Simon v. Shelter General Ins. Co.

• Decision Date: 14 December 1992
• Docket Number: No. 91SC608,91SC608
• Citation: 842 P.2d 236
• Parties: Marilyn SIMON, James Simon, and Rob Coppola, d/b/a Designer Spas & Hot Tubs, Petitioners, v. SHELTER GENERAL INSURANCE COMPANY, a Missouri corporation, Respondent.
• Court: Colorado Supreme Court

Page 236

842 P.2d 236

Marilyn SIMON, James Simon, and Rob Coppola, d/b/a Designer

Spas & Hot Tubs, Petitioners, v. SHELTER GENERAL INSURANCE COMPANY, a Missouri corporation, Respondent.

No. 91SC608.

Supreme Court of Colorado,

En Banc.

Dec. 14, 1992.

Rehearing Denied Jan. 11, 1993.

Pryor, Carney and Johnson, P.C., Mark P. Martens and W. Randolph Barnhart, Englewood, for petitioners Marilyn Simon and James Simon.

Renner & Rodman, Raymond J. Lego, Denver, for petitioner Rob Coppola.

Foede and Lichtenstein, David Lichtenstein, Westminster, for respondent.

Chief Justice ROVIRA delivered the Opinion of the Court.

We granted certiorari to review the decision of the Colorado Court of Appeals in Shelter General Insurance Co. v. Coppola, 824 P.2d 58 (Colo.App.1991), which held that provisions of an insurance policy contained in an endorsement prevail over inconsistent provisions contained in the body of the policy, even though the endorsement and the body of the policy were issued simultaneously, and are fully enforceable against the insured. We reverse.

I

The relevant facts are undisputed. In November 1987, Marilyn Simon was seriously burned when she fell into a hot tub that had been reconditioned by Rob Coppola, d/b/a Designer Spas & Hot Tubs (Coppola). Coppola furnished an equipment pack which contained a defective thermostat as part of its reconditioning of the hot tub. Due to the failure of the thermostat, the water in the hot tub rose to approximately 160 degrees. The thermostat was manufactured by Eaton Corporation.

Simon and her husband later brought suit against Coppola asserting claims for negligent reconditioning of the hot tub and negligent failure to instruct on the proper use of the hot tub. Shelter General Insurance Company (Shelter) then filed a declaratory judgment action against Coppola claiming that its comprehensive general liability policy did not provide coverage for the claims asserted by the Simons. The trial court agreed, finding that both the products hazard and completed operations exclusions unambiguously applied to the stipulated facts and provided no coverage. The court of appeals affirmed. ¹

Under the general grant of coverage contained in the body of the policy issued to Coppola, Shelter agreed to "pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of A. bodily injury or B. property damage to which this insurance applies...." This general grant of coverage is limited by a series of exclusions which narrow the scope of coverage under the policy. In the body of the policy, one such exclusion provides:

This insurance does not apply:

(a) to liability assumed by the insured under any contract or agreement except an incidental contract; but this exclusion does not apply to a warranty of fitness or quality of the named insured's products or a warranty that work performed by or on behalf of the named insured will be done in a workmanlike manner....

(Emphasis added and omitted.) (Hereinafter "exclusion (a).") The general grant of coverage is also limited by exclusions contained in endorsements to the policy. One such endorsement exclusion states:

It is agreed that such insurance as is afforded by the Bodily Injury Liability Coverage and the Property Damage Liability Coverage does not apply to bodily injury or property damage included within the Completed Operations Hazard or the Products Hazard.

(Emphasis omitted.) (Hereinafter "endorsement" or "endorsement exclusions.")

The definitions section contained in the body of the policy defines "completed operations" and "products hazard" as follows:

"completed operations hazard" includes bodily injury and property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured. "Operations" include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earliest of the following times:

(1) when all operations to be performed by or on behalf of the named insured under the contract have been completed,

(2) when all operations to be performed by or on behalf of the named insured at the site of the operations have been completed, or

(3) when the portion of the work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.

Operations which may require further service or maintenance work, or correction, repair or replacement because of any defect or deficiency, but which are otherwise complete, shall be deemed completed. (emphasis omitted) (Hereinafter the "completed operations exclusion").

