Opinion
No. 63249-3-I.
February 22, 2010.
Appeal from a judgment of the Superior Court for King County, No. 07-2-25931-7, Cheryl B. Carey, J., entered March 6, 2009.
Reversed and remanded by unpublished opinion per Ellington, J., concurred in by Dwyer, A.C.J., and Appelwick, J.
Products-completed operations insurance policies are designed to protect manufacturers against injuries caused by defects in their products. The injury in this case arose not out of any defect in the product, but from the negligent operations of the vendor. This injury is not covered by the products-completed operations policy. Because the trial court came to the opposite conclusion on summary judgment, we reverse.
BACKGROUND
Wing Enterprises, Inc. manufactures ladders, which it sells through numerous vendors. Wing maintains an insurance policy covering "products/completed operations" from Liberty International Underwriters, Inc. The policy does not cover Wing's premises or operations. It covers injuries or property damage occurring away from Wing's own premises and arising from its products or its work.
Clerk's Papers at 365.
The policy provision at issue here is a vendor's endorsement, which covers injuries or property damage arising from Wing's products distributed or sold in the regular course of the vendor's business.
One of Wing's vendors is Advanced Ladders. Advanced Ladders maintains its own commercial general liability (CGL) policy with Allstate Insurance Company. The Allstate policy provides coverage for both premises and operations and products-completed operations.
In 2004, James Colton went to Advanced Ladders in Tukwila to buy a Wing "Little Giant" ladder for his employer. An Advanced Ladders employee offered to give Colton a "safe operations training" for the ladder. When the employee extended the ladder to its full 19 foot height and Colton climbed to the top, the ladder collapsed, severely injuring Colton.
Colton threatened to sue Advanced Ladders. The retailer tendered the claim to both Allstate and Liberty. Allstate's investigation determined that Colton's injuries were caused by the apparent negligence of the Advanced Ladders employee "who failed to properly set up the Little Giant ladder." Allstate covered the claim under the premises and operations portion of Advanced Ladders' policy. After its own investigation, Liberty refused the tender.
Clerk's Papers at 86.
Allstate settled the claim for $1,000,000. It then filed a declaratory judgment action against Liberty, seeking recovery of the settlement amount plus defense costs. Allstate alleged Liberty had a duty to defend and indemnify Advanced Ladders and that Liberty's coverage was primary.
The trial court decided two sets of cross motions for summary judgment. In one, the parties disputed whether Advanced Ladders was entitled to coverage as an additional insured under the Liberty vendor's endorsement. In the other, the parties disputed whether, if so, the policy covered Colton's injuries . The court granted Allstate's motions and entered judgment in favor of Allstate. Liberty appeals.
DISCUSSION
The dispositive issue here is whether the Liberty policy covers Colton's claim. The trial court concluded it does. Applying the usual standard of review for summary judgment, and reviewing the interpretation of an insurance policy de novo, we disagree.
A motion for summary judgment may be granted when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. CR 56(c). On appeal, appellate courts engage in the same inquiry as the trial court. McDonald v. State Farm Ins. Cas. Co., 119 Wn.2d 724, 730, 837 P.2d 1000 (1992).
Grange Ins. Co. v. Brosseau, 113 Wn.2d 91, 95, 776 P.2d 123 (1989); Schwindt v. Underwriters at Lloyd's of London, 81 Wn. App. 293, 297-98, 914, P.2d 119 (1996).
Wing's policy with Liberty was not for general commercial liability. It included only products-completed operations coverage and obligated Liberty to pay claims against Wing for "damages because of `bodily injury' or `property damage' included within the `products-completed operations hazard' to which this insurance applies." The products — completed operations hazard includes "all `bodily injury' and `property damage' occurring away from premises you own or rent and arising out of `[Wing's] product' or `[Wing's] work'" with certain exceptions not relevant here.
Clerk's Papers at 365.
Id. at 376.
Allstate contends the Liberty policy covers Colton's claim because his injuries "arose out of" Wing's ladder. It relies on cases involving CGL policies that broadly interpret the phrase "arising out of." But CGL policies offer greater protection than the more limited products — completed operations policy at issue here:
The modern CGL policy provides basic "premises and operations" coverage. This coverage insures for damages arising out of an occurrence at the insured's place of business as a result of the insured's ongoing business activities. The risk covered by the CGL premises and operations coverage differs from the risk posed once an insured relinquishes its products to third parties or completes its work. This latter risk is insured, for an additional hefty premium, under the products-completed operations hazard coverage. The purpose of the products-completed operations hazard coverage is to insure against the risk that the product or work, if defective, may cause bodily injury or damage to property of others after it leaves the insured's hands.
