Northwestern Nat. Ins. Co. v. Pennington Bros., Inc.

• Decision Date: 14 August 1974
• Docket Number: No. 3,Docket No. 18537,3
• Citation: 55 Mich.App. 66,222 N.W.2d 36
• Parties: NORTHWESTERN NATIONAL INSURANCE CO., Plaintiff-Appellee, v. PENNINGTON BROTHERS, INC., Defendant-Appellant
• Court: Court of Appeal of Michigan — District of US

Page 36

222 N.W.2d 36

55 Mich.App. 66

NORTHWESTERN NATIONAL INSURANCE CO., Plaintiff-Appellee, v. PENNINGTON BROTHERS, INC., Defendant-Appellant.

Docket No. 18537.

Court of Appeals of Michigan, Division No. 3.

Aug. 14, 1974.

Released for Publication Oct. 9, 1974.

James R. Stariha, White, Spaniola, Knudsen, Stariha & Potuznik, P.C., Muskegon, for defendant-appellant.

Charles H. Rawlings, Muskegon, for plaintiff-appellee.

Before HOLBROOK, P.J., and T. M. BURNS and SMITH,* JJ.

HOLBROOK, Presiding Judge.

For the purposes of this appeal, the opinion of the trial court will adequately suffice to explain facts of and give background to the case. The case was tried before the trial judge without a jury.

'On November 15, 1969, plaintiff herein, Northwestern National Insurance Company, issued to defendants herein, Pennington Brothers, Inc., its General Liability Policy No. BCP 505680.

'On or about March 13, 1970, the defendant entered into a contract with the Prairie Tank & Construction Company to clean and gas free one cone roof tank located at Covert, Michigan. It was the job of Prairie Tank & Construction Company to cut down the tank with torches and remove it from its location at Covert to another location, and rebuild the tank at the new location. The tank belonged to Lakeside Refining Company of Kalamazoo, Michigan.

'The Prairie Tank & Construction Company would perform its job by cutting the tank into pieces with the welding torches and reassemble it at its new location by welding the tank together again. In order to do this welding the tank must be free of explosive gases. The tank contained serveral thousand gallons of crude oil. Prairie Tank & Construction Company sub-contracted the job of removing the crude oil to Pennington Brothers, Inc.

'Apparently, several thousand gallons of water was (sic) under the crude oil. To facilitate the removal of all of the contents of the tank it was deemed necessary by Pennington Brothers to cut a section out of the tank 6 feet by 8 feet. Pennington Brothers had removed approximately one-half of the contents of the tank by pumping operations, but in removing the last half of the contents of the tank it would be necessary to hog it out by men carrying 5 gallon buckets.

'When it came time to make the cut by a torch on the side of the tank, Pennington Brothers had no one experienced in making such a cut. Pennington then hired a welder from Prairie Tank & Construction Company by the name of Thomas Croasdale and indicated their willingness to pay for his travel, per diem, and salary.

'On April 24, 1970, Mr. Kenneth Clayton from Pennington Brothers, and Mr. Thomas Croasdale appeared on the job site where the tank was located, and after steaming the inside of the tank and making appropriate tests indicating that it was safe to make the cut, Mr. Croasdale proceeded to cut the section one foot by one foot and later, the section 6 feet by 8 feet which included the one foot cut. After completing the 6 by 8 foot cut the plate which had intended to be cut was still held in place by slag. After attempting to break the plate loose and failing, the torch was again used to cut the slag particles and it was at this time that the gas assembled in the tank ignited, setting fire to the materials located therein. The steam was again induced into the tank putting out the fire but not until the tank was damaged as disclosed by Exhibit 2.

'In due time all of the contents of the tank were removed and the tank was cut down and rebuilt at the new location.

'The Prairie Tank & Construction Company has commenced suit against Pennington Brothers, Inc., in the Federal Court for the Western District of Michigan, Southern Division, to recoup the losses sustained by the fire occasioned by the cut of the 6 by 8 foot plate at the side of the tank.

'The suit in the Circuit Court for the County of Muskegon is by Northwestern National Insurance Company against its insured, Pennington Brothers, Inc., for construction of the policy of insurance in existence between Northwestern National Insurance Company and Pennington Brothers, at the time of the fire, being policy number BCP 505680, attached to the pleadings and the matter to be decided by this court is whether or not the tank in question was 'under the care, custody, or control, of the insured, or as to which the insured is for any purpose exercising physical control.' The policy of insurance contains an exclusion clause to 'property in the care, custodyOr control of the insured or as to which the insured is for any purpose exercising physical control.' It will not, therefore, be necessary for Northwestern National Insurance Company, to defend the Federal District suit between Prairie Tank & Construction Company and Pennington Brothers, Inc., if this court finds that the tank in question was under the control of Pennington Brothers. If it is found that the tank was not under the control of Pennington Brothers at the time of the fire, it will be necessary for Northwestern National Insurance Company to defend the action in the Federal District Court.

