Textron, Inc. v. Liberty Mut. Ins. Co.

• Decision Date: 08 April 1994
• Docket Number: No. 93-218-A,93-218-A
• Citation: 639 A.2d 1358
• Parties: TEXTRON, INC. v. LIBERTY MUTUAL INSURANCE CO.
• Court: Rhode Island Supreme Court

Page 1358

639 A.2d 1358

TEXTRON, INC. v. LIBERTY MUTUAL INSURANCE CO.

No. 93-218-A.

Supreme Court of Rhode Island.

April 8, 1994.

John Bomster, Victoria Almeida, John Tarantino, Adler, Pollock & Sheehan, Providence, Eugene Anderson, New York City, for plaintiff.

John P. McGann, Liberty Mut. Ins. Co., Harry Asquith, Jr., Asquith, Merolla, Anderson, Archetto & Kane, Providence, William F. Cupelo, Liberty Mut. Ins. Co., Pamela Meister, Boston, MA, for defendant.

OPINION

WEISBERGER, Acting Chief Justice.

This case comes before us on appeal by the plaintiff, Textron, Inc. (Textron), from a summary judgment entered in the Superior Court in favor of the defendant, Liberty Mutual Insurance Company (Liberty). For the reasons stated herein, we affirm the entry of summary judgment.

The issue presented to us on appeal is whether various insurance policies issued by Liberty provided Textron coverage for claims arising from either property damage or personal injuries that took place during the policy periods but which were not reported to Liberty until twenty-one years after the expiration of the last policy. The undisputed facts surrounding this appeal are as follows.

I

Between 1961 and 1966, Textron purchased from Liberty five successive comprehensive general-liability insurance policies, each with identical terms. Each policy consisted of a five-page standard printed form policy (the standard policy) and a series of endorsements that spanned thirty-four pages. The relevant portions of the standard policy are as follows:

"INSURING AGREEMENTS

"I Coverage A--BODILY INJURY LIABILITY To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident.

"Coverage B--PROPERTY DAMAGE LIABILITY To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident.

* * * * * *

"IV POLICY PERIOD, TERRITORY This policy applies only to accidents which occur during the policy period within the United States of America, its territories or possessions, or Canada.

* * * * * *

CONDITIONS

* * * * * *

"8 NOTICE OF ACCIDENT When an accident occurs written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable."

The relevant portions of the endorsements are:

"AMENDATORY ENDORSEMENT [Endorsement Serial No. 1]

* * * * * *

"4. Coverage A--Substitution of 'Occurrence' for 'Accident'--with respect to Coverage A--Personal Injury Liability only, the word 'occurrence' as defined herein is substituted for the word 'accident' wherever the latter appears in the policy.

"The word 'occurrence' means an unexpected happening or event or a continuous or repeated exposure to conditions which results in injury during the policy period provided the insured did not know or intend that injury would result.

"5. Coverage B--Property Damage Liability on an 'Occurrence Basis'--With respect to such insurance as is afforded by the policy for physical injury to or destruction of tangible property, real or personal, and the resulting loss of use thereof, the word 'accident' wherever used in the policy shall be deemed to include any occurrence as defined herein.

" 'Occurrence' means an event, or continuous or repeated exposure to conditions, which unexpectedly and unintentionally causes physical injury to or destruction of tangible property.

* * * * * *

"7. World Wide Coverage, Policy Period Modified--Insuring Agreement [Part] IV is amended to read:

'The policy applies only to (1) personal injury, sickness or disease, including death resulting therefrom, and (2) injury to or destruction of property, including loss of use thereof, which occur during the policy period anywhere in the world; however, if the insured, at the time a claim is made against it, is no longer covered by a liability policy issued by the company, this policy shall not apply under Coverage B to injury to or destruction of property, including the loss of use thereof, which is caused by exposure to conditions over a period of days, weeks, months, or longer and which is not reported by the insured to the company within one year after the policy period.' "

The last policy issued to Textron by Liberty expired on January 1, 1966. Thereafter Textron changed insurance carriers.

