Southern Guaranty Ins. Co. v. Scott

• Decision Date: 31 August 1972
• Docket Number: 1 Div. 727
• Citation: 289 Ala. 159,58 A.L.R.3d 1,266 So.2d 602
• Parties: , 58 A.L.R.3d 1 SOUTHERN GUARANTY INSURANCE COMPANY, a corporation v. Robert Gorin SCOTT et al.
• Court: Alabama Supreme Court

Page 602

266 So.2d 602

289 Ala. 159, 58 A.L.R.3d 1

SOUTHERN GUARANTY INSURANCE COMPANY, a corporation v. Robert Gorin SCOTT et al.

1 Div. 727.

Supreme Court of Alabama.

Aug. 31, 1972.

Hill, Hill, Stovall, Carter & Franco and Harry Cole, Montgomery, Windell C. Owens, Monroeville, for appellant.

William D. Melton, Evergreen, for appellee Scott.

Brooks, Garrett & Thompson, Brewton, for appellees James Tucker and Silas Tucker.

HEFLIN, Chief Justice.

This is an appeal from a decree in a declaratory judgment action instituted by appellant-complainant Southern Guaranty Insurance Company against the appellees-respondents James Tucker and Silas Tucker, individually and d/b/a Tucker Feed and Supply Company and Robert G. Scott, seeking an interpretation of a liability insurance policy.

Appellee-respondents Tuckers sell anhydrous ammonia (liquid nitrogen) for use as a fertilizer. They do not manufacture the liquid themselves, but purchase it from chemical companies. This liquid fertilizer is delivered to the Tuckers in tank trucks owned by the chemical companies. After the liquid fertilizer is delivered it is transferred to a large, central storage tank located at the Tuckers' place of business in Uriah, Alabama. The Tuckers own 'nurse tanks' which have a capacity of 1,000 gallons each. These nurse tanks, which are fastened on a four wheel wagon and equipped with a trailer hitch, are used to transport the anhydrous ammonia from the storage tank to particular locations where it is used on farms. On some occasions the appellees-respondents Tuckers would haul the nurse tanks to their customers' farms, other times the customers would tow the nurse tanks with their own motor vehicles to their farms.

Once the nurse tank is transported to the particular location where the liquid fertilizer is to be used the customer applies it by means of an applicator, which is a tractor-pulled machine equipped with a small tank which varies in capacity from 80 to 100 gallons. The liquid is transferred from the nurse tank to the applicator by means of a hose 12 feet in length and 1 inch in diameter which, along with the nurse tank and applicator, is owned and supplied by the appellees-respondents Tuckers.

Appellee-respondent Scott was one of the Tuckers' regular customers. On May 6, 1970, Mr. Scott went to the Tucker Feed and Supply Company to get a nurse tank of anhydrous ammonia. He transported a full tank to his farm by his pick-up truck. There had been no prior arrangement to pay for the anhydrous ammonia on this particular occasion, however, the usual and customary procedure was to place the charges on an open account for Mr. Scott, who would pay at the end of the season. The charges were computed by weighing the nurse tank before the customer took it out and again when he returned it. The difference in the two weights represented the amount of liquid used, and the customer was charged accordingly.

After towing the nurse tank to his field with his truck, appellee-respondent Scott proceeded to transfer the liquid to the applicator and from there to his field. Mr. Scott had used one applicabor tank of the liquid and was filling it a second time when the transfer hose ruptured, causing the fluid to spray into his eyes causing him serious personal injuries. Neither at the time of the accident, nor earlier that day had anyone from Tucker Feed and Supply Company been at Scott's farm.

Scott filed suit against the Tuckers and others for his personal injuries alleging that the Tuckers had so negligently maintained or inspected the tank that the hose attached thereto exploded. In another count Mr. Scott framed the negligence charge against the Tuckers around the failure to equip the tank with safety devices including goggles and water as was the local custom. The Tuckers delivered the suit papers to the appellant-complainant Southern Guaranty Insurance Company to defend the law suit under its policy. Southern Guaranty responded to the Tuckers' tender by filing a bill for declaratory judgment to ascertain whether its policy was applicable. Upon final hearing the Circuit Court of Monroe County, Alabama, in Equity, held that the insurance company was obligated to defend the suit filed by Scott. This appeal followed.

The insurance company contends that the insurance policy does not cover Scott's injury because the policy excludes coverage when the insured's products are handled or distributed away from the insured's premises and no operation of the insured was in progress since there was a 'completed operations or product hazard' exclusion clause in the policy. The appellees-respondents, on the other hand, argue that such exclusionary clause is not applicable because the Tuckers own the equipment including the hose and that the operation of the Tuckers was not completed at the time of the occurrence.

The policy of insurance is styled 'General Liability-Automobile Policy' and is in a general liability form. On the 'jacket' of the policy there are 25 different coverage parts. Such form allows for the insertion of the coverage part number and the amount of the advanced premium in appropriate places when various coverages are written. Endorsements are added to the policy to provide the provisions for each particularly applicable coverage that is purchased. In this instance, there was only one coverage and it was entitled 'Manufacturers' and Contractors' Liability Insurance'. For a clearer understanding the jacket of this policy is reproduced as follows:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

The insuring clause of the endorsement is exceptionally broad and comprehensive. The pertinent portions of that clause are as follows:

'1. COVERAGE A--BODILY INJURY LIABILITY

COVERAGE B--PROPERTY DAMAGE LIABILITY

The company will 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, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, * * *.'

The company limits this comprehensive insuring clause by exclusions. Excluded are many hazards such as contractual liability, automobile liability, completed operations or product hazard, and others. The reasons for many of the exclusions, including automobile liability and completed operation or product hazard, are obvious in that it such coverages are provided then premiums must be charged for them and such coverages are then designated by the insertion of the proper endorsement numbers and advanced premium rates on the jacket of the cover; if not provided, then such coverages must be excluded from the broadness of insuring clauses.

The pertinent portion of the policy concerning 'completed operations hazard' is 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.

'* * *'

In order to hold that the insured was not obligated to defend the suit brought by Scott this court must find that the facts of the occurrence fall within the 'completed operations' exclusion. To fall within this exclusion the injury must have occurred a) away from the premises of the insured, and b) when no operation of the insured was in progress. It is not disputed that the injury occurred away from the premises of Tucker Feed and Supply Company. The critical issue is whether the appellees-respondents Tuckers had completed their operation with regard to the business transaction with appellee-respondent Scott prior to the injury.

The appellant-complainant Southern Guaranty Insurance Company, in brief, states in substance that the insurance policy form in question was revised in 1966 and that there have been no decisions interpreting or construing the 'completed operations' exclusionary clause as it is presently written. However, this insurance company contends that the decisions based upon policies issued prior to 1966 are controlling and that the distinctions between the former policy form and that presently in use are inconsequential to the decision in this case because the present form more clearly defines what...