Mid-Continent Casualty Co. v. Peerless Boiler & Engineering Co. , 398 P.2d 79 ( 1964 )

HALLEY, Vice Chief Justice.

This action was commenced by plaintiff, Peerless Boiler & Engineering Company, against the defendant, Mid-Continent Casualty Company, for damages resulting from an explosion on April 18, 1959, at Gretna, Louisiana. Plaintiff’s petition alleged and defendant’s answer admitted that a boiler explosion occurred at that time and place. Prior to trial plaintiff repaired all property damaged in the explosion. Plaintiff was insured by defendant’s comprehensive liability insurance policy which provided, among other coverages, under “Insuring Agreements”:

“Coverage D- — Property Damage ■Liability — Except Automobile: To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, ' including the loss of use thereof, caused by accident.”

The policy also provided under “Rxclu-sions”:

“This policy does not apply:

⅜* ¾* ⅜ ⅜⅝ ¾* ⅜

“(j) under coverage D, to injury to or destruction of * * * (3) * * * property in the care, custody or control of the insured or property as to which the insured for any purpose is exercising physical control, * *

Plaintiff sold the 36,000-lb. per hour Springfield Packaged Water Tube Boiler to Continental Oil Company (hereafter called Continental) on November 20, 1958. It was to be delivered F.O.B. Gretna, Louisiana. Throughout the remainder of this opinion the “boiler unit” will be referred to as one component part of the Springfield Boiler and the “burner and control unit” will be referred to as another component part. The boiler unit was shipped to Continental without the burner and controls unit. Continental installed the boiler unit on its foundation at its refinery in Gretna. Later, approximately three days before the explosion, two of plaintiff’s employees went to Gretna to attach the burner and controls unit to the boiler unit. The burner and controls unit had eight bolt connections to attach it to the boiler unit. No part of the burner and controls unit extended physically into the boiler, but it was set against it and fastened by eight bolts at an opening provided therefor on one end of the boiler. The burner contains a fan which creates a forced draft to cause the flame to go from the burner and controls unit into the boiler unit when the Springfield Boiler is operated.

The facts in this case were undisputed. Plaintiff presented all the evidence. During the trial defendant admitted liability under its insurance policy for damage to property in the amount of $2,050.11, which was all the property damaged except the burner and controls unit and the boiler unit. At the close of plaintiff’s evidence defendant demurred to the evidence. The demurrer was overruled. Defendant rested without presenting any evidence. Plaintiff’s motion for directed verdict for $2,050.11 was sus1 tained. Defendant moved for a directed verdict as to all items of damages except those previously admitted. Defendant’s specific grounds for this motion for directed verdict were that the burner and controls unit was within the care, custody and control of plaintiff, and that the boiler unit was within the care, custody and control of plaintiff, at the time of the explosion. The parties stipulated that the damages to the burner and controls unit amounted to $7,-859.65, and that the damages to the boiler unit were in the amount of $16,975.16. The trial court overruled defendant’s motion for directed verdict and submitted to the jury the issues of defendant’s liability for the damages to the burner and controls .unit and the boiler unit on two interrogatories. The jury answered the two interrogatories with findings that the burner and controls unit was under plaintiff’s care, custody or control, and that the boiler unit was not under plaintiff’s care, custody or control, at the time of the explosion. Based on these findings together with the directed verdict for plaintiff as mentioned above, the trial court entered judgment for plaintiff in the sum of $19,025.30. Defendant filed a motion for new trial which was overruled, and defendant appeals.

Defendant contends that the trial court erred in failing to direct a verdict in its favor on the issue of damage to the boiler unit, because the undisputed evidence showed (in the language of the exclusion clause of the insurance policy) that the boiler was “property in the care, custody or control of the insured or property as to which the insured for any purpose [was] exercising physical control.” We agree with defendant’s contention.

