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Hawkeye Security Insurance v. Hodorowicz

OPINION FILED MAY 29, 1980.

HAWKEYE SECURITY INSURANCE CO., PLAINTIFF,

v.

PETER HODOROWICZ ET AL., DEFENDANTS. — (PETER HODOROWICZ, INDIV. AND D/B/A ATCO HEATING & SHEET METAL CO., COUNTERPLAINTIFF-APPELLANT,

v.

TRANSAMERICA INSURANCE CO., COUNTERDEFENDANT-APPELLEE.)



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.

MR. JUSTICE JIGANTI DELIVERED THE OPINION OF THE COURT:

In January of 1975, Anthony and Lee Stephens filed a complaint against the defendant and counterplaintiff, Peter Hodorowicz d/b/a Atco Heating & Sheet Metal Co. (Atco), alleging that in January of 1967 Atco negligently installed a gas furnace in their dwelling and that the negligence caused a fire. An amendment to the complaint added the allegation that Atco impliedly warranted the fitness and quality of the work performed and that the breach of that warranty caused the fire.

Atco asked the plaintiff, Hawkeye Security Insurance Company (Hawkeye), to provide a defense to the suit. Hawkeye responded by filing a complaint for declaratory judgment. Hawkeye's complaint alleged that the policy under which it insured Atco was for the period of June 1, 1966, through June 1, 1967, and that the defendant and counterdefendant, Transamerica Insurance Company (Transamerica), had issued a liability policy to Atco covering the period of June 13, 1974, to June 13, 1977. Hawkeye asked the court to find that it had no duty to defend or indemnify Atco in the Stephens' suit. Atco then filed a counterclaim against Transamerica asking the court to order Transamerica to defend it in the Stephens' suit. Transamerica answered with an affirmative defense stating the policy did not cover the alleged damages.

Hawkeye and Transamerica each moved for judgment on the pleadings. Both motions were granted. The trial court denied Atco's post-trial motion and Atco appeals from that order. Hawkeye is not a party to this appeal.

• 1 The policy under which Transamerica insured Atco includes a page headed "Exclusions" and states in part that "[t]he insurance afforded by the policy for the coverages designated below does not apply to any damages for the coverage stated herein with respect to the specified hazards." One of the "specified hazards" which has been typed on the form is "Products and Completed Operations." This is defined in the following terms:

"`Completed Operations Hazard and Products Hazard' means the Bodily Injury Liability Coverage and the Property Damage Liability Coverage does not apply to bodily injury or property damage included within the Completed Operations Hazard or the Products Hazard, and that Exclusion (d) 7 is amended to exclude property damage to work performed by or on behalf of the named insured arising out of work or any portion thereof, or out of materials, parts or equipment furnished in connection therewith."

The policy does not appear to contain any further definition of the "Completed Operations Hazard" or "Products Hazard."

An authority on insurance law explains the difference between premises-operations coverage, which was clearly encompassed by the Transamerica policy, and coverage for completed operations and products liability:

"[O]nce a product has been completed and sent to market, or a service has been performed * * * the premises-operations coverage is not an appropriate coverage and the individual now needs `products liability' or `completed operations' coverage. The coverages are complementary and not overlapping and the premiums are separate and distinct. The premium charged for either coverage would be inadequate to cover both hazards." 7A J. Appleman, Insurance Law and Practice § 4508, at 341 (Berdal ed. 1979).

Atco argues the exclusion for completed operations is ambiguous for two reasons. First, it contends the language of the exclusion itself is unclear. Secondly it claims the exclusion is inconsistent with a number of other policy provisions.

Atco contends that on the page entitled "Liability Schedule and Premium Recap." the premiums to be paid for "Premises-Operations" is "based upon the amount of Atco's sales." Atco argues this fact means Atco reasonably believed it would be paying premiums for coverage of completed operations.

We are not persuaded by this argument. The page referred to by Atco provides that the premium bases for sheet metal work and plumbing are, respectively, $30,000 and $15,000. Next to these figures is noted "a" which is defined at the bottom of the page as "per $100 payroll" while "b" is defined as "per $1,000 receipts." It is thus clear that the premiums were based upon the size of Atco's payroll rather than upon the amount of sales.

At oral argument Atco also contended that certain language on the "premium recap." page, providing that a covered hazard is "Sheet Metal Work — erection, installation or repair-shop and outside," gave Atco reason to believe that it was insured for off-premises liabilities. While we agree that the language indicates that some "off premises" occurrences come within the policy coverage, we cannot say that the language gave Atco reason to believe that a fire arising from an operation completed off the premises seven years earlier would be covered, particularly where "Completed Operations" is expressly excluded by the policy.

Atco next argues an ambiguity is created by a statement found on the "Blanket Liability Coverage ...


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