Case Title: BLOHM v. Glens Falls Ins. Co.

Citation: 231 Or. 410, 373 P.2d 412

Docket Number: 

State: oregon

Court: Oregon Supreme Court

Date: 1962-07-06T00:00:00Z

Document:
Reversed with instructions July 6, 1962.
*411 Leo Levenson, Portland, argued the cause for appellant. On the brief was David Sandeberg, Portland.
Cleveland C. Cory, Portland, argued the cause for respondents. With him on the brief were George H. Fraser, Walter H. Evans, Jr., Robert L. Ridgley, and Hart, Rockwood, Davies, Biggs & Strayer, all of Portland.
Before McALLISTER, Chief Justice, and ROSSMAN, WARNER and PERRY, Justices.
REVERSED WITH INSTRUCTIONS.
PERRY, J.
The plaintiffs brought this action against the defendant Glens Falls Insurance Company to recover the expenses they had incurred in defending a personal injury action. The action against these plaintiffs, which they successfully defended, was instituted by one Edward Jarvi.
At the time Jarvi commenced his action against these plaintiffs the plaintiffs tendered the defense of the action to the defendant insurance company on the theory that the incident alleged in Jarvi's complaint was indemnified under the policy issued plaintiffs by defendant. The insurance company refused the tender to defend upon the ground that the pleadings in the Jarvi case disclosed that this incident was not included in the coverage of the policy.
The trial court entered findings of fact and conclusions of law favorable to the plaintiffs, and thereon *412 a judgment was entered for the plaintiffs. The defendant appeals.
The defendant's policy of insurance for the indemnification of the plaintiffs, in addition to paying such sums for bodily injury to third parties, for which under certain circumstances the plaintiffs should be determined liable, also provided it would
The policy also contained an exclusion clause as to products hazard, which, so far as material, reads as follows:
Products Hazard is defined in the policy, as follows:
*413 The amended complaint filed by Jarvi against these plaintiffs, insofar as material, is as follows:
Jarvi alleged as a second cause of action the above facts and also that the proximate cause of his injuries was the negligence of the defendants, as follows:
Jarvi's complaint, as asserted by the plaintiffs, seeks recovery upon two theories, first in negligence upon a breach of warranty as to defects in the machine itself, and second, in negligence because of failure to warn of the dangers inherent in the use of the lawn mower.
1. This court in Macdonald v. United Pacific Ins. Co., 210 Or 395, 311 P2d 425, recognized the majority rule to be that where the complaint against an insured states a cause of action which may lie within the coverage of the policy, it is the insurer's duty to defend. This rule has been stated thus:
Thus, if the complaint is ambiguous or unclear and may be reasonably interpreted to include an incident within the coverage of the policy, there is a duty to defend.
The plaintiffs, in contending there was a duty upon the part of the defendant to defend, argue as follows:
This argument is fallacious. The exact date may be immaterial, but there is no ambiguity in the complaint as to the sequence of events. The complaint of Jarvi, as set out herein, clearly states that Jarvi contacted these plaintiffs and made inquiry concerning a safe lawn mower, he later returned, and receiving the same assurances that a certain lawn mower was what he wanted he "did purchase" and "did pay to defendants [these plaintiffs] a valuable consideration" for the lawn mower; that he then used the lawn mower and discovered it was not safe, as warranted.
2. The plaintiffs' argument that under the Jarvi complaint it was possible for Jarvi to show that in fact he did not purchase the mower, but only took it on trial or approval, is possible, but we are not permitted to indulge in what the ultimate facts may show which might or might not bring the incident within the liability terms of the policy, but only to inquire whether or not upon fair interpretation of the complaint, a liability may exist under the terms of the policy.
3. The duty to defend is not dependent upon the merits of the action brought against the insured, but *418 as previously stated, upon the allegations of the complaint. Macdonald v. United Pacific Ins. Co., supra, and Jarvis et ux v. Indemnity Ins. Co., 227 Or 508, 363 P2d 740.
Under the facts presented in this case the parties are bound by Jarvi's statement of the transaction in the complaint, if it is clear and unequivocal, not by what may have been the actual facts of the sale agreement. Jarvi unequivocally says he purchased and paid for the machine.
The plaintiffs also contend that the Jarvi complaint, in alleging that the proximate cause of the injury was the negligence of these plaintiffs in not warning him of the dangers involved in the use of the machine, stated a liability lying within the coverage of the policy and therefore there was a duty to defend. Their argument is that, since the Jarvi complaint in this respect alleged the sole proximate cause of the accident was the negligence of the defendants (plaintiffs here) it had no connection with "a warranty of goods or products." This is undoubtedly true. But this policy of insurance is not concerned solely with the matter of warranty, nor is it concerned with the proximate cause of an accident. The interpretation of the policy lies in determining what liabilities the plaintiffs may incur which the insurance company agrees to indemnify.
The insurer and the assured agreed that no liability should attach to "products hazard as defined in the policy." Products hazard is defined as "the handling or use of * * * goods or products * * * sold, * * * if the accident occurs after the insured has relinquished possession thereof to others and away from" the insured's premises.
*419 The Jarvi complaint, as we have previously pointed out, discloses that the injury to Jarvi occurred out of the use of the lawn mower sold to Jarvi and, as admitted by the plaintiffs away from their premises.
In the case of Bitts v. General Accident Fire & Life Assur. Corp., 282 F2d 542, the United States Court of Appeals for the Ninth Circuit, in interpreting a clause defining "products hazard" which reads identically with the clause in the defendant's policy, stated:
4. The trial court erred in its failure to sustain the defendants' motion, and the cause is reversed with instructions to set aside the judgment entered and grant defendants' motion for an involuntary nonsuit.