Western Fire Ins. Co. v. J. R. Snyder, Inc.

• Decision Date: 08 June 1977
• Docket Number: Docket No. 27631
• Citation: 76 Mich.App. 242,256 N.W.2d 451
• Parties: The WESTERN FIRE INS. CO., and the Western Casualty & Surety Co., jointly and severally, Plaintiffs-Appellees, v. J. R. SNYDER, INC., J. R. Snyder d/b/a J. R. Snyder Co., Snyder Masonry, Inc., a/k/a J. R. Snyder Co., Inc., and/or J. R. Snyder Masonry, Inc., Practical Investment Co., formerly Practical Home Builders, Inc., and Security Mutual Ins. Co. of New York, jointly and severally, Defendants-Appellants. 76 Mich.App. 242, 256 N.W.2d 451
• Court: Court of Appeal of Michigan — District of US

Page 451

256 N.W.2d 451

The WESTERN FIRE INS. CO., and the Western Casualty & Surety Co., jointly and severally, Plaintiffs-Appellees, v. J. R. SNYDER, INC., J. R. Snyder d/b/a J. R. Snyder Co. Snyder Masonry, Inc., a/k/a J. R. Snyder Co., Inc., and/or J. R. Snyder Masonry, Inc., Practical Investment Co formerly Practical Home Builders, Inc., and Security Mutual Ins. Co. of New York, jointly and severally Defendants-Appellants.

Docket No. 27631.

76 Mich.App. 242, 256 N.W.2d 451

Court of Appeals of Michigan.

June 8, 1977.

Rehearing Denied July 15, 1977.

Released for Publication Aug. 12, 1977.

[76 MICHAPP 243] Metry, Metry & Sanom by Gilbert E. Metry, Detroit, for defendants-appellants.

Robert E. Fox, Southfield, for plaintiffs-appellees.

[76 MICHAPP 244] Before V. J. BRENNAN, P. J., and GILLIS and RILEY, JJ.

PER CURIAM.

Defendants appeal a declaratory judgment of the Oakland Circuit Court holding that two insurance policies issued by plaintiffs did not give rise to a duty to defend the various Snyder companies in a separate suit commenced in Wayne County.

In the Wayne suit an injured workman employed by Snyder, the subcontractor, sued Practical, the general contractor, for personal injuries resulting from a construction accident. ¹ Practical impleaded Snyder as a third-party defendant pursuant to the indemnity and "hold-harmless" provisions of a contract between the general contractor and subcontractor. ² Snyder, assuming it was insured by plaintiffs, demanded that the insurers defend the third-party complaint brought by Practical. Denying liability, the insurers initiated the present suit for declaratory judgment.

Two policies of insurance are involved. The first, an "Automobile-General Comprehensive Liability Policy" issued to the Snyder companies by plaintiff The Western Casualty and Surety Company, provides coverage for general exposures and for bodily injury. By its terms, however, the policy does not include "bodily injury to any employee of the insured arising out of and in the course of his employment". Of the two exceptions to this exclusion[76 MICHAPP 245] of coverage, only one arguably applies, namely, that bodily-injury coverage is allowed where the insured has assumed liability "under a contract as defined" by the instant policy.

Since defendants have admitted that the workman suffered his injuries while in the course of his employment, our only task in construing the first policy is to determine whether Snyder's contract to indemnify and hold Practical harmless is a liability assumed by the insured under a "contract" as defined by the policy. The general definitions of the policy provide in pertinent part:

"(c) Contract means, if in writing, a lease of premises, easement agreement, agreement required by municipal ordinance, sidetrack agreement, or elevator or escalator maintenance agreement."

