AMERICAN FIDELITY FIRE INSURANCE COMPANY v. TRAVELERS COMPANIES

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Court of Appeal, Fourth District, Division 2, California.

AMERICAN FIDELITY FIRE INSURANCE COMPANY, Plaintiff and Appellant, v. TRAVELERS COMPANIES, Defendant and Respondent.

Civ. 20462.

Decided: June 04, 1979

Kendig, Stockwell & Gleason, Inc., Eugene L. Stockwell, Jr., William R. Jackson, Los Angeles, and Thomas Wylie, Beverly Hills, for plaintiff and appellant. Wilson, Borror & Dunn and Caywood J. Borror, San Bernardino, for defendant and respondent.

OPINION

Plaintiff American Fidelity Fire Insurance Company (American Fidelity) appeals from a summary judgment entered in favor of the defendant, The Travelers Companies (Travelers).

The issue is whether a garage owners liability insurance policy issued by Travelers affords coverage for injuries occurring after the policy period, where the repairs allegedly causing the injuries occurred while the policy was in effect.

FACTS

Travelers issued a garage owners liability policy to Dwight Sissel, doing business as Sissel Chevron (Sissel), effective from February 25, 1975 to February 25, 1976. Coverage G provided coverage for bodily injury liability.

American Fidelity issued a garage owners liability policy to Sissel covering a policy period from February 27, 1976 to February 27, 1977. Coverage G under the American Fidelity policy also covered bodily injury liability.

On April 24, 1976, Timothy Rolph suffered bodily injury when his motorcycle collided with a 1964 Chrysler driven by Roy Asa Schroder.

An action was brought on Rolph's behalf against Sissel, alleging that Sissel had negligently serviced and repaired the Chrysler vehicle, causing the vehicle to become unsafe and thereby causing Rolph's injuries. Sissel had cleaned the carburetor and installed an air filter on the 1964 Chrysler on or about February 11, 1976. This repair allegedly caused a defect in the carburetor linkage system.

Although the collision occurred on April 24, 1976, during the policy period of the American Fidelity policy, the alleged negligent repair was made on or about February 11, 1976, during the policy period of the Travelers policy. American Fidelity filed this action, seeking a declaration that the Travelers policy provides coverage for Rolph's bodily injury which resulted from the negligent repair.1

Travelers filed a motion for summary judgment, arguing that there was no triable issue as to any material fact. The court granted the motion and entered judgment for Travelers.

DISCUSSION

The key issue in the case is the interpretation of certain provisions of the Travelers insurance policy.

There was no extrinsic evidence presented on the issue of interpretation of the instrument. Where the only concern is the construction of a written instrument, unaffected by extrinsic evidence, the interpretation is essentially a question of law, not a question of fact. (See Estate of Platt (1942) 21 Cal.2d 343, 352, 131 P.2d 825; Estate of Shannon (1965) 231 Cal.App.2d 886, 890-891, 42 Cal.Rptr. 278.)

The parties did not otherwise dispute the material facts, hence, no triable issue as to any material fact remained. The outcome of the appeal therefore rests entirely upon the legal question of the interpretation of the insurance policy.

The garage liability portion of the Travelers policy provided in relevant part as follows:

“Garage Liability—Coverage G (Bodily Injury) and Coverage H (Property Damage) —The Travelers will pay on behalf of the Insured [Sissel] all sums which the Insured shall become legally obligated to pay as damages because of:

(a) bodily injury;

(b) property damage;

to which this insurance applies, caused by an occurrence and arising out of business operations ․”

The policy defined “occurrence” as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the Insured.” The term “bodily injury” was defined as “bodily injury, sickness or disease sustained by any person which occurs during the period this insurance is in effect, including death at any time resulting therefrom.”

American Fidelity argues that the term “occurrence” in the policy is ambiguous, since it is defined simply as an “accident,” and that therefore the policy must be interpreted to extend coverage to repairs performed during the policy period.

American Fidelity relies heavily on the case of Sylla v. United States Fid. & Guar. Co. (1976) 54 Cal.App.3d 895, 127 Cal.Rptr. 38. In that case, a garage owner sought a declaration that his liability insurer was obligated to defend and indemnify him. The garage owner had sold a car to the buyer. The buyer had an accident with the auto, injuring a third party. The injured third party sued the garage owner, claiming that the car was either in a defective condition when it was sold, or that the garage owner was negligent in making repairs. The insurer had refused to defend and indemnify the garage owner on the ground that although the policy was in effect at the time the car was sold, it was not in effect at the time of the auto accident.

The court was called upon to interpret the meaning of the word “occurrence” under the garage owners liability policy. The company was obligated to pay damages for “‘bodily injury … caused by an occurrence and arising out of garage operations ․”’ (Sylla v. United States Fid. & Guar. Co., supra, 54 Cal.App.3d 895, 897, 127 Cal.Rptr. 38, 38.) An “occurrence” was defined as “‘an accident, … which results, during the policy period, in bodily injury or property damage…”’ (Ibid.)

