Sacharko v. Center Equities Ltd. Partnership, 2420

• Decision Date: 21 August 1984
• Docket Number: No. 2420,2420
• Citation: 2 Conn.App. 439,479 A.2d 1219
• Court: Connecticut Court of Appeals
• Parties: Winifred M. SACHARKO v. CENTER EQUITIES LIMITED PARTNERSHIP.

Page 1219

479 A.2d 1219

2 Conn.App. 439

Winifred M. SACHARKO v. CENTER EQUITIES LIMITED PARTNERSHIP.

No. 2420.

Appellate Court of Connecticut.

Argued April 12, 1984.

Decided Aug. 21, 1984.

John J. Bogdanski, Hartford, with whom, on the brief, was Edward S. Ludorf, Hartford, for appellant (third party defendant Ins. Co. of North America).

Robert E. Courtney, Jr., West Hartford, for appellee (defendant-third party plaintiff).

Before DANNEHY, C.P.J., and HULL and BORDEN, JJ.

BORDEN, Judge.

This is an appeal ¹ from the judgment of the trial court on a third party complaint by Center Equities Limited Partnership (Center Equities) against the third party defendant, Insurance Company of North America (ICNA). The court found that ICNA breached its insurance contract with Center Equities by failing to defend Center Equities in the main action.

The facts are as follows. Center Equities leased premises which it owned at 980 Farmington Avenue, West Hartford, to Edelweiss Restaurant, Inc. (Edelweiss). As a condition of the lease, Edelweiss agreed to carry liability insurance at its own expense and to name Center Equities as an additional insured under the policy. Edelweiss obtained such a policy from ICNA and the policy was in effect at the time of the accident.

The main action was brought by Winifred Sacharko, an employee of Edelweiss, against Center Equities, for personal injuries she sustained in a fall on icy pavement at the rear of the premises. Notice of the main action was given to ICNA, which refused to defend Center Equities. Center Equities joined Edelweiss ² and ICNA as third party defendants and alleged that ICNA breached its duty to defend Center Equities in the main action.

The main action was defended by the Home Indemnity Company (Home Indemnity), ³ Center Equities' other liability insurer, and culminated in a stipulated judgment for Sacharko in the amount of $60,000.

On the third party complaint, the court rendered judgment for Center Equities against ICNA in the amount of $64,019.85, representing the $60,000 stipulated judgment in favor of Sacharko against Center Equities; $48.60 in out-of-pocket costs; and $3971.25 in attorney's fees incurred in defending the main action.

ICNA argues that the court erred in concluding that it was obligated to provide Center Equities with a defense to the claim asserted by Sacharko. We disagree.

"The question of whether [ICNA] had a duty to defend the action brought by [Sacharko] depends on whether the complaint in that action stated facts which appeared to bring [Sacharko's] claimed injury within the policy coverage." Missionaries of Co. of Mary, Inc. v. Aetna Casualty & Surety Co., 155 Conn. 104, 110, 230 A.2d 21 (1967); Firestine v. Poverman, 388 F.Supp. 948, 950 (D.Conn.1975); 7C Appleman, Insurance Law and Practice § 4683. An insurer's duty to defend is broader than its duty to indemnify and is not eliminated by facts disclosed by the insurer's independent investigation. Missionaries of Co. of Mary, Inc. v. Aetna Casualty & Surety Co., supra.

Sacharko alleged in her complaint that she was an employee of Edelweiss; that she sustained injuries from a fall on an icy pavement adjacent to and in front of the rear exit of the restaurant; that Center Equities had exclusive control of the exterior of the premises; and that Center Equities failed properly to maintain the gutters, leaders, and downspouts at the rear of the building, which failure precipitated the icy condition of the pavement.