'The parties to this action have presented the case in the following manner: A copy of the insurance policy has been filed with the court together with certain other exhibits consisting of four photographs of the tank in question; the contract between Pennington Brothers and the Prairie Tank & Construction Company; and the depositions of J. Spencer Van Alsburg, Tommy Howard Croasdale, and Kenneth Clayton. The parties have filed briefs with the court.

'The court has carefully reviewed the exhibits offered in evidence, including more than 200 pages of deposition testimony, and has given careful consideration to the briefs submitted by the respective parties. I am led to the conclusion that the tank was under the care, custody, and control of the defendant, Pennington Brothers within the meaning of the exclusionary clause found in the insurance contract. Pennington Brothers were hired by Prairie Tank & Construction Company to remove the contents of the tank consisting primarily of crude oil and several thousand gallons of water lying under the crude oil. Defendant argues that it controlled only two manholes and at most the contents of the tank, but not the entire tank. The fact remains, however, that nothing could be done by Prairie Tank towards the performance of its job which was the dismantling of the tank until it had been emptied nor is it controlling that Thomas Croasdale was normally an employee of Prairie Tank & Construction Company because on the date in question, for all practical purposes, he had been hired by Pennington Brothers (see page 38 of the deposition of Kenneth Clayton).

'Defendant Pennington Brothers undertook the job of removing the contents of the tank and until such time as the tank was emptied and cleaned it was under their control within the meaning of the policy, and since the accident occurred while under their control, the exclusionary clause of the contract is applicable.'

This panel in Arrigo's Fleet Service, Inc. v. Aetna Life & Casualty Co., 54 Mich.App. 482, 221 N.W.2d 206 (1974), has recently reviewed this exclusionary clause, which is commonly found in contractor's and garagemen's liability policies, in great depth. We there found that: 1) the applicability of the 'care, custody or control * * * (or) for any purpose exercising physical control' exclusion is a question of fact, not law; 2) the clause is inherently ambiguous and thus is to be strictly construed against the insurer; 3) the most valuable indicium of applicability is whether the property damaged was necessary to the insured's work or merely incidental thereto; ¹ and, 4) physical control connotes some degree of responsibility. ² Here, the trial court determined the question on the facts and, without so stating, found the tank to be necessary rather than incidental to the insured's work.

Were it not that the trial court, in its otherwise fine opinion, neglected to determine one necessary issue of fact, we would be constrained to affirm.

Black's Law Dictionary defines fixture as:

'A chattel attached to realty. Becoming accessory to it and part and parcel of it. * * *

'A thing is deemed to be affixed to land when it is attached to it by roots, imbedded in it, permanently resting upon it, or permanently attached to what is thus permanent, was by means of cement, plaster, nails, bolts, or screws.' (Citations omitted.)

It is necessary to determine whether the tank was so affixed to the real estate as to have become part of it or whether the tank was movable. In Goswick v. Employers' Casualty Co., 440 S.W.2d 287, 290 (Tex., 1969), the Court said: 'Only rarely has the exclusion been applied to realty.'

In Boswell v. Travelers Indemnity Co., 38 N.J.Super. 599, 120 A.2d 250 (1956), the plaintiff was in the business of repairing steam boilers. He contracted to replace all the tubes of two heat exchange units in an office building. After replacement, a hydrostatic test was run. By mistake the water was run through the outer shells of the units rather than the tubes. As a result, one shell cracked from end to end. The Court held the clause inapplicable, relying upon, Inter alia, Maryland Casualty Co. v. Hopper, 237 S.W.2d 411 (Tex.Civ.App., 1950).

In Maryland Casualty, Hopper was an independent contractor who was hired to lay flow lines connecting an oil well to a battery of two 500-barrel capacity oil storage tanks (the oil tank involved in the present case is distinctly larger) and lay a pipeline from the gathering pipeline system to the storage tanks. In the course of this operations a valve to one tank was left open, allowing gas to escape from one tank to the other. At one point, it was necessary to bend a 3-inch pipe to an angle of 45 degrees--in order to so do, an acetylene torch was used and an explosion resulted which destroyed one of the tanks. The Court found the clause inapplicable and wrote:

'It...