The court held that the term “occurrence,” defined as an “accident” was ambiguous. It considered several definitions of the word “accident” (as that term has been reviewed in Oil Base, Inc. v. Continental Cas. Co. (1969) 271 Cal.App.2d 378, 76 Cal.Rptr. 594), such as:

““‘… It “‘includes any event which takes place without the foresight or expectation of the person acted upon or affected by the event.”’ … ‘Accident, as a source and cause of damage to property, within the terms of an accident policy, is an unexpected, unforeseen, or undesigned happening or consequence from either a known or unknown cause.’ ..”

“‘It is an ‘occurrence which produces hurt or injury.’ … [A]s commonly used in liability insurance policies, the word ‘accident’ is predicated of an occurrence which is the cause of the injury. That is to say, as used in liability insurance contracts, the word is employed to denote the cause, rather than the effect.””' (Sylla v. United States Fid. & Guar. Co., supra, 54 Cal.App.3d 895, 901, 127 Cal.Rptr. 38, 41.)

These definitions did not rule out the possibility that the “accident” or “occurrence” was in fact the negligent repair of the car and not the resulting auto accident. The court then looked at the nature of the garage owner's operation. It found that the hazards the garage owner seeks to insure against are different from those of ordinary holders of vehicle liability policies. The garage owner's fundamental hazard is not the vehicular collision itself (since he does not control the vehicle), but rather his own negligence in servicing and repairing the vehicle. It would therefore be reasonable to expect to be insured against the acts of negligence, not simply the resulting injury. In this context, the court held, it was next to meaningless to define an “occurrence” as an “accident.” Such a definition did not resolve the ambiguity about the scope of coverage. Accordingly, the ambiguity was resolved, under the rule of Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168, in favor of extending coverage to the insured and against the insurer.

American Fidelity points out the similarity in language between the Travelers policy and the policy involved in Sylla, and concludes that Sylla must therefore control this case.

The focus of the Sylla court, however, was on the meaning of the word “occurrence” or “accident.” Evidently, the court was not concerned with the effect of the language, “‘which results, during the policy period, in bodily injury or property damage․”’ (Sylla v. United States Fid. & Guar. Co., supra, 54 Cal.App.3d 895, 897, 127 Cal.Rptr. 38, 38.) The present case turns on the construction of language in the Travelers policy similar to the latter phrase. The Travelers policy specifically limits bodily injury to “bodily injury, sickness or disease sustained by any person which occurs during the period this insurance is in effect ․”2 (Emphasis added.)

The courts have considered language like this in other cases, notably Tijsseling v. General Acc. etc. Assur. Corp. (1976) 55 Cal.App.3d 623, 127 Cal.Rptr. 681, and Remmer v. Glens Falls Indem. Co. (1956) 140 Cal.App.2d 84, 295 P.2d 19. In Tijsseling, the plaintiffs claimed that their property was damaged because a house built by Tijsseling encroached on their land. Tijsseling sought a declaration that the insurer must defend and indemnify him. The encroachment occurred before the insurance policy was issued, but it was discovered while the policy was in force.

The company was obligated to pay damages for property damage “‘caused by an occurrence ․”’ An “occurrence” was defined as “‘an accident .. which results, during the policy period, in bodily injury or property damage ..”’ and the scope of coverage was limited “‘only to bodily injury or property damage which occurs during the policy period.”’ (Tijsseling v. General Acc. etc. Assur. Corp., supra, 55 Cal.App.3d 623, 625-626, 127 Cal.Rptr. 681, 682-683.) The court held that “‘the time of the occurrence of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed, but the time when the complaining party was actually damaged.”’ (Id., at p. 626, 127 Cal.Rptr., at p. 683, citing Remmer.) The controlling question then became simply, “When were the plaintiffs damaged?”

In Remmer, the insureds had graded and filled their land in 1947, while a comprehensive personal liability policy was in effect. Several years after the policy was cancelled, the rock and earth from the fill slid onto the neighboring property, causing damage. The insureds sought to compel the company to defend them in the damage suit brought by the neighboring landowners.

The policy had provided that “‘This policy applies only to occurrences during the policy period.”’ (Remmer v. Glens Falls Indem. Co., supra, 140 Cal.App.2d 84, 85, 295 P.2d 19, 20.) “Occurrence” was defined as “‘an accident, or a continuous or repeated exposure to conditions, which results in injury during the policy period, provided the injury is accidentally caused…”’ (Id., at p. 86, 295 P.2d, at p. 20.) The court held that there was no coverage for the damage caused by the landslide. “The general rule is that the time of the occurrence of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed, but the time when the complaining party was actually damaged. [Citations.] This general rule is adopted by the insurance policy here involved because it defines an ‘occurrence’ insured against an ‘an accident, or a continuous or repeated exposure to conditions, which results in injury during the policy period.”’ (Id., at p. 88, 295 P.2d, at p. 21-22.)

