Aetna Insurance Co. v. Lythgoe

618 P.2d 1057, 1980 Wyo. LEXIS 317

• Court: Wyoming Supreme Court
• Decided: October 31, 1980
• Docket: 5261
• Status: Published

Opinions

THOMAS, Justice.

The question posed in this appeal is one of coverage to defend an insured under a liability insurance policy. More particularly, the case requires the selection and application of a “completed operations” clause from either an insurance policy issued to the appellee by the appellant or a renewal policy. The district court ruled in favor of coverage, and Aetna Insurance Company has appealed from that judgment. We will affirm the judgment of the district court.

A summary of the évents leading to the coverage issue can be found in Brubaker v. Glenrock Lodge International Order of Odd Fellows, Wyo., 526 P.2d 52 (1974). For our present purposes, it is sufficient to note that Katherine Brubaker instituted the action against Glenrock Lodge International Order of Odd Fellows. She sought to recover damages for injuries she suffered when a stairway collapsed while she was using it. She was a lessee of the basement of the lodge building. Glenrock Lodge International Order of Odd Fellows brought a third-party action against Lythgoe (appel-lee here) seeking to be indemnified by Lyth-goe for any liability to Brubaker. Lyth-goe had been employed by the lodge to do some carpentry work, which work included the relocation of the stairway. When Aet-na Insurance Company refused to defend Lythgoe, he brought this third-party action to require Aetna Insurance Company to assume his defense or reimburse him for his expenses in defending the action.

As framed by the appellant, the issues on appeal are as follows:

“1. Was coverage afforded Lythgoe by Aetna under a policy of insurance under the facts of this case?

“(a) Was the operation ‘completed’? “(b) Which policy applies?

“(c) Are the key operative terms defined?

“(d) Are the exclusions of coverage clearly expressed?

“2. Was Aetna, in any event, obligated to defend Lythgoe on the Brubaker claim?”

The appellee in his brief presents a more detailed statement of his perception of the issues. Without reciting his position in detail, he claims that the provisions of the earlier policy govern over those of the renewal policy. He then urges the application of the “completed operations” exclusion clause in the earlier policy, but argues in the alternative that his operations had not been completed even under the renewal policy. In further defending the appeal, the appellee contends that the pleadings of the personal injury case which invoked the duty to defend came within the policy coverage and that there is no suggestion in the Brubaker personal injury complaint leading to relief for Aetna under the “completed operations” exclusion. He further urges that the doctrine of reasonable expectations should be adopted in the State of Wyoming.¹

Aetna Insurance Company relies upon the proposition that Lythgoe’s operations on the job out of which the personal injury claim by Mrs. Brubaker arose had been completed under the provisions of Policy Number CG 75 14 19. The language of the policy on which Aetna Insurance Company relies is as follows:

“Exclusions

“This insurance does not apply:

* * * * * *

“(m) to bodily injury or property damage included within the completed operations hazard or the products hazard

In the definitions section of that policy appears the following language:

“ ‘completed operations hazard1 includes bodily injury and property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured. ‘Operations’ include materials, parts or equipment furnished in connection therewith. Operations shall be deemed completed at the earliest of the following times:

“(1) when all operations to be performed by or on behalf of the named insured under the contract have been completed,

“(2) when all operations to be performed by or on behalf of the named insured at the site of the operations have been completed, or

“(3) when the portion of the work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.

“Operations which may require further service or maintenance work, or correction, repair or replacement because of any defect or deficiency, but which are otherwise complete, shall be deemed completed.”

Lythgoe relies upon the language of policy MCL 27 20 80. In the Definition of Hazards section of that policy appears the following language:

“Division 4 — Products—Completed Operations.

******

“(2) operations, including any act or omission in connection with operations performed by or on behalf of the named insured on the premises or elsewhere, whether or not goods or products are involved in such 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 stated in division 1 of item 4 of the declarations specifically includes completed operations.” (Emphasis added.)

The Exclusions section of this policy, which was the earlier of the two policies provides:

“This policy does not apply:

******

“(c) under division 1 of the Definition of Hazards, and under coverage C, to (1) the Independent Contractors Hazard or (2) the Products — Completed Operations Hazard;”

There js no question that the second policy states on its face that it is a renewal of the policy upon which Lythgoe relies. From the record, it appears that Lythgoe directed to Aetna Insurance Company a Request for Admissions, which included the following request:

“1. The endorsement page of Aetna Policy Number CG-75-14-19, a copy of which is attached hereto [this endorsement provided coverage for completed operations], was never a part of Aetna Policy Number MCL-27-20-80.”