Goodwin v. Wright, 100 Wn. App. 631, 635-36, 6 P.3d 1 (2000) (citing Roger C. Henderson, Insurance Protection for Products Liability and Completed Operations — What Every Lawyer Should Know, 50 Neb. L. Rev. 415 (1971)); see also 9A Lee R. Russ Thomas F. Segalla, Couch on Insurance 3d § 129:2 at 7-9, § 129:23 at 45-46 (3d ed. 2005).
Thus, in the CGL context, an injury need only arise out of "an occurrence" to be covered. In the products — completed operations context, the injury must arise out of a defect in the insured's product or work.
This distinction was dispositive in Transport Indemnity Co. v. Sky-Kraft, Inc. There, the Sky-Kraft aviation school rented an aircraft to an amateur pilot for a flight it knew the pilot was unqualified to make. The plane crashed shortly after takeoff and the pilot was killed. His personal representative sued Sky-Kraft, alleging negligent operation of its flight school business. Among the questions on appeal was whether the pilot's death fell under the "completed operations and products liability" clause of Sky-Kraft's fixed base operator's liability policy. That clause covered "injury . . . arising out of the possession, use, consumption or handling of any goods or products manufactured, constructed, altered, repaired, serviced, treated, sold, supplied, or distributed by the Insured [Sky-Kraft] or its employees after such goods or products have ceased to be in the possession or under the control of the Insured."
48 Wn. App. 471, 740 P.2d 319 (1987).
Id. at 473-74.
Id. at 474.
Id. at 475.
Id. at 488 n. 5.
The pilot's estate argued the policy provided coverage because his death "arose out of" his possession and use of an aircraft supplied by Sky-Kraft. The court rejected that argument because products — completed operations policies are designed to protect against loss caused by the insured's product, not its negligent operations. Since the pilot's estate alleged negligence rather than products liability claims, his death was not covered under that portion of the policy:
Id. at 489; see also 9A Lee R. Russ Thomas F. Segalla, Couch on Insurance 3d § 130:1 (3d ed. 1997).
Although the use of the aircraft was indivisibly related to the accident, the aircraft itself was not the cause in fact of the injury. [The completed operations and products liability clause] was not intended to provide coverage for Sky-Kraft's negligent operation of its flight school, but rather was designed to provide coverage for injuries or damages caused by defects in goods or products. Accordingly, we find no coverage.
Transport Indemnity, 48 Wn. App. at 489.
We see no relevant distinction between Sky-Kraft and this case. As in Sky-Kraft, the injuries at issue here were not caused by a defect in the product but — as established by Allstate's own investigation — by the negligent operations of its insured. Products — completed operations policies are not designed or intended to protect against such losses.
Allstate attempts to distinguish Sky-Kraft because that case did not involve a vendor's endorsement, as does the instant case, and because the policy language in Sky-Kraft is arguably narrower than in this case. We see no relevance to the former distinction, and no practical difference in the latter.
Even if we interpreted "arising out of" as in CGL policies to mean "originating from," "having its origin in," "growing out of," or "flowing from," we would find no coverage. Because the vendor's negligence was the exclusive cause of the fall, Colton's injury did not originate from, grow out of, or flow from Wing's ladder. It may be true, as Allstate argues, that Colton would not have been injured but for the ladder. This cannot be the test, however, for the same would be true if improperly stacked ladders had simply fallen on top of Colton. As in that situation, the ladder here was merely the conveyance through which the vendor's negligence caused injury. In other words, though a ladder was involved, Colton's injuries originated from, grew out of, and flowed from the vendor's negligence, not the ladder.
Australia Unlimited, Inc. v. Hartford Casualty Ins. Co., 147 Wn. App. 758, 774, 198 P.3d 514 (2008); see also Equilon Enterprises LLC v. Great American Alliance Ins. Co., 132 Wn. App. 430, 437-38, 132 P.3d 758 (2006).
Because Colton's injuries did not arise out of a defect in Wing's ladder, they are not covered by Liberty's products/completed operations policy. We reverse the summary judgment order and remand for entry of summary judgment for Liberty.
Because this issue is dispositive, we need not decide whether Advanced Ladders is covered as an additional insured.