Opinion
44163 Record No. 791080.
September 11, 1981
Present: Carrico, C.J., Cochran, Compton, Stephenson, JJ. and Harman, S.J.
Lightning damage to air conditioner compressor units not an insured risk under terms of tenant's "Commercial Package" insurance policy.
(1) Insurance — "Commercial Package" — Tenant as Insured — Coverage — "Personal Property Owned by Others" — Air Conditioner Compressors Conceded Fixtures not Covered.
(2) Insurance — "Commercial Package" — Tenant as Insured — Coverage — "Betterments" — Air Conditioner Compressors not Made or Acquired at Expense of Insured and not Covered.
(3) Insurance — "Commercial Package" — Tenant as Insured — Coverage — "Bodily Injury and Property Damage Liability" — Exclusion — "Liability Assumed by the Insured Under Any Contract or Agreement Relating to the Premises" — Excludes Insurer from Liability for Any Obligation under Lease by Tenant to Repair Compressor.
(4) Insurance — "Commercial Package" — Tenant as Insured — Coverage — Endorsement CF 21 Does not Extend To and Subparagraph 2 Excludes Property Damage Arising Out of Maintenance or Repairs.
Martin operated a cafeteria in a shopping center. The premises were leased to Martin pursuant to a contract which obligated him to maintain and repair the heating, ventilating, and air conditioning equipment. During the term of the lease, lightning struck and damaged two air conditioning compressors on the roof of the premises. These compressors were built into the building as a part of the air conditioning system and served the premises leased to Martin, who had neither installed nor expended money on the original installation. Martin had the units repaired at his own expense for $2,715.76, and sought reimbursement from his insurer. The insurer denied coverage, and Martin filed this action seeking $2,715.76 in damages. Martin claimed coverage under several provisions of his tenant's commercial insurance contract, which provided various coverages appropriate for a lessee of business property. The Trial Court held that Martin's insurance contract provided coverage. The insurer appeals.
1. Martin, having conceded the compressors were fixtures, these were part of the realty and were not covered as "personal property owned by others".
2. The air conditioning compressors were not made or acquired at the expense of the insured and were thus not covered under the "Betterments" provision.
3. Exclusion (g) exempts from coverage "liability assumed by the insured under any contract or agreement relating to such premises" and relieves the insurer of any liability under the contract, being applicable to Coverage C — Bodily Injury and Property Damage Liability even though Martin's lease may have obligated him to repair the compressor units.
4. Endorsement CF 21 does not expand coverage but is intended instead to set an aggregate limit to liability and Subparagraph 2 of the Endorsement excludes property damage arising out of maintenance or repairs at premises owned or rented to the named insured.
Appeal from a judgment of the Circuit Court of the City of Danville. Hon. James F. Ingram, judge presiding.
Reversed and final judgment.
Frank O. Meade (Meade, Tate Daniel, on brief), for appellant.
Allan Garrett (Garrett, Garrett, Smith Garrett, on brief), for appellee.
In this appeal, we consider whether lightning damage to air conditioner compressor units was a risk insured under a "Commercial Package" insurance policy.
The appellee, George G. Martin, Sr., operated a cafeteria in a Danville shopping center. The premises for Martin's Cafeteria were leased to Martin pursuant to a contract which obligated Martin to maintain and repair the heating, ventilating, and air conditioning equipment. During the term of the lease, lightning struck and damaged two air conditioning compressors on the roof of the premises leased to Martin. These compressors, which, according to the record, were "built into the building" as a part of the air conditioning system, served the premises leased to Martin, who had neither installed them nor expended money on the original installation. Martin had the compressor units repaired at his own expense for $2,715.76, and sought reimbursement for this expenditure from his insurer, appellant United States Fire Insurance Company. The insurer denied coverage, and Martin filed this action seeking $2,715.76 in damages. The trial court held that Martin's insurance contract provided coverage, and the insurer has appealed, challenging that ruling.
Section 26 of the lease provided in pertinent part:
Tenant, at its sole cost and expense, shall operate, maintain and repair the heating, ventilating and air conditioning equipment including the making of all necessary replacements thereto throughout the term of this lease and any renewal thereof.
Martin claims coverage under several provisions of this tenant's commercial insurance contract, which negated coverage for physical damage to the building occupied by the tenant. The "Commercial Package" provided various coverages appropriate for a lessee of business property.
[1-2] First, Martin contends that coverage was provided by the personal property damage provision of the contract. But he concedes the compressors were fixtures. Thus, they were a part of the realty and were not "personal property owned by others." In addition, because the air conditioning compressors were not "made or acquired at the expense of the insured," the "Betterments" provision is inapplicable. Hence, coverage was not provided under the personal property provisions of the contract.
"Coverage B — Personal Property" provided in pertinent part:
When the insurance under this policy covers personal property, such insurance shall cover only business personal property owned by the insured . . . and shall also cover the insured's interest in personal property owned by others to the extent of the value of labor and materials expended thereon by the insured; all while in or on the described buildings. . . .
This coverage shall also include Tenant's Improvements and Betterments, meaning the insured's use interest in fixtures, alterations, installations or additions comprising a part of the buildings occupied but not owned by the insured and made or acquired at the expense of the insured. . . . [Emphasis added].
Second, Martin claims coverage under "Coverage C — Bodily Injury and Property Damage Liability." Coverage C provides that the insurer would pay "all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies." Exclusion (g) clearly exempts from coverage "liability assumed by the insured under any contract or agreement relating to such premises." While Martin's lease may have legally obligated him to repair the compressor units, exclusion (g) relieves the insurer of any obligation arising under the contract.
Endorsement G-209 to the liability insurance provisions extended $100,000 coverage for damage to the buildings. It, however, also included an exemption of "liability assumed by the insured under any contract or agreement."
Finally, Martin suggests that endorsement CF21, modifying the limits of liability under "Coverage C — Bodily Injury and Property Damage Liability," provides coverage. The relevant portions of this endorsement clearly demonstrate that the clause upon which Martin relies was intended merely to set an aggregate limit of liability and was not intended to expand the number of risks covered by the policy. Subparagraph (2), moreover, concerns property damage occurring in the course of work performed by an independent contractor and expressly excludes maintenance work at the premises rented by the insured. The damage at issue in this case, of course, did not occur in the course of work performed by any independent contractor. Therefore, even if subparagraph (2) could be viewed as covering risks beyond those initially set forth in Coverage C, it would not provide a basis for concluding the insurer was liable in this case.
The pertinent portions of Endorsement CF21 provide:
[T]he total liability of the Company for all damages because of all property damage to which this coverage applies and described in any of the numbered subparagraphs below shall not exceed the limit of property damage liability stated as "aggregate".
* * *
(2) all property damage arising out of and occurring in the course of operations performed for the named insured by independent contractors and general supervision thereof by the named insured, including any such property damage for which liability is assumed under any incidental contract relating to such operations, but this subparagraph (2) does not include property damage arising out of maintenance or repairs at premises owned by or rented to the named insured. . . . [Emphasis added].
For the reasons stated, we hold the insured's loss was not covered by the policy in question. Thus, we will reverse the judgment of the court below and enter final judgment for the insurer.
Reversed and final judgment.