Under the terms of the policy, ICNA agreed to "pay on behalf of the Insured ... all sums which the Insured shall become legally obligated to pay as damages because of A--Personal Injury or B--Property Damage caused by an occurrence during the policy period and within the policy territory." The policy further provided that "[t]he Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such personal injury ... even if any of the allegations of the suit are groundless, false, or fraudulent ...." The additional insured endorsement of the policy stated that "[t]he 'Persons Insured' provision is amended to include as an Insured the person or organization designated below, but only with respect to liability arising out of ownership, maintenance or use of that part of the premises designated below leased to the Named Insured ...."

ICNA admitted in its answer to the third party complaint that Center Equities was an insured under the policy. The hazards against which ICNA insured Center Equities were the "ownership, maintenance or use" of the premises. Sacharko's complaint alleged in substance that she was injured when she fell as a result of an icy condition which Center Equities negligently caused or allowed to exist on the premises. These allegations state facts, as the trial court found, which squarely bring the injuries sustained within the coverage of the policy. See Missionaries of Co. of Mary, Inc. v. Aetna Casualty & Surety Co., supra; 7C Appleman, supra, § 4683.01.

ICNA maintains that under the employee exclusion clause ⁴ of the policy it was not obligated to defend the suit brought by Sacharko. It argues that, since it would have had no duty to defend the named insured Edelweiss had Sacharko sued Edelweiss directly, it had no duty to defend Center Equities. We disagree. We conclude, as did the trial court, that because the policy contained a severability of interests provision, ⁵ ICNA cannot use the employee exclusion clause as a basis for abandoning its duty to defend Center Equities.

In general, a suit by the named insured's employee against an additional insured under the policy is protected from the employee exclusion clause; and where, as here, there is a severability of interests provision, a limit is placed on the exclusion to allow more complete recovery under the policy. 6C Appleman, supra, § 4413. Severability of interests provisions were adopted by the insurance industry to define the extent of coverage afforded by a policy issued to more than one insured. Ratner v. Canadian Universal Ins. Co., 359 Mass. 375, 380, 269 N.E.2d 227 (1971). Where a policy contains a severability of interests clause, it is a recognition by the insurer that it has a separate and distinct obligation to each insured under the policy, and that the exclusion under the policy as to employees of the insured is confined to the employee of the insured who seeks protection under the policy. Employers' Liability Assurance Corporation v. Travelers Ins. Co., 411 F.2d 862, 865-66 (2d Cir.1969); General Aviation Supply Co. v. Ins. Co. of North America, 181 F.Supp. 380, 384 (E.D.Mo.), aff'd, 283 F.2d 590 (8th Cir.1960). "[T]he term 'the insured' as used in [the] policy must be examined by first applying the 'severability of interests' test. 'The insured' does not refer to all insureds; rather, the term is used to refer to each insured as a separate and distinct individual apart from any and every other person who may be entitled to coverage thereunder. When a claim is made against one who is an 'insured' under the policy, the latter is 'the insured,' for the purpose of determining the [insurer's] obligations with respect to such claim." Commercial Standard Ins. Co. v. American Gen. Ins. Co., 455 S.W.2d 714, 721 (Tex.1970). Thus, the test of whether the employee's exclusion clause precludes coverage must be applied to each insured separately and not to all collectively. Id.

The primary objective of an employee's exclusion clause is to avoid duplication of coverage with an employer's workers' compensation coverage. General Aviation Supply Co. v. Ins. Co. of North America, supra, 384. "If the insurer wishes to further exclude its liability, it could clearly so state in its contract and its failure to do so should be strictly construed. Especially is this true when the policy contains a severability clause, for there it can be implied that the insurer is actually recognizing a separate obligation to others, distinct and apart from the obligation it owes to the named insured." Id.

ICNA next argues in effect that Sacharko's injuries occurred beyond the leased premises and therefore beyond the policy territory. The additional insured endorsement clearly stated that Center Equities was an additional insured with respect to the ownership, maintenance or use of the part of the premises leased to Edelweiss. The lease stated that Center Equities "does grant, demise and let unto the Lessee the restaurant building located at No. 980 Farmington Avenue ......