Scott v. Keever
| Decision Date | 14 July 1973 |
| Docket Number | No. 46939,46939 |
| Citation | 512 P.2d 346,212 Kan. 719 |
| Parties | Eva C. SCOTT, Appellee, v. Earl KEEVER, d/b/a Gamble's, Ness City, Kansas, et al., Appellees, and Liberty Mutual Insurance Company, Appellant. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. Although ambiguities in the wording of an insurance contract are to be construed in favor of the insured, such rule has no application to language which is clear in its meaning.
2. A court must look to the entire contract of insurance for a true understanding of what risks are assumed by the insurer and what risks are excluded.
3. Where a contract of insurance is unambiguous it must be enforced according to its terms.
4. A comprehensive general liability policy of insurance and attached endorsements which protect the named insured and those persons or organizations in the commercial chain of a product manufactured, sold, handled or distributed by the named insured which explicitly limited application of the policy to accidents, as defined therein, which occur during the policy period does not afford coverage for liability for injuries, or death, resulting from an accident occurring after the policy period even though the sale of the defective product causing the accident was made within the policy period.
Donald L. Newkirk, Fleeson, Gooing, Coulson & Kitch, Wichita, argued the cause, and David W. Buxton, Wichita, was with him on the brief for appellant.
John L. Hampton of Hampton & Ward, Great Bend, argued the cause, and Tom Smythe, Ness City, was with him on the brief for appellee Eva C. Scott.
Steven P. Flood of Flood, Martin, Coffelt & Flood, Hays, was on the brief for appellee Earl Keever, d/b/a Gamble's, Ness City, Kansas.
H. W. Fanning of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, was on the brief for appellee Gamble-Skogmo, Inc.
This is a proceeding in garnishment initiated by plaintiff-appellee, a judgment creditor, on a judgment for the wrongful death of her husband, which was rendered on October 7, 1970, in favor of plaintiff against all of the defendants-appellees. Plaintiff attempted to collect the judgment by initiating this garnishment proceeding against appellant Liberty Mutual Insurance Company (the garnishee defendant), who had until November 1, 1966, provided comprehensive general liability insurance to Falco Products Company.
Liberty Mutual answered in the garnishment proceedings denying any liability to any of the defendants. This answer was disputed by all defendants except Falco which did not appear in the action. The controversy was submitted on a written stipulation of facts to the trial court which found against Liberty Mutual. This appeal results.
The appeal is presented on an agreed statement of facts. R. E. Scott, husband of plaintiff Eva C. Scott, was injured on August 28, 1967, and died four days later. Mr. Scott's injuries resulted from a fall caused by the collapse of a defective ladder purchased from defendant-appellee Earl Keever, d/b/a Gamble's, Ness City, on April 16, 1966. Mr. Scott had maintained possession of the ladder until the accident. Defendant-appellee Earl Keever owns and operates the Gamble Store in Ness City, a franchised operation of defendant-appellee-Gamble-Skogmo, Inc. Keever purchased the ladder in question from Gamble-Skogmo, Inc., his supplier, in a quantity wholesale purchase for resale to franchise operations. Falco designed and manufactured the ladder for sale and distribution to the public prior to November 16, 1966. On October 20, 1966, Falco was adjudicated a bankrupt. Falco at all times material herein, prior to November 1, 1966, was insured by Liberty Mutual under the policy in question. The policy is denominated a 'Comprehensive General Liability Policy' and was issued for a term commencing November 1, 1965, and expiring November 1, 1966.
The question in the case is whether the policy and attached endorsements afford coverage even though the accident for which Falco and the other defendants-appellees were adjudged liable did not occur until almost a year after the designated expiration date of the policy. The precise question is presented to this court for the first time. It is not disputed that if the accident, which happened on August 28, 1967, had occurred prior to November 1, 1966, it was such an occurrence as would have been covered by the policy, and defendants-appellees would have been protected by the defense and indemnity provisions of the policy.
