Citation Numbers: 56 Misc. 2d 983, 289 N.Y.S.2d 852, 1968 N.Y. Misc. LEXIS 1587
Judges: Meyer
Filed Date: 4/10/1968
Status: Precedential
Modified Date: 10/19/2024
Plaintiffs bring this action pursuant to subdivision 7 of section 167 of the Insurance Law. They hold a judgment against Randy Homes, Inc. resulting from personal injury to plaintiff Mary Johnson incurred when the cellar stairs in a home erected by Randy Homes Inc. pulled away from the wall. At the time of Mrs. Johnson’s accident the home was owned by one Sidney Thaler, for whom Mrs. Johnson worked. Defendant issued to Randy Homes, Inc. a comprehensive general liability policy which a jury has found included an indorsement entitled “ Exclusion of Products Hazard” reading “It is agreed that the policy does not apply to the products hazard as defined therein.” Contending that its policy did not cover the
The policy states in Item 2 that the 1 ‘ Business of the named insured is Building Contractor.” Item 3 includes the statement that “ The insurance afforded is only with respect to such and so many of the following coverages as are indicated by specific premium charges. The limit of the company’s liability against each such coverage shall be as stated herein, subject to all the terms of this policy having reference thereto ”, and under Coverage A— “ Bodily Injury Liability ” in the box for ‘ ‘ Limits of Liability ’ ’ shows the typewritten figure ‘ ‘ 100,000 ’ ’ next to the printed words “ each person ”, the typewritten figure “ 300,000 ” next to the printed words “ each accident ”, and a blank in the space next to the printed words ‘ ‘ Aggregate Products”. Under Item 4 of “ Declarations ” in Schedule No. 1 appear boxes with printed subheads. Division (a) is entitled “ Premises — Operations division (c), “ Independent Contractors division (d), “ Products — Including Completed Operations ”. Division (d) is left blank; in division (c) has been typed “ Construction operation — contractor (not railroads) excluding operations on board ships ” and appropriate rating and premium data; in division (a) has been typed “ Contractors— Construction or erection executive supervisors exercising supervision through superintendents or foremen, no direct supervision ’’followed by appropriate rating and premium data; and on a separate line “Model Homes”, followed by separate rating and premium data, and on a further separate
The “ Insuring Agreements ” define “ Coverage A — Bodily Injury Liability ” as follows: “ To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person and caused by accident.” Mrs. Johnson’s accident having occurred within the policy period and the judgment for her bodily injury being within the liability limits, defendant insurer is obligated to pay the judgment under the policy provisions so far recited. Defendant argues, however, that it is relieved of that liability by the fact that the “ Aggregate Products ” space in Item 3 and the division (d) space in Item 4 have been left blank, by the indorsement reading “ It is agreed that the policy does not apply to the products hazard as defined therein ’ ’, and by the definition of products hazard set forth in paragraph 3 (c) of the “ Conditions ” of the policy. That definition reads as follows:
“(c) products hazard. The term ‘ products hazard ’ means
“ (1) goods or products manufactured, sold, handled or distributed by the named insured or by others trading under his name, if the accident occurs after possession of such goods or products has been relinquished to others by the named insured or by others trading under his name and if such accident occurs away from premises owned, rented or controlled by the named insured or on premises for which the classification stated in division (a) of the declarations excludes any part of the foregoing; provided, such goods or products shall be deemed to include any container thereof, other than a vehicle, but shall not include any vending machine or any property, other than such container, rented to or located for use of others but not sold;
“ (2) operations, if the accident occurs after such operations have been completed or abandoned and occurs away from premises owned, rented or controlled by the named insured; provided, operations shall not be deemed incomplete because improperly or defectively performed or because further operations may be required pursuant to an agreement; provided further, the following shall not be deemed to be ‘ operations ’ within the meaning of this paragraph: (a) pick-up or delivery, except from or onto a railroad car, (b) the maintenance of vehicles owned or used by or in behalf of the insured, (c) the existence of tools, uninstalled equipment and abandoned or unused materials and (d) operations for which the classification
Operations by Randy Homes Inc. at the premises where Mrs. Johnson’s injury occurred had been completed and the house transferred to Mr. Thaler prior to Mrs. Johnson’s accident. If only the first two clauses of subdivision 2 of the 1 ‘ products hazard ” definition are considered, the accident is excluded from coverage by the plain and unambiguous wording of the policy (Berger Bros. Elec. Motors v. New Amsterdam Cas. Co., 293 N. Y. 523). However, the policy must be considered as a whole and, under familiar principles, for the insurer to benefit from the exclusion the burden is upon it to show (1) that it would be unreasonable for the average businessman reading the policy to conclude that the accident was covered and (2) that its own construction was the only one that could fairly be placed on the policy (Sincoff v. Liberty Mut. Fire Ins. Co., 11 N Y 2d 386; Vito v. General Mut. Ins. Co., 15 A D 2d 289, app. den. 11 N Y 2d 645). Plaintiffs argue that ambiguity, which must be resolved in favor of coverage, exists because (1) the two clauses appear not as a “ completed operations ” exclusion but as part of the definition of “products hazard ”, and (2) the third clause of the definition creates an exception to the exclusion. The court agrees that there is coverage.
