Stearns-Roger Corp. v. Hartford Acc. & Indem. Co.
| Decision Date | 19 October 1977 |
| Docket Number | No. 12962-PR,STEARNS-ROGER,12962-PR |
| Citation | 117 Ariz. 162,571 P.2d 659 |
| Parties | CORPORATION, a Colorado Corporation, Appellant, v. The HARTFORD ACCIDENT AND INDEMNITY COMPANY, an Insurance Corporation, Appellee. |
| Court | Arizona Supreme Court |
Lewis & Roca by John P. Frank and Charles G. Case, II, Phoenix, for appellant.
Holesapple, Conner, Jones & Johnson by Philip Hawley Smith, Tucson, for appellee.
A declaratory judgment action was brought by appellant Stearns-Roger Corporation (Stearns) and Phelps-Dodge Corporation (Phelps-Dodge) asking that an insurance policy issued by appellee Hartford Accident and Indemnity Company (Hartford) be construed to afford coverage as to a particular accident. Motions for summary judgment were filed by both parties. The trial court granted summary judgment in favor of Hartford and denied coverage. Stearns filed an appeal from the judgment of the Superior Court. Thereafter Hartford moved in the Court of Appeals to dismiss Stearns' appeal prior to the time briefs were filed on the basis that Stearns lacked standing. This motion was denied. The Court of Appeals reversed the decision of the trial court. Stearns-Roger Corporation v. Hartford, 117 Ariz. 132, 571 P.2d 278 (App. 1976). Hartford filed a petition for review which was accepted by this court. The opinion of the Court of Appeals is vacated. The judgment of the Superior Court is affirmed.
In 1967, Stearns, an engineering construction firm based in Colorado, entered into a long-term construction agreement with Phelps-Dodge for work to be performed at Phelps-Dodge's Morenci substation. Pursuant to this construction agreement Stearns agreed to procure comprehensive public liability insurance. 1 In addition, Stearns also obtained workmen's compensation coverage in a separate policy from Hartford.
Under the public liability insurance policy, Stearns was the named insured and Phelps-Dodge, though not expressly named, was an additional insured. 2 During the course of the construction two employees of the named insured, Stearns, were injured and filed suit against Phelps-Dodge. The injury of each employee occurred while doing Stearns' work, yet each workman contended that the negligence was that of Phelps-Dodge. Phelps-Dodge then tendered the defense of the action to Hartford pursuant to the Hartford-Stearns insurance policy. Hartford refused to defend claiming lack of coverage.
The policy includes the following exclusion upon which Hartford relies:
Both negligence cases were settled with payment coming from both Phelps-Dodge and to some extent from its liability insurance carrier, American Motors Insurance. In those settlements Phelps-Dodge waived its right to appeal the declaratory judgment; however Stearns' right to appeal was specifically preserved.
A threshold question presented in this appeal is whether Stearns has standing to contest the decision of the court below.
Stearns contends that the denial of Hartford's motion to dismiss in the Court of Appeals constitutes the law of the case which precludes Hartford from re-litigating the issue in this court. In dismissing the motion the appellate court merely issued an interlocutory order which does not constitute a judgment which establishes the "law of the case."
Hartford contends that Stearns lacked standing to maintain the appeal from the declaratory judgment which held that Hartford owes no duty to defend or indemnify Phelps-Dodge. Hartford claims that Stearns would not be a party "aggrieved" by the judgment. 3 Stearns answers that since the only issue decided in the declaratory judgment was coverage on the Hartford policy for Phelps-Dodge, Phelps-Dodge can still sue Stearns on the theory that it failed to provide insurance coverage as agreed in the contract between Phelps-Dodge and Stearns. If the declaratory judgment were allowed to stand Hartford would plead res judicata when Stearns looked to it for relief on the Phelps-Dodge claim. It has been held that if an appellant would be bound by a ruling of the trial court because of the doctrine of res judicata a party is sufficiently "aggrieved" to warrant the right of direct appeal. Maloney v. Taplin, 154 Conn. 247, 224 A.2d 731 (1966); Nat'l Farmers Union Property and Casualty Company v. Maca, 26 Wis.2d 399, 132 N.W.2d 517 (1965). The judgment in the court below has such a substantial effect on the rights of Stearns that we believe Stearns is a party sufficiently aggrieved to maintain this appeal.
On the merits, it is Stearns' position that the word "insured" as used in the exclusionary clause refers to a person who is an employee of the insured claiming coverage. In this case since the employees who are injured are not employees of the insured claiming coverage (Phelps-Dodge), the exclusion does not apply and Hartford is obligated to defend Phelps-Dodge. Hartford, on the other hand, argues that the word "insured" refers to the named insured (Stearns) and to the additional insured (Phelps-Dodge). Hartford argues that because employees of the named insured were injured the exclusionary clause applies and Hartford is relieved of its obligation to defend. Stearns urges that the word "insured" is ambiguous because it could be construed to mean either the named insured or the additional insured. Stearns points out that where there is ambiguity respecting the coverage or terms of an insurance contract it will be construed against the insurer and in favor of the insured. Federal Insurance Company v. P.A.T. Homes, Inc., 113 Ariz. 136, 547 P.2d 1050 (1976); Prudential Insurance Company of America v. Barnes, 285 F.2d 299 (9th Cir., 1960).
The exclusion clause in question reads in part:
Stearns argues that the clause is ambiguous because the terms "Named Insured" and "insured" are both used; hence an interpretation should be employed which favors coverage.
It is one thing to construe an ambiguity, and it is quite another...
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