* * * * * *

"products hazard" includes bodily injury and property damage arising out of the named insured's products or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others....

(Emphasis omitted.) (Hereinafter "product hazards exclusion.")

Coppola argues that these five provisions, when read together, create an inherent conflict respecting the scope of coverage under the policy. Coppola maintains this conflict requires that we construe the policy most strictly against Shelter--and in favor of Coppola--finding that the policy grants coverage to Coppola for the Simons' claims.

Shelter argues (1) that the above cited provisions do not conflict and (2) that if these provisions are found to be in conflict, the endorsement exclusions govern because the provisions of an endorsement prevail over inconsistent provisions contained in the body of the policy.

II

In determining the meaning of an insurance contract and assessing whether it contains conflicting provisions, we are guided by well-settled principles of interpretation. Our starting point is, of course, the intent of the parties as manifested by the plain language of the policy. Marez v. Dairyland Ins. Co., 638 P.2d 286, 289 (Colo.1981) ("Policy is not sui generis but is treated in the law in the same way as contracts are treated generally, and is to be interpreted according to the intent of the parties."); Allstate Ins. Co. v. Starke, 797 P.2d 14, 18 (Colo.1990) ("In construing insurance policy, words should be given their plain meaning according to common usage ... and strained construction should be avoided." (citations omitted)). When construing the language of an insurance contract, its provisions cannot be read in isolation, but must be considered as a whole. Security Ins. Co. of Hartford v. Houser, 191 Colo. 189, 191, 552 P.2d 308, 310 (1976). When provisions of an insurance policy conflict, they are to be construed against the insurer and in favor of coverage to the insured. See 13 John A. Appleman & Jean Appleman, Insurance Law and Practice § 7401, at 253-54 (1976).

It is also important to recognize that the determination of an insurance contract's meaning and whether it contains conflicting provisions is not answered by reference to what those who are experts in the construction of insurance contracts or those with a clear understanding of the legal effects of specific language might understand by reading a policy. See Travelers Ins. Co. v. Jeffries-Eaves, Inc., 166 Colo. 220, 223, 442 P.2d 822, 824 (1968); Standard Marine Ins. Co. v. Peck, 140 Colo. 56, 60, 342 P.2d 661, 663 (1959); Columbian Nat'l Life Ins. Co. v. McClain, 115 Colo. 458, 461, 174 P.2d 348, 350 (1946). To the contrary, the construction of an insurance contract must be ascertained by reference to what meaning a person of ordinary intelligence would attach to it. Standard Marine, 140 Colo. at 60, 342 P.2d at 663.

The exception to exclusion (a) for a warranty of fitness or quality and the products hazard exclusion found in the endorsement are plainly in conflict. Exclusion (a) provides that "this exclusion does not apply to a warranty of fitness or quality of the named insured's product...." The endorsement exclusion, however, provides that coverage does not apply to damage included within the products hazard exception. Products hazard, as defined in the policy, encompass damage "arising out of the named insured's products or reliance upon a representation or warranty made at any time thereto...." Thus, the Shelter policy on the one hand excepts from exclusion certain warranties while the products hazard specifically excludes coverage for damage arising from reliance upon a warranty. The two provisions are in conflict respecting the policy's coverage for liability resulting from product warranties.

Similarly, there is a conflict between exclusion (a)'s exception for "work performed by or on behalf of the named insured ... in a workmanlike manner" and the completed operations exclusion. "Workmanlike" is defined as "worthy of a good workman: well performed, skillful." Webster's Third New Int'l Dictionary at 2635 (1986). More specifically, workmanlike has been used to refer to the promise that a "building will be erected in a reasonably good and workmanlike manner and will be reasonably fit for the intended purpose." Markman v. Hoefer, 252 Iowa 118, 106 N.W.2d 59, 62 (1960). The completed operations hazard exclusion, however, covers myriad operations in which the warranty of workmanlike performance would be applicable. Additionally, a conflict arises due to exclusion (a)'s exception for a warranty of workmanlike performance and the endorsement exclusion for "reliance upon a ... warranty." Consequently, we find that these provisions are in conflict respecting the scope of coverage under...