Opinion
46237 Record No. 890179
March 2, 1990
Present: All the Justices
The record supports the trial court's finding that the exclusions in a general insurance policy were inapplicable. Because the insured brought the loss within the terms of the policy and the insurer failed to prove the applicability of either exclusionary clause, it was unnecessary to decide whether the conflicting provisions in the policy render the contract of insurance ambiguous as a whole.
Insurance — Exclusionary Clauses — General Contractors — Subcontractors — Negligence — Ambiguity — Construction of Policy
A general contractor contracted with a city to make repairs and improvements on the city sewer system. The general contractor subcontracted part of the work to the insured, a mechanical contractor, whose job it was to temporarily stop the flow in a sewer main and install new pipes and pumps at a particular pumping station, While the work was in progress, a faulty joint in the existing piping for which the insured was not responsible under his contract blew out and flooded the station with sewage. A large stream of sewage escaped into the streets and city officials requested that the subcontractor undertake emergency repairs. He incurred large expenses cleaning up the station and replacing damaged equipment. The general contractor took the position that the rupture was due to the subcontractor's failure to support the pipe sufficiently. The subcontractor made a claim under the general liability policy he had purchased from the insurer, The insurer sent a letter to the contractor stating that it was denying the claim. The subcontractor brought an action against the insurer, asserting that the loss was due to the contractor's negligence and that the insurer was liable under its policy. The trial court ruled that the subcontractor's claim was covered under the policy and that none of the exclusions applied. The insurer appeals.
1. Where an insured has shown that his loss occurred while an insurance policy was in force, but the insurer relies upon exclusionary language in the policy as a defense, the burden is upon the insurer to prove that the exclusion applies to the facts of the case.
2. Policy language purporting to exclude certain events from coverage will be construed most strongly against the insurer.
3. Here, the subcontractor was responsible for certain mechanical work done in the pumping station, but he was in no sense entrusted with the overall care, custody and control of the station itself. The evidence supports the trial court's finding that the "care, custody and control" exclusion in the insurance policy is inapplicable.
4. Another exclusion applies only to damage arising out of work performed or materials furnished by the insured. Here the insurer failed to carry its burden of proving by a preponderance of the evidence that any labor, materials, parts, or equipment furnished by the insured caused or contributed to the blowout. He denied responsibility for the break in the pipe and the trial court, as trier of fact, accepted his version. The record supports the trial court's finding that this exclusion is inapplicable.
5. It is unnecessary to decide whether the conflicting provisions within the policy render the contract of insurance ambiguous as a whole. Because the insured brought the loss within the terms of the policy and the insurer failed to prove the applicability of either exclusionary clause, the judgment will be affirmed.
Appeal from a judgment of the Circuit Court of the City of Norfolk. Hon. Morris B. Gutterman, judge designate presiding.
Affirmed.
James A. Howard, II (Howard Howard, on briefs), for appellant.
Virginia K. Shema (William D. Breit; Breit, Drescher Breit, on brief), for appellee.
This is an appeal from a judgment in favor of an insured against an insurer. The insurer relied on two exclusionary clauses in the contract of insurance in refusing to pay the claim. We must decide whether the trial court correctly held those clauses inapplicable.
In 1982, Hunt Contracting Corporation (Hunt), a general contractor, had a contract with the City of Portsmouth for repairs and improvements to the City's sanitary sewer system. Hunt subcontracted a part of the work at the Race Street pumping station to T. A. Sheets, a mechanical contractor. Sheets' responsibility at the Race Street station included temporarily stopping the flow in a sewer main by means of a check valve, breaking the main open in order to install new piping, removing three old pumps, and installing new pumps with an oil-accumulator system to serve them. Sheets was also required to support and protect the existing piping during the progress of the work.
On March 30, 1983, while the work was in progress, a faulty lead joint in the existing piping yielded to the pressure of the closed main and ruptured, flooding the station with sewage. The lead joint was in a section of pipe 15 to 20 feet away from the area in which Sheets was working. The joint was not a part of Sheets' responsibility under the contract, and he had done no work on it.
A large stream of sewage escaped into the street and officials of the City advised Sheets that emergency repairs must be undertaken immediately. Sheets incurred expenses amounting to approximately $13,000 in cleaning up the station and replacing damaged equipment.
Hunt took the position that the rupture was due to Sheets' negligence in failing to support, or shore up, the existing pipe sufficiently. Sheets made a prompt claim for his losses under a policy of general liability insurance and contractual liability insurance that he had purchased from Bituminous Casualty Corporation (Bituminous). On July 11, 1983, Bituminous sent a letter to Hunt stating that it was denying Hunt's claim against Sheets because its investigation revealed no negligence on the part of Sheets.
