Tiano v. Aetna Cas. and Sur. Co.

• Decision Date: 02 December 1980
• Docket Number: Docket No. 44503
• Parties: Gerald Kenneth TIANO, Individually and Gerald Kenneth Tiano, as Next Friend of Joseph Kenneth Tiano, a Minor, Individually and as Assignee of William J. Pry, d/b/a R. J. Pry & Son, Plaintiffs-Appellants, v. AETNA CASUALTY AND SURETY COMPANY, a Foreign Corporation, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 476

301 N.W.2d 476

102 Mich.App. 177

Gerald Kenneth TIANO, Individually and Gerald Kenneth Tiano,

as Next Friend of Joseph Kenneth Tiano, a Minor,

Individually and as Assignee of William J. Pry, d/b/a R. J.

Pry & Son, Plaintiffs-Appellants, v. AETNA CASUALTY AND SURETY COMPANY, a Foreign Corporation,

Defendant-Appellee.

Docket No. 44503.

Court of Appeals of Michigan.

Dec. 2, 1980.

Released for Publication Feb. 20, 1981.

William J. Liedel, Detroit, for plaintiffs-appellants.

Samuel A. Garzia, Detroit, for defendant-appellee.

Before T. M. BURNS, P. J., and MAHER and CLEMENTS, ^* JJ.

CLEMENTS, Judge.

Plaintiffs appeal as of right from a March 16, 1979, order granting defendant's motion for summary judgment. The plaintiffs had brought suit against the defendant insurance company seeking recovery of a $300,000 consent judgment which had previously been entered in favor of the plaintiffs against William J. Pry, a heating and plumbing contractor who had an insurance policy which the defendant. Summary judgment was granted based on "products hazard" and "completed operations" exclusions contained in the policy issued to Pry.

In September of 1971, Joseph Tiano, age 2, was burned when a hot water boiler exploded while he was visiting the home of his grandparents. Suit was commenced against Pry, who had converted the heating system at the grandparents' home to a natural gas system prior to the time of the explosion. The plaintiffs' complaint alleged that Pry was negligent because he failed to properly install a valve and because the valve furnished and installed by him was unsuitable and defective. Pry contacted the defendant insurance company which refused to defend the action on the basis of exclusionary clauses contained in the policy. After the consent judgment was entered, Pry assigned his claims against the defendant to the plaintiffs.

The insurance policy issued to Pry, under the heading "Comprehensive General Liability Insurance", reads as follows:

"1. BODILY INJURY LIABILITY COVERAGE

PROPERTY DAMAGE LIABILITY COVERAGE

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or 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, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient * * * " Immediately following this statement a number of exclusions are listed. The first of these exclusions is noted by the plaintiffs and reads as follows:

"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."

Exclusion (k) in the same section reads as follows:

"(k) to bodily injury or property damage resulting from the failure of the named insured's products or work completed by or for the named insured to perform the function or serve the purpose intended by the named insured, if such failure is due to a mistake or deficiency in any design, formula, plan, specifications, advertising material or printed instructions prepared or developed by any insured; but this exclusion does not apply to bodily injury or property damage resulting from the active malfunctioning of such products or work."

On a separate page preceding the above passages there is an endorsement which reads:

"This endorsement modifies such insurance as is afforded by the provisions of the policy relating to the following:

COMPREHENSIVE GENERAL LIABILITY INSURANCE EXCLUSION

(Completed Operations Hazard and Products Hazard)

"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."

Another page of the policy, under the heading "Description of Hazard", contains a Hazard D "Completed Operations" and a Hazard E "Products" in the printed form. Typed below the description of the hazards covered, together with the code and rates, is the legend, "D&E NOT COVERED".

"Completed Operations Hazard" and "Products Hazard" are defined in the Definitions section near the end of the policy. The completed operations definition reads 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."

Products hazard and named insured's products are defined as follows:

" '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.

* * *

* * *

" 'named insured's products' means goods or products manufactured, sold, handled or distributed by the name insured or by others trading under his name, including any container thereof (other than a vehicle), but 'named insured's products' shall not include a vending machine or any property other than such container, rented to or located for use of others but not sold."

The issue presented here is whether the completed operations exclusion or the products hazard exclusion preclude recovery from the insurer for the consent judgment entered against the insured for damages which arose because of the insured's negligence in furnishing and installing an improper valve in converting a heating system to natural gas. There is no dispute that the explosion occurred after the operation was completed. There are numerous recent cases from other jurisdictions which have found that virtually identical exclusionary clauses precluded recovery from insurance companies for injuries arising after operations had been completed or when the injuries arose out of the insured's products. ¹ We find the reasoning of those cases applicable to this appeal and affirm the summary judgment order entered in favor of the defendant.

The plaintiffs argue that in the first paragraph under the "Comprehensive General Liability Insurance" heading and in exclusion (a) immediately following, quoted earlier in this opinion, the defendant agreed to pay on behalf of the insured any claims with respect to breach of warranties of fitness or quality of the insured's products and breach of warranties that work performed by the insured would be performed in a workmanlike manner. It is claimed that the policy is ambiguous when this exclusion is read in conjunction with the products hazard and completed operations exclusions and that such ambiguities, under well established Michigan law, must be resolved against the insurer. Similar arguments with respect to virtually identical language have been rejected by courts of other jurisdictions. Shelby Mutual Ins. Co. v. LaMarche, 371 So.2d 198 (Fla.App., 1979), St. Paul Fire & Marine Ins. Co. v. Coss, 80 Cal.App.3d 888, 145 Cal.Rptr. 836 (1978), Abco Tank & Manufacturing Co. v. Federal Ins. Co., 550 S.W.2d 193 (Mo., 1977), Roberts v. P & J Boat Service, Inc., 357 F.Supp. 729 (E.D.La., 1973). In addressing this question, the Roberts Court stated at 733-734:

"It is clear from the wording of the endorsement in this case that the intention was to modify the provisions of the policy relating to comprehensive general liability insurance by excluding from the bodily injury liability coverage and property damage liability coverage bodily injury or property damage included within the completed operations hazard and products hazard. The fact that some of the coverage for the completed operations hazard or products hazard is provided for in an exception to an exclusion rather than in the general coverage provisions makes no difference under the wording of this endorsement; so long as the coverage appears in the comprehensive general liability insurance portion of the policy, it is to be excluded by the endorsement. Counsel has suggested no reason, and none suggests itself, why coverage provided by, or saved by, an exception to an exclusion of the policy, should be any more exempt from exclusion by endorsement than are the general coverage provisions themselves. The endorsement had the effect therefore of excluding bodily injury and property damage included within the completed...