Significant in the construction of the policy are the facts that it is denominated a comprehensive general liability policy (Sincoff v. Liberty Mut. Fire Ins. Co., supra, p. 391; National Screen Serv. Corp. v. United States Fid. & Guar. Co., 364 F. 2d 275, 279-280, cert. den. 385 U. S. 958) and that, as already stated, the ‘ ‘ products hazard ’ ’ definition aside, the terms of the policy encompass an accident such as Mrs. Johnson’s. The question then is whether the average businessman would understand from the policy as a whole that coverage of an accident such' as Mrs. Johnson’s had been excluded by the subsequent provisions and indorsements.
By the weight of authority, the indorsement excluding “ products hazard ’ ’ and the definition of that phrase quoted above are not sufficiently clear to exclude from coverage the completed operation of a contractor who sells no product. As to injuries caused by the contractor’s work occurring during the policy period there is coverage notwithstanding that the injury occurs after the contractor has completed his operations, because it is reasonable for such a contractor to conclude that both subdivisions of the products hazard definition relate only to products: — Insurance Co. of North America v. Electronic Purification Co. (63 Cal. Reptr. 382) (swimming pool cleaner);
The court is, furthermore, aware that, other than the policy’s statement of the business of the named insured as “ Building Contractor ’ ’, there is no evidence in this case concerning whether Randy Homes, Inc. simply erected houses under contract on land owned by some other person or entity or was a builder-vendor, erecting homes on its own land and then transferring the improved property to purchasers such as Thaler. It does not, however, regard the distinction as material. If the former situation be the fact, Randy Homes, Inc. clearly was performing a service and not selling a product (Peerless Ins. Co. v. Clough, 105 N. H. 76; see Nielson v. Travelers Ind. Co., 174 F. Supp. 648, 652, affd. 277 F. 2d 455, supra). If the latter situation be the fact, then, bearing in mind that what governs is not the legal meaning'of the words used but the manner in which they might reasonably be construed by the average person or the ordinary businessman (Bronx Sav. Bank v. Weigandt, 1 N Y 2d 545, 553; Harris v. Allstate Ins. Co., 309 N. Y. 72; Tonkin v. California
“ It [defendant insurer] says that the idea that a contractor has no ‘ product ’ is wholly illogical, erroneous and fallacious and that the building of the athletic field and the school are the ‘ products ’ of their builders and that what a contractor leaves behind when his work is finished — his ‘ completed operation ’ — is his ‘ product ’.
“ We do not agree with the defendant’s position in attaching such a broad meaning to the term products as used in the insurance policy in question. We do not think it was the intended policy meaning when using the term products and this appears more convincingly so when the policy itself states the nature of the insured’s business as 1 contracting
(See, also, Peerless Ins. Co. v. Clough, 105 N. H. 76, 81, supra; Kendrick v. Mason, 234 La. 271, 294-295, supra; Nielsen v. Travelers Ind. Co., 174 F. Supp. 648, 653-654, supra.) Relevant also is the fact that chapter 14 of the Restatement, 2d, Torts, which is the portion of the Restatement covering products liability, is entitled “ Liability of Persons Supplying Chattels for the Use of Others ”. The point is not that a builder-vendor of homes cannot incur a “products hazard” or “products liability ”, but that the ordinary businessman would not interpret a “ products hazard ” exclusion as related to such a business.
The third clause of subdivision 2 of the “ products hazard ” definition presents a further, though not quite as clear, reason for construing the policy to cover the Johnson accident. That clause excepts from the exclusion “(d) operations for which the classification stated in division (a) of the declarations specifically includes completed operations.” In Cohen v. Jacoby (27 Misc 2d 396, 399) that language was construed to create an ambiguity requiring construction against the insurer because ‘ ‘ one reading the policy would have a right to assume that, in any event, it would cover the operations specifically set forth in ‘ Division (a)’, even if completed.” The instant case is even stronger for, as already noted, the words 11 including completed operation ” appear in division (a) of the declarations. True it is that that phrase appears between “ Real estate agents ” and