Volf v. Ocean Accident & Guarantee Corp. ( 1958 )

TRAYNOR, J.

Plaintiff Edward J. Volf, a general contractor, constructed a stucco house in San Andreas for A. P. Hoover. A stucco exterior finish for a house consists of three coats: a “scratch” coat, which is a mixture of sand, cement and water applied % inch to % inch thick; a “brown” coat, which is a similar mixture of the same thickness; and a “color” or “finish” coat, which is like a paint wash applied with a trowel about % inch thick. The “scratch” coat went on without incident. The “brown” coat would not stick to the “scratch” coat so Volf returned the mixture to the Neilsen Company for replacement. He mixed the new ingredients in the proper proportions and applied the “brown” coat. The mixture did not meet Volf’s expectations but he assumed that it would be all right. After applying the “brown” coat, he applied the finish or “color” coat. Shortly before the building was completed and possession taken by Hoover, cracks appeared in the exterior stucco of the building and Hoover complained. Hoover and Volf then agreed that if the cracks did not get worse Hoover would accept the building and Volf would fill in and paint over the cracks if necessary. When the rain came, the cracks became worse and Hoover called in the State Contracting Board. Tests showed that the stucco was of the right mixture but below compressive strength and that the cracking occurred in the “scratch” and “brown” coats. The board decided in favor of Hoover and Volf put a new stucco exterior over the old at an additional cost to him of $1,309.15.

Defendant had issued to plaintiffs a comprehensive liability insurance policy that contained, among other provisions, the following clause:” Coverage D—Property Damage Liability —Except Automobile. 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.” The policy also contained certain exclusions. The pertinent part of “Exclusion (g)” provided that the policy did not apply under coverage “D” to injury to or destruction of “ (3) . . . property in the care, custody or control of the insured, or (4) any goods or products manufactured, sold, handled or distributed ... by the named insured, or work completed by . . . the named insured, out of which the accident arises. ...”

Plaintiffs brought this action to recover the cost of the new stucco exterior. The trial court entered judgment for plaintiffs, and defendant insurance company appeals. The only issue involved'is the coverage afforded by the policy.

We agree with defendant that the injury was excluded under “Exclusion (g) ” of the policy, even if it is assumed that it was otherwise included under coverage D. Since the defective cement was used and the cracks appeared in the stucco while Volf was constructing the house and before Hoover took possession, the loss was occasioned by “injury to . . . property in the care, custody or control of the insured” and is therefore excluded under Exclusion (g)(3). The injury is also excluded under Exclusion (g) (4), for it was to a product “manufactured, sold, handled or distributed ... by the named insured” as well as to “work completed by . . . the named insured.”

Hauenstein v. Saint Paul-Mercury Indent. Co., 242 Minn. 354 [65 N.W.2d 122, 125], and Heyward v. American Casualty Co. of Reading, Pa., 129 F.Supp. 4, 8, invoked by plaintiffs, actually support defendant. In the Hauenstein case the plaintiffs were distributors of a certain type of plaster. They were insured by defendánt for property damage under a clause similar to coverage D in the instant policy, which was subject to an exclusion identical to the products exclusion in Exclusion (g)(4). The plaintiffs sold the plaster to a contractor who used it on a construction job. After application the plaster shrank and cracked, and the contractor had to remove it and replaster the walls and ceilings. The contractor sought recovery from the plaintiffs for breach of warranty. Plaintiffs then sought a declaratory judgment against the defendant casualty company. They contended that the injury to the plaster itself was not excluded on the grounds that after its application it ceased to be goods or products, and by virtue of the law of accession became a part of the realty. The court rejected this contention, stating: “The law of accession is important in controversies where the distinction between personalty and realty is vital, but it has no justifiable use as a vehicle for importing ambiguity into the language of an insurance contract where none otherwise exists. . . . Clearly the exclusionary clause herein is applicable to plaster as a product handled by plaintiffs without any limitation as to its changed condition by its regular and ordinary use.” The court then found that aside from any injury to the plaster itself the building was damaged by its application because the plaster had to be removed so that the walls and ceilings could be replastered. In the instant case, however, the stucco did not have to be removed and there is no evidence and no finding that the house was injured by reason of the application of the defective stucco.

In holding that an exclusion similar to Exclusion (g) in the instant policy had no application to personal injury the court in Heyward v. American Casualty Co. of Reading, Pa., supra, stated: “This Exclusion means that the policy will not protect the insured if he has to repair or replace some product or work which proved defective and caused an accident. The Exclusion has no reference to liability for damage to other property or personal injury arising out of such accident.” (129 P.Supp. at p. 8.) In the instant ease the plaintiffs seek protection for the very thing that is specifically excluded by Exclusion (g), i.e., the cost to the plaintiffs of replacing the stucco that proved to be defective. So far as Exclusions (g) (3) and (g)(4) are concerned it is immaterial whether or not Hoover became the owner of the stucco.

Plaintiffs contend that the extrinsic evidence supports the interpretation that Exclusion (g) does not preclude recovery of the loss here involved. Mrs. Volf testified that they stated that they wanted “full coverage as far as materials and workmanship” were concerned and made other similar statements. There was no discussion of particular risks. Mrs. Volf also testified that they wanted “the most coverage for as much, what we could afford,” and that cost was an item with respect to the purchase of insurance. She further testified that they stated that they wanted full coverage “like Lodato,” a competitor, and that defendant’s agent showed her Lodato’s policy and “we were equally covered.” When questioned about the particular loss involved here, i.e., a situation where plaintiffs had done a job and had to replace it, Mrs. Volf testified that there was no reference to such a situation “because we never had the need of it. We didn’t think anything like that would come up.” There was no discussion of the particular exclusions, but plaintiffs accepted the policy and renewed it the following year without objection. Exclusion (g), especially Exclusion (g) (4) relating to work completed by the named insured, is not reasonably susceptible of the interpretation contended for by plaintiffs, and the extrinsic evidence does not support their position. To read the policy, to cover the loss here involved would require that Exclusion (g) be omitted from the policy, but the evidence does not show, nor do plaintiffs claim, that they are entitled to a reformation of the policy omitting Exclusion (g).

The judgment is reversed with directions to the trial court to enter judgment in favor of defendant.

Gibson, C. J., Shenk, J., Schauer, J., Spence, J., and Me-Comb, J., concurred.