Shelter Mut. Ins. Co. v. Gardner

• Decision Date: 06 January 1995
• Docket Number: Civ. No. 94-5114.
• Citation: 872 F. Supp. 622
• Parties: SHELTER MUTUAL INSURANCE COMPANY, Plaintiff v. Bill J. GARDNER, Janet F. Gardner, Raymond Beans, Amy Beans, William N. Aitken, Ada S. Aitken, Don Toepfer, and Shores Hardware and Propane Gas, Inc., Defendants.
• Court: U.S. District Court — Western District of Arkansas

872 F. Supp. 622

SHELTER MUTUAL INSURANCE COMPANY, Plaintiff v. Bill J. GARDNER, Janet F. Gardner, Raymond Beans, Amy Beans, William N. Aitken, Ada S. Aitken, Don Toepfer, and Shores Hardware and Propane Gas, Inc., Defendants.

Civ. No. 94-5114.

United States District Court, W.D. Arkansas, Fayetteville Division.

January 6, 1995.

Timothy L. Brooks and W. H. Taylor, Mashburn & Taylor, Fayetteville, AR, for Bill and Janet Gardner.

Rex M. Terry, Hardin, Jesson, Dawson & Terry, Fort Smith, AR, for Raymond and Amy Beans.

Dale Garrett and Woody Bassett, Bassett Law Firm, Fayetteville, AR, for William and Ada Aitken.

Robert L. Jones, Jr., Jones, Gilbreath, Jackson & Moll, Fort Smith, AR, for Don Toepfer.

Tilden P. Wright, III, Davis, Cox & Wright, Fayetteville, AR, for Shores Hardware.

Thomas B. Pryor, Pryor, Barry, Smith, Karber & Alford, Fort Smith, AR, for plaintiff.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

This declaratory judgment action was filed by Shelter Mutual Insurance Company (Shelter) on June 22, 1994. Shelter seeks a declaration that it does not have a duty to defend a state court lawsuit currently pending between William and Ada Aitken and, inter alia, its insureds, Bill and Janet Gardner. Shelter additionally seeks a declaration that the policy in question does not provide coverage on the claim asserted by Mr. and Mrs. Aitken. The case has been removed from the trial docket and the parties have agreed that the court may resolve the issues on the basis of the materials submitted by the parties.

Background.

Shelter issued to Bill and Janet Gardner a commercial general liability policy. The Gardners first obtained liability insurance in February of 1991 in response to requests of general contractors for certificates of insurance. The initial policy was renewed on an annual basis and was in full force and effect on October 31, 1993.

Bill Gardner (Gardner) is a plumber doing business as a sole proprietor under the name Gardner Plumbing. He works primarily as a subcontractor installing piping and fixtures in newly constructed buildings. In March of 1991 Gardner entered into an oral contract with Don Toepfer (Toepfer) to install the plumbing (drains, water and gas lines) in a house Toepfer was constructing for William and Ada Aitken. Of particular relevance to this lawsuit, Gardner was to install certain pipes, valves, and fittings for the purpose of transmitting liquified petroleum (LP) gas to the appliances and fireplaces within the home.

Gardner commenced work in March of 1991. By March of 1992, the home was completed, Gardner was fully paid for his work, and the house including the plumbing fixtures were in use. Gardner did not have any service agreements or warranties or other obligations to the Aitkens regarding his work. No representations were made regarding the safety of the plumbing installation and the pipelines. Gardner Deposition at 69.

Toepfer selected separate defendant, Shores Hardware and Propane Gas, Inc. (Shores), to provide and install two 1000-gallon LP gas storage tanks to transmit the gas to household appliances via the pipes, valves, and fittings, installed by Gardner. The storage tanks were installed at the Aitkens home in July of 1991 when the home was still under construction. Arkansas liquified petroleum gas regulations require a pressure test, using plain air, of at least 25 pounds per square inch (psi) to check the pipes, valves, and fittings, and a certification to the state that there are no leaks. The installer of the tanks must fulfill this requirement before actually hooking up the LP gas tanks and transmitting LP gas into the home.

In July of 1991, when the initial test was run a leak was found in the stone fireplace on the first level of the home. The Shores' employees refused to hook up the tanks until Gardner repaired the leak. On July 31, 1991, the Shores' employees returned to the home to run a second pressure test. Gardner allegedly told one Shores' employee, Joey Cagle, not to run the test above 20 psi because the "O-rings" in the fireplace valves would not withstand a higher pressure. No leaks were discovered when the test was run at the lower pressure and the tanks were installed. Cagle and Gardner certified the work as completed.

