Peerless Ins. Co. v. Clough

• Decision Date: 06 September 1963
• Citation: 193 A.2d 444,105 N.H. 76
• Parties: PEERLESS INSURANCE COMPANY v. Harold CLOUGH et al.
• Court: New Hampshire Supreme Court

Page 444

193 A.2d 444

105 N.H. 76

PEERLESS INSURANCE COMPANY v. Harold CLOUGH et al.

Supreme Court of New Hampshire.

Argued May 7, 1963.

Decided July 30, 1963.

Rehearing Denied Sept. 6, 1963.

Wescott & Millham, Harold E. Westcott, Laconia, for plaintiff.

George P. Cofran and L. Wilder Quint, Concord, for defendant Clough.

Normandin, Normandin, Cheney & O'Neil, Laconia, for defendants Clem and Jacobs.

BLANDIN, Justice.

The over-all question here may be easily stated. It is the interpretation of an insurance policy which is for this court. Hogan v. Lebel, 95 N.H. 95, 97, 58 A.2d 321. However, between the Scylla of what the Trial Justice has termed the confusing bewildering and misleading provisions of the policy, and the Charybdis of conflicting decisions, it is by no means easy to determine the answer. The specific issues are whether we should sustain the Court's rulings that the defendant Clough had no coverage because of the exclusionary clauses relating to (1) property in the 'care custody or control of the insured or property as to which the insured for any purpose is exercising physical control,' and (2) 'Products--Completed Operations.' It appears that for several years before the occurrence of the losses from which the present proceeding arose, the defendant Clough had taken out policies similar, though not precisely identical with, the one here involved. Each policy was stated to be a 'renewal' of the previous one. For reasons which will hereinafter appear, we hold that the last policy introduced in evidence, covering the period from May 1958 to May 1959, is applicable.

The Trial Court has ruled that the plaintiff is not obligated to defend the actions brought by Clem and Jacobs against the defendant Clough or to satisfy any judgments rendered therein upon two grounds. One ground is that the time when the allegedly negligent acts causing the fires occurred, rather than the time of the fires, is controlling. Since at the time of the alleged negligence the premises were sustainably found to be within 'the custody or control' of the defendant and over which he was 'exercising physical control,' the Court held that the clause excluding from coverage losses suffered in these circumstances was decisive against Clough. However, the majority--and we believe the better rule--is that the time of the occurrence resulting in the loss or damage, and not the time of the negligence, determines whether there is coverage under the policy. Nielson v. Travelers Indemnity Co., 174 F.Supp. 648 (N.D.Iowa 1959), aff'd Travelers Indemnity Co. v. Nielson, 277 F.2d 455 (8th Cir., 1960); Export S. S. Corporation v. American Ins. Co., 106 F.2d 9 (2d Cir., 1939), 108 F.2d 1013 (2d Cir., 1940). See also, Remmer v. Glens Falls Indem. Co., 140 Cal.App.2d 84, 295 P.2d 19; Annot., 57 A.L.R.2d 1385. See Desrochers v. New York Casualty Co., 99 N.H. 129, 133, 106 A.2d 196.

Furthermore, in the case before us the event insured against is 'destruction of property' and not negligence, and it is expressly stated under the heading 'Policy Period' that 'This policy applies only to occurrences during the policy period.' Bearing in mind that the instrument is to be interpreted as the ordinary person in the shoes of the insured would understand it (Hoyt v. American Eagle Fire Insurance Company, 92 N.H. 242, 243, 29 A.2d 121, 148 A.L.R. 484; Lalos v. Tickler, 103 N.H. 292, 170 A.2d 843), we hold that the Court erred in its ruling. The defendant's exceptions thereto are sustained.

No findings were made that at the time of the fires the property of either of the claimants Clem and Jacobs was in the 'care custody or control of the insured' or was 'property as to which the insured for any purpose [was] exercising a physical control.'

At the time of the fires, all work on both cottages had been completed and the properties had been turned over to their respective owners. It could not be found upon the record before us that either property was within the above exclusionary clause. The Court's finding to the contrary rested upon the erroneous assumption that the time of the occurrence of the alleged negligence from which the fires resulted, rather than the time of the fires, was controlling. Therefore the finding cannot be upheld, and the defendant's exception to it is sustained.