In the mid to late 1980's the Environmental Protection Agency, numerous state environmental agencies, and various private parties brought actions against Textron in connection with its alleged environmental contamination of a myriad of sites across the United States. Textron first reported the environmental-based claims to Liberty in August 1987, which was twenty-one years after the expiration of the last Liberty policy. Liberty refused to defend against or provide indemnification for the claims because, it asserted, the injury to or destruction of the property had not been reported to Liberty within one year after its last policy had expired as required by clause number seven of the Amendatory Endorsement, Endorsement Serial No. 1 (clause seven).

Textron had filed a declaratory-judgment action in Superior Court, seeking, inter alia, a determination that the Liberty policies provided coverage for all alleged environmental contamination that may have occurred between 1961 and 1966. Liberty moved for summary judgment pursuant to Rule 56 of the Superior Court Rules of Civil Procedure. Upon reviewing the policies and determining the language to be "relatively clear," the trial justice ruled that the one-year reporting requirement in clause seven barred all Textron's claims. The trial justice also determined that although the policies appeared to be "hybrids," containing elements of both occurrence ¹ and claims-made ² policies, the policies did not violate public policy. Accordingly the trial justice entered summary judgment in favor of Liberty.

II

Textron's claims are based upon both property damage and personal injuries. As discussed herein, Liberty's policies set forth separate and distinct requirements for these two types of claims. We therefore consider the coverage issues for property-damage claims separately from those relating to the personal-injury claims.

A. Property-Damage Claims

The central issue before us is whether, under the terms of Liberty's policies, coverage existed for property damage which allegedly occurred during the policy periods but which was not reported to Liberty until twenty-one years after the policies's expiration.

Textron proffers several theories in support of its position that coverage existed under the policies. The thrust of Textron's first theory is that the policies contained two separate notice provisions, condition number eight in the Insuring Agreements and clause seven in the Amendatory Endorsement. Textron claims that these provisions apply to domestic and international claims, respectively. Since its present claims are domestic in nature, Textron asserts that clause seven has no application and cannot bar coverage. In the alternative Textron argues that even if clause seven does apply to domestic claims, the time limit therein cannot be enforced for two reasons. First, Textron contends that the notice-prejudice doctrine precludes enforcement absent a showing of prejudice by Liberty. Second, Textron asserts that the provision restricts Textron's freedom to contract and thereby violates public policy.

In reviewing an entry of summary judgment, we apply the same standard as the trial justice below. Barratt v. Burlingham, 492 A.2d 1219, 1220 (R.I.1985). Under that well-established standard, the trial justice must review the pleadings, affidavits, and other appropriate evidence in the light most favorable to the party opposing the motion. Hodge v. Osteopathic General Hospital of Rhode Island, 107 R.I. 135, 141-42, 265 A.2d 733, 737 (1970). If, when the evidence is viewed in such light, no material issues of fact exist and the movant is entitled to judgment as a matter of law, the trial justice must enter summary judgment. Alfano v. Landers, 585 A.2d 651, 652 (R.I.1991).

As we have stated in prior cases, whether coverage exists in any given case for a particular damage-causing event depends first and foremost upon the precise terms and conditions of the policy in question. See Mullins v. Federal Dairy Co., 568 A.2d 759, 762 (R.I.1990). When presented with a preprinted-form policy with various endorsements attached thereto, we read the two components together, with the terms of the preprinted form remaining intact except to the extent they are altered by the endorsements. 13A John Appleman and Jean Appleman, Insurance Law and Practice, § 7537 at 143-44 (1976). In so doing, we give the language in both the form policy and the endorsements its plain, ordinary, and usual meaning. Malo v. Aetna Casualty and Surety Co., 459 A.2d 954, 956 (R.I.1983); Bush v. Nationwide Mutual Insurance Co., 448 A.2d 782, 784 (R.I.1982). If the terms are clear and unambiguous, we must enforce the policy as written and refrain from engaging in any judicial modification of the policy terms. Amica Mutual Insurance Co. v. Streicker, 583 A.2d 550, 551 (R.I.1990); Malo, 459 A.2d at 956.

In the case at hand the terms of coverage for property damage are set forth in Part I, Coverage B of the Insuring Agreements, as amended by clauses five and seven of the Amendatory Endorsement. When we read these provisions together, we perceive no ambiguity and find the terms and scope of coverage readily apparent. Given their plain and ordinary meaning, these provisions clearly impose two requirements before coverage attaches: (1) the property damage must occur during the policy period, and (2) if Textron is no longer insured by...