Clearly, only the most strained construction could interpret the Snyder-Practical indemnity contract as of the type described in the policy's definition of contract. See Kipka v. Chicago & Northwestern Railway Co., 289 F.Supp. 750 (D.Minn., 1968). Despite our obligation to construe insurer-drafted policies in favor of coverage for the insured, Zurich Insurance Co. v. Rombough, 384 Mich. 228, 180 N.W.2d 775 (1970); Arrigo's Fleet Service, Inc. v. Aetna Life and Casualty Co., 54 Mich.App. 482, 221 N.W.2d 206 (1974), lv. den., 392 Mich. 812 (1974), we cannot deny the plain language of the policy. Hence, we affirm the declaratory judgment as to plaintiff Western Casualty & Surety Company.

A different question, however, is presented under the second policy, a "Workmen's Compensation and Employer's Liability Policy" issued by plaintiff The Western Fire Insurance Company. "(C)overage A" under this policy includes a duty to [76 MICHAPP 246] pay workmen's compensation claims to an injured employee, which plaintiff Western Fire asserts it has done; "coverage B" obliges the insurer:

"(t)o pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury by accident or disease * * * sustained * * * by any employee of the insured arising out of and in the course of his employment * * * in (Michigan)."

In addition, the insurer agreed "as respects the insurance afforded by the other terms of this policy" to:

"defend any proceeding against the insured seeking such benefits and any suit against the insured alleging such injury and seeking damages on account thereof, even if such proceeding or suit is groundless, false or fraudulent."

Plaintiffs, however, sought to avoid their defense obligation by relying on certain exclusions from coverage:

"This policy does not apply:

"(c) under coverage B, to liability assumed by the insured under any contract or agreement,

"(f) under coverage B, to any obligation for which the insured or any carrier as his insurer may be held liable under the workmen's compensation or occupational disease law of (Michigan), any other workmen's compensation or occupational disease law, any unemployment compensation or disability benefits law, or under any similar law."

In the complaint for declaratory judgment, [76 MICHAPP 247] plaintiff Western Fire cited the Snyder-Practical indemnity contract and urged the court "under the circumstances and under the language of the (instant) policy" to hold it unobliged to defend Practical's third-party complaint against Snyder in Wayne County. In their respective answers, defendants acknowledged the indemnity agreement, but defendant Practical further asserted as an affirmative defense that its third-party complaint was predicated not only upon contractual indemnity but also upon "negligence against the employer (i. e., Snyder)". Without disputing this latter contention and without detailing the particulars of the third party complaint, plaintiffs moved for summary judgment, GCR 1963, 117.2(2), 117.2(3), seeking a declaration that the insurers had no duty to defend the Snyder companies. Plaintiffs' attorney appended an affidavit to this motion in which he indicated that "the pleadings of defendant admit the issues involved" in the litigation. The affidavit was silent, however, with regard to the negligence theory asserted by Practical.

The lower court, in an opinion ³ noteworthy for its brevity and its apparent disregard of GCR 1963, 517.1, granted summary and declaratory judgment in favor of plaintiffs.

For a variety of reasons, we hold that the lower court erred in granting summary and declaratory judgment to plaintiff Western Fire. First, the insurer[76 MICHAPP 248] had an obligation to plead the facts entitling it to the judgment it seeks. Kuhn v. East Detroit, 50 Mich.App. 502, 504, 213 N.W.2d 599 (1973); Ravenna Education Association v. Ravenna Public Schools, 70 Mich.App. 196, 200, 245 N.W.2d 562 (1976). If the insurer was seeking a declaration that it had no duty to defend the Snyder companies, then at the very least it should have indicated all of the theories of recovery asserted by Practical's third party complaint against Snyder. Indeed, "(t)he insurer has the duty to look behind the third party's allegations to analyze whether coverage is possible. See 14 Couch on Insurance 2d, § 51:47, p. 540 (Supp. 1975-1976)." Shepard Marine Construction Co. v. Maryland Casualty Co., 73 Mich.App. 62, 65, 250 N.W.2d 541, 542 (1976). Second, Practical's assertion in its answer (that its third-party complaint charged Snyder's negligence) was an issue of...