These cases clearly show that language which limits the policy to injuries arising during the policy period excludes from coverage injuries which occur subsequent to the policy period, even though the injuries may in some sense have been caused by acts done while the policy was in effect.

Insurance Co. of North America v. Sam Harris Constr. Co. (1978) 22 Cal.3d 409, 149 Cal.Rptr. 292, 583 P.2d 1335, relied on by American Fidelity, recognizes this principle. Although the court in Sam Harris held that language limiting the policy to “‘occurrences or accidents … during the policy period …’ was ambiguous (and therefore did not exclude coverage), it recognized that where an “occurrence” is defined as “an accident causing injury during the policy period …”, no ambiguity arises. (Id., at p. 412, 149 Cal.Rptr., at p. 293, 583 P.2d, at p. 1336, emphasis added.)

Recently, Sylla was severely criticized in Maples v. Aetna Cas. & Surety Co. (1978) 83 Cal.App.3d 641, 148 Cal.Rptr. 80. The court in Maples reviewed a number of California and other cases dealing with the interpretation of the term “accident” or “occurrence” in insurance policies. “Review of this seemingly unbroken line of authority finding that the term ‘accident’ unambiguously refers to the event causing damage, not the earlier event creating the potential for future injury, leads to the question of how the courts in Oil Base and Sylla were able to reach results contradicting this line of authority. Neither Oil Base nor Sylla acknowledges any of the above-cited California or out-of-state authorities, which strongly suggest [[[[sic] that they were not briefed or argued.” (Id., at pp. 647-648, 148 Cal.Rptr., at p. 84.)

The court then distinguished the cases defining “accident” which were cited in Sylla and Oil Base: “The fact that there may be ambiguity in the question of whether a collision with two cars is one accident or two accidents (Hyer),3 or the question of whether malicious prosecution is an accident (Maxon),4 or whether damage done by a defective door is an accident (Geddes),5 does not mean that there is ambiguity in the question of whether the term ‘accident’ means the negligent installation of a heater or the fire six years later attributed to the negligent installation, which is our case at bench. Accepted popular, as well as legal definition, would call the latter event the ‘accident.”’ (Maples v. Aetna Cas. & Surety Co., supra, 83 Cal.App.3d 641, 650, 148 Cal.Rptr. 80, 85.) The court therefore rejected the view that “the terminology ‘accidents which occur during the policy period’ is … ambiguous as used in the parties' comprehensive liability policy” and held that the phrase refers not to the time the wrongful act was committed, but to the time when the complaining party was injured. (Id., at p. 642, 148 Cal.Rptr., at p. 81.)

We believe that the line of cases followed by Maples is the better reasoned. The court in Sylla was concerned with the kind of coverage a garage owner could reasonably expect to be provided. In view of the nature of the garage owner's business, and since negligent repairs could result in injury at some undetermined future time, the court felt that the garage owner might well expect coverage from work done during the policy period, regardless of when the injury occurred. To define an “occurrence” simply as an “accident” in such a context did not aid the court in determining the scope of the policy.

It might not be unreasonable, in view of the risks faced, for a garage owner to seek such coverage. However, it appears that the Sylla court did not take account of or give effect to the phrase “‘which results, during the policy period, in bodily injury or property damage․”’ (Sylla v. United States Fid. & Guar. Co., supra, 54 Cal.App.3d 895, 897, 127 Cal.Rptr. 38, 38.) Had the court considered that language, it might have reached a different result.

In accord with the views herein-above expressed, we hold that the Travelers policy is not ambiguous, but clearly limits the scope of coverage to injuries which arise during the policy period.

The judgment is affirmed.

FOOTNOTES

1.  American Fidelity does not dispute that its own policy provides coverage for any liability incurred by Sissel on account of the injuries suffered by Rolph. Rather, it seeks a declaration that the Travelers policy also provides coverage.

2.  We construe the phrase, “the period this insurance is in effect” to be essentially equivalent to “the policy period.”

3.  Hyer v. Inter-Insurance Exchange, etc. (1926) 77 Cal.App. 343, 246 P. 1055.)

4.  Maxon v. Security Ins. Co. (1963) 214 Cal.App.2d 603, 29 Cal.Rptr. 586.)

5.  Geddes & Smith, Inc. v. St. Paul Mercury Indemnity Co. (1959) 51 Cal.2d 558, 334 P.2d 881.

MORRIS, Associate Justice.

TAMURA, Acting P. J., and McDANIEL, J., concur.