In holding for the defendants-appellees the trial court rested its decision generally on two premises: (1) that since the sale and warranty of fitness of the ladder took place prior to November 1, 1966, protection was afforded; and (2) that ambiguity exists in the provisions of the policy and attached endorsements, which must be construed against Liberty Mutual and, thus, the policy would afford protection to all insureds under the policy.
On appeal Liberty Mutual attacks the trial court's judgment on both grounds mentioned, taking the position that the policy and endorsements by the express, unambiguous provisions thereof exclude protection against accidents arising subsequent to the expiration date of the policy, regardless of the fact that the sale of the defective product occurred during the policy period.
As a general rule, the construction and effect of a contract of insurance is a matter of law to be determined by the court. If the facts are admitted, as they are here, then it is for the court to decide whether they come within the terms of the policy, and the function of this court on appellate review is the same as that of the court below. (Goforth v. Franklin Life Ins. Co., 202 Kan. 413, 449 P.2d 477; 1 Couch on Insurance 2d § 15:3, p. 638.)
The policy herein is structured in the customary form. It is divided into sections entitled 'Insuring Agreements,' 'Exclusions' and 'Conditions.' Attached to the policy are several endorsements, two of which are pertinent to the question involved and will be set out and discussed in the course of this opinion.
The first section of the body of the policy is entitled 'Insuring Agreements.' This section is divided into four separate divisions designated by Roman numerals. Sections I and II set out the insurance afforded by the policy and Section III defines insured. Section IV, which is pertinent to the controversy, is entitled 'Policy Period, Territory' it reads in full as follows:
'This policy applies only to accidents which occur during the policy period within the United States of America, its territories or possessions, or Canada.' (Emphasis supplied.)
By the express terms of agreement IV the policy covered only accidents which arose during the one year for which the policy was issued. No reasonable person could read this simple language any other way. As far as this provision goes that an accident may be definitely located as to time when and place where it happened, it presents a single test to determine whether the liability under the policy arises within its specified period. To stretch the scope of 'accident' backward in time to reach the date of the earliest initiation of any event which might be regarded as having a causal relation to the accident would introduce ambiguity where none now exists. Such would be the effect of adopting the position of defendants that the breach of warranty at the time of the sale of the ladder in question is the event which fixes coverage under the policy.
To support their position, as we understand it to be asserted, the defendants-appellees have tried to broaden the definition of an 'accident' so as to relate back to the time when the wrongful act occurred which in the case of a claim for breach of warranty would be when the product was sold. Defendants-appellees say the provisions of Endorsements Serial Nos. 3 and 5, either broaden the scope of 'accident,' as we have mentioned, or create an ambiguity which must be construed against the insurer.
Endorsement Serial No. 3, entitled 'Products Liability Endorsement-Vendors,' reads in part as pertinent herein as follows:
'It is agreed that such insurance as is afforded by the policy also applies, subject to the following provisions, with respect to the possession, consumption, handling or use of, or the existence of any condition in any merchandise or product manufactured, sold, handled or distributed by the named insured:
(Emphasis supplied.)
Paragraph numbered two of Endorsement Serial No. 3 merely excludes from coverage those persons in the commercial chain who change the form of, repack, service or repair any such merchandise or products under the conditions therein set out; it is immaterial to the issue herein and need not be set out.
The manifest purpose of Endorsement No. 3 is to extend the coverage afforded by the policy to protect those involved in the commercial chain of the product, i. e., persons or organizations involved in the sale, distribution or handling of products manufactured or sold by the principal insured. But the protection extended to those persons or organizations in the commercial chain is only 'such insurance as is afforded by the policy' and that is protection against liability for accidents occurring within the policy period. We are unable to detect any inconsistency or ambiguity between the provisions of Endorsement No. 3 and the provisions of the Insuring Agreements of the principal policy. The fact that the ladder was purchased by Mr. Scott during the term of the policy and that a cause of action for breach of warranty against Falco and/or others in the commercial chain accrued at that time is irrelevant to the coverage afforded by the policy and attached endorsements. The accident which caused the injury and...
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