In 1984, Sheets brought this action against Hunt and Bituminous, asserting that the loss was due to Hunt's negligence and that if the loss was due to Sheets' negligence, Bituminous was contractually liable under its policy. Hunt counterclaimed, alleging that the loss resulted from Sheets' negligence. Bituminous denied coverage and asked for a separate trial on the coverage issue. When the negligence case came to trial in 1986, Bituminous settled with Hunt on Hunt's counterclaim, and Sheets dismissed his claim against Hunt. The case was continued solely for determination of Sheets' claim for coverage under his insurance contract with Bituminous. After hearing evidence and arguments, the court ruled that Sheets' claim was covered under the policy and that none of the exclusions applied. On November 15, 1988, the court entered final judgment against Bituminous for $12,000, the amount claimed by Sheets. We granted Bituminous an appeal.
Because Bituminous defended and settled Hunt's claim without making any reservation of rights, Sheets argues that Bituminous is now estopped to deny coverage under its policy. Bituminous invokes Rule 5:25 as to this argument, correctly pointing out that Sheets made no waiver or estoppel argument in the trial court, We agree, and will not consider those issues.
Although Bituminous contended at trial that Sheets' claim did not come within the insuring clauses of the policy, the only errors assigned relate to the applicability of two exclusionary clauses. Accordingly, we will confine our consideration to those questions. Rule 5:17(c).
Sheets' policy contained an endorsement captioned "Contractual Liability Insurance (Blanket Coverage Broad Form)," which included eighteen exclusionary clauses, exclusive of subparts. Bituminous relies on exclusions (g) and (k). They provide, respectively, that the insurance does not apply:
(g) to property damage to
(1) property owned or occupied by or rented to the insured,
(2) property used by the insured, or
(3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control;
and
(k) 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.
The policy contained, following the exclusions, a further endorsement indicating that the following operations were covered:
(22) Salvage Operations — including incidental wrecking, shoring or other structural work, the handling of machinery in damaged buildings, and salesmen or clerical at site of wrecking
and
(25) Sewer Mains or Connections Construction — including tunneling at street crossings[.]
Sheets argues that to the extent these specific grants of coverage conflict with the exclusionary clauses, the policy is rendered ambiguous, and even if unambiguous, the exclusionary clauses are inapplicable under the facts of the case.
[1-2] The case is controlled by familiar principles. Where an insured has shown that his loss occurred while an insurance policy was in force, but the insurer relies upon exclusionary language in the policy as a defense, the burden is upon the insurer to prove that the exclusion applies to the facts of the case. See Johnson v. Insurance Co. of No. America, 232 Va. 340, 345, 350 S.E.2d 616, 619 (1986); White v. State Farm, 208 Va. 394, 396, 157 S.E.2d 925, 927 (1967). Further, because insurance contracts are ordinarily drafted by insurers rather than by policyholders, the courts consistently construe such contracts, in cases of doubt, in favor of that interpretation which affords coverage, rather than that which withholds it. Policy language purporting to exclude certain events from coverage will be construed most strongly against the insurer. St. Paul Ins. v. Nusbaum Co., 227 Va. 407, 411, 316 S.E.2d 734, 736 (1984).
Guided by those principles, we apply the two exclusionary clauses under consideration to the facts of the present case. Exclusion (g) applies if the damaged property was (1) owned, occupied or rented by the insured, (2) used by the insured, or (3) under the insured's care, custody or control. Bituminous makes no contention that subsections (1) or (2) apply; its appeal is based upon the theory that the damaged property was in Sheets' "care, custody or control" at the time of the loss.
Sheets' claim consisted of the labor to clean up the pumping station after the flooding and the repair and replacement of the oil accumulator, sump pump, and three motors. At the time of the loss, Sheets had completed his work on the oil accumulator. It had been installed, was operating, and Sheets had received payment for it. The pumps and motors that were damaged had also been installed and therefore were no longer in Sheets' care, custody, or control. The pipe joint which blew out, causing the damage, was old and was not one on which Sheets was required to work. It was no more a part of his responsibility under his contract than were other joints on the same pipeline located miles away. Sheets was the subcontractor responsible for certain mechanical work in the Race Street pumping station, but he was in no sense entrusted with the overall care, custody, or control of the station itself. We hold that the evidence supports the trial court's finding that the "care, custody and control" exclusion is inapplicable.
Exclusion (k) applies only to damage "arising out" of work performed or materials furnished by the insured. Here, the insurer failed to carry its burden of proving by a preponderance of the evidence that any labor, materials, parts, or equipment furnished by Sheets caused or contributed in any way to the blowout. Hunt made such allegations, but Bituminous settled Hunt's claim, and that issue was never adjudicated. Sheets denied responsibility for the failure of the lead joint, and the trial court, as trier of fact, accepted Sheets' version. Thus, the record also supports the trial court's finding that exclusion (k) is inapplicable.
It is unnecessary to decide whether the conflicting provisions within the policy render the contract of insurance ambiguous as a whole. Because the insured brought the loss within the terms of the policy and the insurer failed to prove the applicability of either exclusionary clause, the judgment will be
Affirmed.