Neither party cites any cases in which this Court has interpreted the language “care, custody or control” or “physical custody for any purpose” in connection with insurance policy provisions. They do, however, cite the annotation on the subject at 62 A.L.R.2d 1242, and each party relies on the holdings of certain cases cited therein. The annotation lays down certain guidelines that courts have used when considering this type of exclusion clause:

1. Some courts say the exclusion clause is ambiguous and will be construed most favorably to the insured; other courts say the exclusion clause is clear and unambiguous and must be given the plain and ordinary meaning of -the terms used.

2. The majority of courts construe the clause as referring to possessory han- ■ dling of the property as distinguished from proprietary control.

3.The extent of control is an important factor in determining whether the requirement of the exclusion clause is satisfied.

We will briefly discuss these guidelines. First, we find that the language used in the policy is clear and that it must be given the plain and ordinary meaning of the terms used. Maryland Casualty Co. v. Holmsgaard, 10 Ill.App.2d 1, 133 N.E.2d 910; International Derrick & Equipment Co. v. Buxbaum (C.A.3rd Cir.), 240 F.2d 536, 62 A.L.R.2d 1237.

Second, we follow the majority of courts in holding that the language of the exclusion clause must be construed as referring to possessory handling of the property, rather than requiring proprietary control. See cases cited at 62 A.L.R.2d 1245 (§ 4).

Third, the extent of control should be determined in order to decide whether the requirement of the exclusion clause is satisfied. The undisputed evidence in the instant case, in addition to that which we have related above, is that at the time of the explosion plaintiff’s two employees were the only ones working with and immediately supervising the Springfield Boiler. They had fastened the burner and controls unit to the boiler unit by means of bolts. Immediately prior to the explosion they were attempting to adjust the pilot flame so that it would burn-properly .when the burner was operated at “full load”, that is, when the burner flame was injecting the maximum capacity of heat into the boiler unit. They lost the pilot flame and attempted to shut off the forced draft burner. Plaintiff’s employee testified that he momentarily relaxed the contact with the control button and that the unit attempted to ignite when there was gas in it. The explosion resulted.

This evidence clearly shows that plaintiff was exercising possessory control of the boiler unit as well as the burner and controls unit. Plaintiff was also exercising exclusive physical control of the burner and controls unit and the boiler unit. Plaintiff argues that its employees testified that there was no necessity to use the boiler unit in testing the burner and controls unit. The fact remains, however, that they were using it and that they testified that such was one method of making the tests which they were making at the time of the explosion. It was necessary to the work in the manner they were doing it. The purpose of adjusting and testing the burner and controls unit was to allow it to properly fire the boiler unit. All of the evidence in the instant case was that the boiler unit was physically controlled by and under the immediate supervision of the insured as a necessary element of the work being performed, and there was no evidence that the boiler unit was merely incidental to the property on which plaintiff’s work was being performed. Hill v. United States Fidelity & Guaranty Company, 48 Tenn.App. 419, 348 S.W.2d 512; Madden v. Vitamilk Dairy, Inc., 59 Wash.2d 237, 367 P.2d 127. There were thus no triable issues of fact to submit to the jury as to plaintiff’s care, custody or control of the boiler unit. P & M Stone Co. v. Hartford Accident & Indemnity Co., 251 Iowa 243, 100 N.W.2d 28. The trial court erred in failing to sustain defendant’s motion for directed verdict as to the damages to the boiler unit. The judgment of the trial court must be reversed with directions to sustain such motion. Plaintiff states in its brief that defendant has paid the amount of the directed verdict in favor of plaintiff ($2,050.11), and plaintiff did not appeal from the judgment entered against it on the damages to the burner and controls unit. Therefore our decision herein disposes of the only issue pertinent to this appeal.

Reversed with directions.

BLACKBIRD, C. J., and DAVISON, JACKSON and IRWIN, JJ., concur. JOHNSON, WILLIAMS and BERRY, JJ., dissent.