Hurtig v. Terminix Wood Treating & Contracting Co. , 67 Haw. 480 ( 1984 )

OPINION OF THE COURT BY

HAYASHI, J.

Petitioners, Hawaiian Insurance & Guaranty Company, Limited and United National Insurance Company Limited (Insurers) filed for a writ of certiorari claiming error by the Intermediate Court of Appeals. We granted certiorari.

Defendant, Terminix Wood Treating & Contracting Co., Ltd. (Terminix) entered into a contract for the inspection and treatment for termites of the home owned by plaintiffs, Bernard and Helen Hurtig (Hurtigs). Some time after Terminix finished the treatment, the Hurtigs sued Terminix claiming that it failed to correctly perform the contract which had led to termite damage to the house. Terminix brought a third-party complaint against Insurers claiming that Insurers must defend and indemnify Terminix in the law suit. Terminix moved for summary judgment on the issue of Insurers coverage under the policy. The trial court granted the motion for summary judgment. The Intermediate Court of Appeals affirmed the trial court’s decision.

Insurers claim that exclusion (o) of the insurance contract excludes coverage for the damage to the Hurtigs’ house. Exclusion (o) provides that the insurance does not apply “to property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith. .. .” Both the trial court and the Intermediate Court of Appeals were correct in holding that exclusion (o) does not provide for exclusion of coverage in this case.

It has long been recognized in this state that insurance policies must be construed liberally in favor of coverage because they are contracts of adhesion. Sturla, Inc. v. Fireman’s Fund, Insurance Co., 67 Haw. 203, __, 684 P.2d 960, 964 (1984). Therefore, coverage exists under the policy unless the exclusions clearly provide otherwise. Exclusion (o) only excludes “property damage to work performed.” Insurers claim that the work performed is a termite free home. They conclude that exclusion (o) excludes property damage to the home. We disagree.

Webster’s Third New International Dictionary 1678 (unabridged ed. 1976) defines “perform” as, “to carry out an action or pattern of behavior: fulfill a threat or promise.” The work that Terminix carried out was inspection of the house and application of chemicals. Terminix did not carry out a termite free house. Therefore, exclusion (o) must be held to only exclude damages to the inspection and application of chemicals. There was no damage to the inspection, application or the chemicals.

Further, we have previously interpreted exclusion (o) contrary to Insurers’ interpretation. In Sturla, we said that when paragraph (a) which provides coverage for a breach of an implied warranty is “ ‘considered with exclusion ... [(o) in the instant case] it clearly appears that property damage claims of third persons resulting from the insured’s breach of an implied warranty are covered unless the claimed loss is confined to the insured’s own work or work product.’ ” 67 Haw. at_, 684 P.2d at 965 (quoting Haugan v. Home Indemnity Co., 86 S.D. 406, 413, 197 N.W.2d 18, 22 (1972)). Thus, exclusion (o) only excludes loss confined to the insured’s own work or work product. In Sturla, we held that there was no coverage because the loss sought was for the uneven fading of the carpet sold by Sturla, Inc. The “claimed loss [was] confined to the insured’s own work or work product.” Haugan, 86 S.D. at 413, 197 N.W.2d at 22.

John T. Komeiji (Bert T. Kobayashi, Jr. with him on the supplemental brief; Kobayashi, Watanabe, Sugita £si Kawashima of counsel) for petitioners and third-party defendants-appellants. Richard F. Dvonch (Law Offices of Vernon T. Tashima of counsel) for respondent and third-party plaintiff-appellee.

In the present case, the claimed loss was not confined to Terminix’s own work or work product. According to the contract, Terminix agreed to “inspect and treat subterranean termites... .” The loss was not to the inspection or treatment. The loss exceeded the inspection and treatment and went to the home itself.

Affirmed.