The Answer to Request for Admissions by Aetna Insurance Company with respect to their request quoted above states:

“1. Defendant admits that the endorsement page to Policy No. CG-75-14-19 attached to said request was never a part of Policy No. MCL-27-20-80 provided, however, that CG-75-14-19 was a renewal of MCL-27-20-80.” (Emphasis added.)

With respect to which policy should be looked to as the controlling one in this factual situation, we espouse the language of the United States Court of Appeals for the Tenth Circuit:

“ * * * When a renewal policy is issued, it is presumed, unless a contrary intention appears, that the parties intended to adopt in the renewal policy the terms, conditions and coverage of the expiring policies.” Pearl Assur. Co. v. School Dist. No. 1 In San Miguel County, Colo., 10 Cir., 212 F.2d 778, 782 (1954).

This language was quoted with approval by the United States Court of Appeals in Government Employees Insurance Company v. United States, 10 Cir., 400 F.2d 172 (1968). In this latter case the court also noted that:

“ * * * [I]t is the general rule that an insurance company is bound by the greater coverage in an earlier policy where the renewal contract is issued without calling to the insured’s attention a reduction in policy coverage. * * * ” Government Employees Insurance Company v. United States, supra, 400 F.2d at 175.

This same proposition is found in Noyes Supervision, Inc. v. Canadian Indemnity Company, 487 F.Supp. 433 (D.Colo.1980); Giles v. St. Paul Fire & Marine Insurance Company, 405 F.Supp. 719 (N.D.Ala.1975); Commercial Insurance Company v. American and Foreign Insurance Association, 370 F.Supp. 345 (D. Puerto Rico 1974); and Industro Motive Corporation v. Morris Agency, Inc., 76 Mich.App. 390, 256 N.W.2d 607 (1977).

In 17 Couch on Insurance 2d, § 68:63, p. 699 (Lawyers Cooperative Publishing Co. 1967), can be found the consistent propositions that unless the insurer calls to the attention of the insured changes in the coverage or conditions of the policy the insured has a right to presume that they are the same as those in the policy renewed even in light of the failure of the insured to examine the policy. The obligation is with the insurer to specifically inform the insured of the changes in the terms of the policy which is a renewal policy. To the same effect are cases cited in Annotation 91 A.L.R.2d 546 (1963), and this view apparently represents a clear majority rule. All of these statements are consistent with the principle of liberal construction of insurance policies in favor of the insureds. From the record, there is no dispute between the parties that when the second policy was issued Lythgoe’s attention was not, by correspondence or otherwise, specifically directed to the adjustment in language relating to completed operations.

Our disposition of this case, then, is premised upon language from W. N. Leslie, Inc. v. Travelers Insurance Company, 264 S.C. 408, 215 S.E.2d 448 (1975), in which the court said at 215 S.E.2d 450:

“The primary contention of the appellant, Travelers, is that the insured’s operations were completed within the intent and meaning of the policy and coverage accordingly terminated prior to the injury to Mrs. McDaniel. Its contention that it was entitled to a judgment n. o. v. on this ground has to be considered in the light of two elementary principles of law. The policy must, of course, be liberally construed in favor of the insured, with any ambiguity therein being resolved in favor of coverage. And, the evidence and all of the inferences reasonably deducible therefrom must be viewed in the light most favorable to the plaintiff-respondent. * * *”

In W. N. Leslie, Inc. v. Travelers Insurance Company, supra, the Supreme Court of South Carolina had before it a situation markedly similar to the facts in this one. The policy language presented was that of Policy CG 75 14 19, the second policy in this case. The court there held that even under the specific standards found in the second policy the operations had not been completed:

“ * * * Under the facts and circumstances of this case the court certainly would not be warranted in holding, as a matter of law, that the slight use to which the stairway had been put prior to the injury was putting such to its intended use within the contemplation of the policy, and the insurer thereby relieved of liability. Even viewed in the light most favorable to the insurer this made only an issue for the jury.” W. N. Leslie, Inc., supra, 215 S.E.2d at 451.

It is apparent that the coverage afforded Lythgoe was more limited under the second policy than it was under the first policy. The effect of the exclusion in the first policy was that no coverage would be afforded “after such operations have been completed.” The exclusionary language of the second policy is substantially the same, but it incorporates the more specific definition of completed operations which is quoted above. We eschew the specific standards in the second policy in favor of the more general language in the first policy. If the language of the first policy is applied the question of whether the operations have been completed is one for the trier of fact. W. N. Leslie, Inc. v. Travelers Insurance Company, supra. Cf., Daniel v. New Amsterdam Casualty Company, 221 N.C. 75, 18 S.E.2d 819 (1942). The only requirement then remaining is whether there is any evidence to support the conclusion of the district court as the finder of fact that the operations had not been completed.

