzman v. Wager, 114 Md. 322, 333, 79 A. 205, 1912A Ann.Cas. 619 (1911); Culbreth v. Smith, 69 Md. 450, 458, 16 A. 112, 1 L.R.A. 538 (1888); and Devecmon v. Devecmon, 43 Md. 335, 347 (1875). To like effect see 1 H. Tiffany, The Law of Real Property § 19, at 39, and § 38, at 98 (enlarged ed. 1920); and 51C C.J.S. Landlord & Tenant § 202(9) (1968).

The precise question here before us does not appear to have been considered by this Court before. As a matter of fact, if it has been before any other appellate court that fact eluded counsel and this Court.

The term 'tangible property' is succinctly defined in Black's Law Dictionary (4th ed. 1951):

'That which may be felt or touched, and is necessarily corporeal, although it may be either real or personal. . . .

'The phrase is used in opposition to such species of property as patents, franchises, copyrights, rents, ways, and incorporeal property generally. . . .'

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