On May 12, 1993, a Shores' employee, Chris Miller, went to the Aitkens home to refill the LP tanks. Mrs. Aitken informed him that she had been experiencing gas loss and could smell gas in the home. Two leaks were discovered outside the home and repaired. A third leak was discovered at the fireplace valve in the living room when an air pressure test was performed at 25 psi or above. The Aitkens were informed of the leak which was inside the wall and the tanks hooked back up.

William Aitken telephoned Bill Gardner to apprise him of the situation and talk with him about what needed to be done. Mr. Aitken reached Janet Gardner and left a message for Mr. Gardner. The message was never returned. Chris Miller, the Shores' employee, encountered Bill Gardner a few days later and mentioned the leaks to Gardner who indicated unhappiness at having to return to the Aitken home to work on anything.

On October 31, 1993, the Aitkens home was destroyed by an explosion and fire allegedly caused by the leakage of liquified petroleum gas from a valve near the fireplace. Gardner had installed the valve. As of October 31, 1993, Gardner indicated there was nothing he was supposed to have performed that he had not performed. Gardner Deposition at 69.

On April 25, 1994, the Aitkens filed suit in the Circuit Court of Benton County, Arkansas, against Bills Gardner d/b/a Gardner Plumbing Service, Don Toepfer and Shores Hardware & Propane Gas, Inc. The complaint alleges, among other things, that Bill Gardner was guilty of negligence which was a proximate cause of the liquefied petroleum gas explosion. Specifically, it is alleged Gardner was negligent in the following respects: (1) failing to properly install the LP gas lines and related parts; (2) in failing to inspect and test the lines and related parts for leakage; (3) failing to correct and eliminate the leakage; (4) allowing the plaintiffs to occupy the home knowing the LP lines and related parts were allowing LP gas to escape into the structure; (5) failing to exercise the requisite degree of care; and (6) in installing automatic fireplace starters to be used with LP gas. Shelter is presently defending the state court lawsuit under a reservation of rights.

Shelter contends the policy provides no coverage for the damages at issue because of an exclusion contained in the policy endorsement for products — completed operations hazard. Shelter's contention is quite simply that the installation of all lines was complete and being used for more than one year prior to the explosion and fire.

The defendants in this case have each adopted portions of the briefs filed by other defendants. Thus, for purposes of discussion we will not attempt to segregate the arguments made by each defendant separately. First, it is argued that the definitions, in particular the definition of completed, are circular.

Second, it is argued that Gardner's work was never completed because (1) the proper pressure test was never run and (2) Gardner failed to provide proper warnings or instructions. The gist of the defendants' arguments in this respect is that the work Gardner did was not completed because of his negligence in installation and his failure to properly instruct or warn the Aitkens.

Third, it is argued that the exclusion does not apply at all because Gardner's work in selecting the valves occurred on Gardner's work in selecting the valves occurred on Gardner's premises and at his place of business. Even if the court considers the premises where the parts were installed to be the proper place to decide the issues under the policy, defendants reiterate their argument that the product itself was never complete because an improper type of fireplace valve was chosen and put into the system without warning of the possible consequences.

Fourth, defendants argue the system was never put to its intended use. Defendants state the use intended by Gardner and the Aitkens was a trouble-free LP gas system that did not leak, did not create the smell of gas in the home, and that did not cause a strangely high gas bill.

Finally, it is argued that Gardner's omission in failing to timely respond to the report of an LP gas leak invokes coverage under the policy which is totally separate and apart from the products completed operations hazard exclusion. This argument is premised in part on the deposition testimony of Bill Fulkerson, Shelter's agent, who indicated the policy provided coverage for occurrences relating to or arising out of service calls that a plumber made to an existing residence. It is argued that a finding of liability may be premised on a negligent omission to perform a certain act where a duty to act existed.

In response to this argument, Shelter contends that the failure to respond to the call in May of 1993 had certainly been abandoned or completed by the date of the loss on October 31, 1993. At best, Shelter argues the "alleged negligence relating to the phantom service call — and most emphatically the situation that existed five months after the alleged call — falls within the purview of `work that may need service, maintenance, correction, repair or replacement,' which under the provisions of the policy `will be treated as completed.'"

In their answer the Gardners assert estoppel. The Gardners' brief does not address this point and the court assumes the Gardners no longer wish to rely on this legal argument.

Policy Provisions.

The insuring agreement provides as follows:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend any "suit"

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