The record testimony with respect to the stage of the operations is that of Lyth-goe, as follows:

“Q. Now, in March of 1968, did you do some work for the Glenrock Lodge of the International Order of Odd Fellows?

“A. Yes, I did.

“Q. Would you describe that for us? “A. At the time of the remodeling, of which is now Kay’s Clothing Store, they decided that they would like to have the stairs changed from one direction to the other for better access, so I proceeded to take the stairs apart and turn them around and replace them on the opposite direction.

“Q. You didn’t build those stairs, did you?

“A. No, I did not.

* * * * * *

“Q. Mr. Lythgoe, at the time Mrs. Bru-baker was injured, had you completed your work in the lodge?

“A. There might have been some other small things that we had to do but that part of it was completed.

“Q. That is the stairway, which was involved in her injury had been completed? “A. Yes, that part was.

“Q. What other things are you talking about that might have not been done? “A. There might have been a few touch ups and things like that.

“Q. Was that in the same area?

“A. Yes, in the same area.” (Emphasis added.)

Under the general language of the first policy, we hold that the testimony of Lyth-goe is sufficient to support the trial court’s finding of fact that the operations had not been completed. While our previous decision arises in an entirely different context, our judgment is that this approach and result are consistent with Tottenhoff v. Rocky Mountain Construction Company, Inc., Wyo., 609 P.2d 464 (1980), which involved a question of when a roofing contract had been completed for purposes of applying our mechanic’s lien statute, § 29-2-109, W.S.1977. Referring there to earlier Wyoming cases, the court said at 609 P.2d 567:

“ * * * Where the critical date involves installation of minor items or performance of a trifling service, the ultimate decision rests with the trier of fact who must consider all the circumstances which bear on the question of good faith and necessity in relation to prolongation of the period of construction.” (Emphasis added.)

There is no dispute over the proposition that the duty of an insurer to defend is broader than the duty of the insurer to indemnify, Lanoue v. Fireman’s Insurance Companies, Minn., 278 N.W.2d 49 (1979); Boston Insurance Company v. Maddux Well Service, Wyo., 459 P.2d 777 (1967). Cf., Flori v. Allstate Insurance Company, R.I., 388 A.2d 25 (1978).² Neither is there any dispute as to the proposition that the decision as to the duty to defend is not made on the basis of the ultimate liability of the insurer to indemnify the insured or on the basis of whether the underlying action is groundless or unsuccessful. Employers’ Fire Insurance Company v. Beals, 103 R.I. , 240 A.2d 397 (1968); Burger v. Continental National American Group, 6th Cir., 441 F.2d 1293 (1971).

We conclude that coverage to defend did exist under the first policy.³ There was evidence to sustain the district court’s implied finding that the operations were not completed. The allegations in the pleading in this case do not disclose a situation in which no coverage was afforded. Applying language of the first policy in the factual context of this case did structure a question of fact which the district court by implication resolved in favor of Lythgoe, and there is evidence to support that implied finding. Under these circumstances, the judgment of the trial court should be affirmed because it effectively recognizes the broader duty of insurer to afford a defense to his insured even though indemnification coverage may be in question.

The judgment of the trial court is affirmed.

1 . Having concluded to resolve this appeal on other grounds, the issue raised concerning the doctrine of reasonable expectations is not discussed any further.

2 . Since we do not have the complete pleading file in this record we cannot apply the pleading test as was done in Flori v. Allstate Insurance Company, R.I., 388 A.2d 25 (1978). Appellant argues in its brief that the complaint discloses that Lythgoe’s operations were completed. Alm v. Hartford Insurance Company, Wyo., 369 P.2d 216 (1962), appears to adopt the pleading test, and the court there says that ambiguity in a complaint for which coverage is claimed should be resolved against an insurance company. Of like tenor are Insurance Company of North America v. Forty-Eight Insulations, Inc., 451 F.Supp. 1230 (E.D.Mich. 1978); Afcan v. Mutual Fire, Marine and Inland Insurance Co., Alaska, 595 P.2d 638 (1979); and Sykes v. Midwestern Indemnity Company, 38 Ohio Misc. 64, 311 N.E.2d 906 (1978).

3 . We do not decide the question of coverage under the second policy. In W. N. Leslie, Inc. v. Travelers Insurance Company, 264 S.C. 408, 215 S.E.2d 448 (1975), the court found coverage under the language used in the second policy here. From the opinion in Brubaker v. Glenrock Lodge International Order of Odd Fellows, Wyo., 526 P.2d 52 (1974), there is a suggestion that the two cases may be distinguishable on the basis of more extensive use by Katherine Brubaker.