Title: Amer. Cast Iron Pipe Co. v. Commerce & Industry Ins.

State: alabama

Issuer: Alabama Supreme Court

Document:

481 So. 2d 892 (1985)
AMERICAN CAST IRON PIPE COMPANY, a Georgia corporation
v.
COMMERCE & INDUSTRY INSURANCE COMPANY.
84-787.

Supreme Court of Alabama.
December 20, 1985.
Gary M. London of Thomas, Taliaferro, Forman, Burr & Murray, Birmingham, for appellant.
*893 Mark W. Lee of McDaniel, Hall, Parsons, Conerly & Lusk, Birmingham, for appellee.
BEATTY, Justice.
Appeal by American Cast Iron Pipe Company (ACIPCo), plaintiff, from summary judgment rendered in favor of Commerce & Industry Insurance Company (C & I) in ACIPCo's action for damages based upon an alleged breach of a contract of insurance. We reverse and remand.
The case was submitted to the trial court on the parties' motions for summary judgment, stipulation of fact, briefs, and arguments. The stipulation was as follows:
The policy referred to in the stipulation is a general liability policy under which C & I obligated itself to defend ACIPCo against all general liability claims, subject to a single limit of $50,000.00 and to a deductible amount of $5,000.00 for each occurrence. The failure to pay this amount was the gravamen of ACIPCo's complaint, which alleged causes of action in negligence, breach of contract, and bad faith refusal to pay an insurance claim.
According to the policy, the "named insured" is specifically described as:
The policy provided as follows:
The policy defines "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 policy also contained an exclusion of coverage for bodily injury or property damage arising from "completed operations hazard and products hazard." "Completed operations hazard" was defined in the policy thusly:
In considering the parties' summary judgment motions, the trial court noted that the parties generally agreed upon three issues to be decided:
After consideration, the trial court decided Issue 1 and Issue 2 in favor of ACIPCo, and C & I did not appeal from those rulings. Regarding Issue 3, the trial court held:
The issue before this Court, then, is whether or not the trial court was correct in deciding that the "completed operations hazard" exclusion was applicable under these facts to support the denial of coverage by C & I. Put in another way, did O'Brien's bodily injury claim arising out of the conveyor located on American Valve's premises amount to a "completed operations hazard" under the policy?
"Completed operations" is a term referring to the liability of a business entity, generally a contractor, which arises after he has completed his work and after the subject matter has been accepted by a third party. Annot. 58 A.L.R.2d 12 at 19 (1958). Although there are a number of decisions in the literature applying the "completed *895 operations hazard," see, for example, Annot. 58 A.L.R.2d 12, and Employers Ins. Co. of Ala. v. Rives, 38 Ala.App. 411, 87 So. 2d 646 (1953), rev'd, 264 Ala. 310, 87 So. 2d 653 (1955), on remand, 38 Ala.App. 411, 87 So. 2d 646 (1956), cert. denied, 264 Ala. 696, 87 So. 2d 658 (1956), none has been cited to us, nor have we found a case, containing these particular facts. Defendant C & I makes much of the fact that O'Brien's injuries occurred upon American Valve's premises. C & I describes American Valve as "a separate and distinct corporation" which owned the premises on which the injuries to O'Brien occurred. Thus, C & I insists that the injury occurred "away from premises owned by ... the named insured." C & I discounts the effect of the "named insured" as also including American Valve, pointing to a severability clause contained in the policy:
C & I cites us to our decision in United States Fire Ins. Co. v. McCormick, 286 Ala. 531, 243 So. 2d 367 (1970), in which this Court discussed the effect of such a severability clause in a comprehensive general liability policy. That case dealt with a factual situation in which the policy of insurance named as "insured" a corporation and an individual who was president of the corporation. The policy contained an exclusion from any "obligation for which the insured ... may be held liable under any workmen's compensation ... law." The plaintiff in that case sued the president of the corporation, as provided by a statute which allowed the recovery of workmen's compensation and also an action against "any party other than the employer." The insurance company defended on the ground that the suit against the president of the company in reality was a suit against the employer. This Court rejected that position as not conforming to the intentions of the contracting parties.
The insurance company also contended that the policy's severability clause excluded coverage when the injured party was an employee of any insured, even though he might not have been an employee of the person committing the tort. This Court rejected that argument by adopting the reasoning of cases from other jurisdictions which held that the effect of the severability clause[1] was to broaden or extend coverage rather than to limit it:
With deference to defendant's argument, we point out that McCormick dealt with the applicability of the severability clause to a co-employee liability case arising under workmen's compensation law and did not pertain to the particular problem presented here. The question here deals with the effect of that clause in an insurance policy purchased by a corporation, a named insured, which wholly owns another named insured. It is stipulated that ACIPCo owns 100% of the stock of American Valve. For the purposes of applying the severability clause in C & I's policy, what did the parties intend? If the bodily injury occurred at American Valve's premises, were these premises "away from the premises owned *896 by ... the named insured," ACIPCo? Or, were American Valve's premises also ACIPCo's premises, so that the bodily injury occurred on ACIPCo's premises, with the result that the "completed operations hazard" exclusion did not apply?
By its language, the severability clause itself does not modify the term "named insured," nor does it limit the definition of "completed operations hazard." Therefore, we must use other means to ascertain ACIPCo's status vis-a-vis the additional insured, American Valve.
Admittedly, American Valve is a separate corporate entity. Nevertheless, ACIPCo owns 100% of the stock of American Valve and thus, as sole stockholder, has the ultimate voting authority and control over American Valve. In Alabama, shareholders are the equitable owners of corporate assets, including real property, to the extent of their interest, and thus exercise ultimate control over the corporation through their voting power to elect directors. Williams v. North Alabama Express, 263 Ala. 581, 83 So. 2d 330 (1955). As was more pointedly stated in Diebold v. Commissioner of Internal Revenue, 194 F.2d 266, 268 (3d Cir.1952):
See also Code of 1975, § 10-2A-185 (on dissolution).
Accordingly, we cannot conclude that ACIPCo's purchase of this policy and the naming of its subsidiary company as an insured effected a severance of insured interests. The "premises" upon which O'Brien's accident occurred were the "premises" of ACIPCo, and so the exclusion for "completed operations hazard" does not apply.
Thus, the trial court was in error in its finding to the contrary. Accordingly, the judgment predicated upon that finding must be, and it is, reversed, and this cause is remanded for further proceedings consistent with this opinion. It is so ordered.
REVERSED AND REMANDED.
FAULKNER, ALMON and HOUSTON, JJ., concur.
TORBERT, C.J., concurs in the result.
[1]  "... The term `the insured' is used severally and not collectively, but the inclusion herein of more than one insured shall not operate to increase the limits of the company's liability." McCormick, 286 Ala. at 538, 243 So. 2d  at 373.