Another ground upon which the decree was based is that the 'Products--Completed Operations' exclusion, relates not only to products which are completed, but also means that no losses sustained after the insured has finished his contracting operations upon the property may be recovered. Whether the Court's conclusion is correct depends upon the interpretation to be placed upon the policy. We are well aware that through no fault of insurance companies, grave problems are often created for them by the fiercely adversary interests of their insureds, as well as by the claims of third parties. If companies are to continue solvent and capable of serving an important public interest, they must carefully protect themselves against risks which they have not covered and for which no premiums have been paid to them. However, it must be borne in mind, as previously stated, that the policy is held to mean what a reasonable person in the position of the insured would think it meant. Hoyt v. American Eagle Fire Insurance Company, 92 N.H. 242, 243, 29 A.2d 121, 148 A.L.R. 484. If, in an overzealous endeavor to guard itself against every imaginable contingency, the company deliberately writes what the court has found to be a needlessly misleading and obscure policy (which, if it could be comprehended at all by the ordinary insured, would lead him to believe he was covered against a certain risk), it must accept the consequences. Here, the Court expressly found that 'ordinary men would be confused, bewildered and misled by the manner in which the policy was written.' It further found that, had the plaintiff desired to limit coverage as it now claims it did, to only the accidents which occurred while work of construction was in progress at a given location, it would have been easy to have said so in 'plain and simple language in the Definition of Hazards, Division 1. Premises--Operations.'

An examination of the instrument in force from May 10, 1958 to May 10, 1959, which for reasons hereinbefore stated we hold to be the applicable policy, since the fires occurred in the fall of 1958, convinces us that these findings are sustainable. On the face of the instrument, or what is known as the Declaration Sheets, it is stated that 'Business of the named insured is contractor.' In the description of his operations, it states that they consist of 'carpentry in the construction of detached private residences for occupancy by one or two families and private garages in connection therewith.'

The policy is entitled 'Schedule General Liability Policy' covering manufacturers and contractors. The declaration sheet, together with endorsement 5, which is stated to be a part of the original policy, lists four items. The first contains the name and address of the defendant insured, and his business as 'contractor.' The second covers the policy period from May 10, 1958 to May 10, 1959. The third reads as follows: 'The insurance afforded is only with respect to such and so many of the following coverages and divisions thereunder as are indicated by specific premium charge or charges * * *.'

Item 4 is a description of the hazards. It lists the various sorts of hazards which may be insured against, with the premium bases and rates for A, Bodily Injury Liability, and B, Property Damage. There are five hazards enumerated: (1) Premises--Operations; (2) Elevators--number at premises; (3) Independent Contractors; (4) Products--Completed Operations; (5) Contractual--Types of Agreements.

Under the large black letter heading 'INSURING AGREEMENTS,' there is a subheading 'Coverage B--Property Damage Liability,' wherein the plaintiff agrees: 'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof.'

Under the heading 'DEFINITION OF HAZARDS,' subheading 'Division 1 Premises--Operations,' the policy reads: 'The ownership, maintenance or use of the premises, and all operations necessary or incidental thereto or if M & C [manufacturers and contractors] all operations.' The insured paid a premium for this division only.

Under the subheading 'Division 4 Products--Completed Operations,' appearing under the main heading 'DEFINITION OF HAZARDS,' there are two paragraphs which read as follows: '(1) Goods or products manufactured, sold, handled or distributed by the named insured or by others trading under his name, if the accident occurs after possession of such goods or products has been relinquished to others by the named insured or by others trading under his name and if such accident occurs away from premises owned, rented or controlled by the named insured or on premises for which the classification stated in division 1 of Item 4 of the declarations excludes any part of the foregoing; provided, such goods or products shall be deemed to include any container thereof, other than a vehicle, but shall not include any vending machine or any property, other than such container, rented to or located for use of others but not sold;

'(2) operations, if the accident occurs after such operations have been completed or abandoned and occurs away from premises owned, rented or controlled by the named insured; provided, operations shall not be deemed incomplete because improperly or defectively performed or because further operations may be required pursuant to an agreement; provided, further, the following shall not be deemed to be 'operations' within the meaning of this paragraph: (a) pick-up or delivery, except from or onto a railroad car, (b) the maintenance of vehicles owned or used by...