Opinion ID: 2614139
Heading Depth: 1
Heading Rank: 1

Heading: The damage to the Pears Resulted from an Occurrence within the terms of the Insurance Policy.

Text: By the terms, of the insurance policy defendant agreed to pay plaintiffs for loss or damage resulting from an occurrence as defined by the policy, subject to exclusions, conditions and other terms of the policy. The pertinent portions of the policy on this issue are as follows: `Occurrence' shall mean only       d) contact or permeation of insured property by ammonia or refrigerant; but `Occurrence' shall not mean       iv. any sudden and unforeseen damage resulting from any testing or purging of any refrigeration system or of the equipment or apparatus used solely with said system;   . Defendant contends that any loss or damage in this case was damage resulting from the purging of the system and therefore was not an occurrence as defined in the policy. In order to determine the validity of this contention it is necessary to consider the facts. Plaintiffs' plant includes a precooling room some 40 feet wide and from 60 to 80 feet long, with cooling or diffuser units hanging from the ceiling. It was filled with 630 or 640 pallet bins of pears, or between 15 and 17 carloads. On the night of September 27, 1969, the plant engineer, Mr. Orgain, was informed by the night watchman that the room was warming up and that one of the diffuser units was not working properly. Upon arriving at the plant he found that warm, instead of cold, air was blowing out of one of the units. He then undertook to open a trap in the pipeline of that unit for the purpose of cleaning a screen in that trap to remove possible oil, particles of slag or other substances which sometimes collected in the screens of such traps and which might have been the cause of the trouble. This particular trap was on a section of pipe three-quarters of an inch in diameter and was located just ahead of an automatic solenoid switch which controlled the flow of ammonia through the pipes of the unit. To make possible the cleaning of the screen in the trap without permitting the escape of ammonia from the entire unit, two hand-operated shut-off valves were located on the pipe, one on each side of the trap, and approximately three feet apart. Thus, when these valves were closed, the trap could be opened so as to clean the screen and only the ammonia in that short section of pipe would escape. That amount of ammonia was estimated as approximately one-half pint, assuming the pipe to be of that size, as testified by plaintiffs' witness. According to plaintiffs' testimony, the release of that amount of ammonia would not normally cause damage to the pears stored in a precooling room of that size and no pears were stored close enough to that trap to be damaged by the escape of that small amount of ammonia. The cleaning of the screens in the traps of these refrigeration units was recognized to be a more or less routine maintenance operation, to be performed while the rest of the units continued to operate, and was apparently done quite often. On that particular night, Mr. Orgain, plaintiffs' engineer, shut the two hand-operated valves so as to isolate the area between them and then loosened the bolts on the bottom of the trap to permit the ammonia in that section of the pipe to escape, which he said roughly takes five minutes or so. Although he had previously performed this operation on other units in the plant, he had never previously done so on this particular unit  the plant then having been in operation less than two months. While waiting for the ammonia to escape Mr. Orgain got back down off the catwalk, because the ammonia gets pretty strong. Upon returning to clean the screen, however, he found that ammonia was still escaping. He testified that he then tried to tighten the valves by hand, but was unable to do so, not having his wrenches with him, and then had to get back down out of there because of the escaping ammonia. Mr. Orgain then called the fire department and went back a third time with the fireman, after getting a mask, and tightened the bolts on the bottom of the trap so as to shut off the ammonia. By that time vapor from the ammonia was coming out the door about two feet above the ground and looked like steam or fog. Two days later Mr. Orgain went back and had no trouble closing the valves. He then removed the screen from the trap and upon cleaning it found particles of slag in the screen. There was testimony that such particles resulted from welding and cutting operations during the recent installation of the refrigeration system and that this was one reason for installation of the trap. Mr. Orgain also testified that although the two hand-operated valves operated properly, as far as I know on the previous occasion, if they had operated properly when he tightened them on that occasion it should have stopped that ammonia, but that the flow of ammonia didn't stop. There was testimony that the ammonia in the pipes of the unit was under pressure of between 175 and 200 pounds per square inch. Defendant called as an expert witness an engineer with experience in the design and operation of cold storage refrigeration equipment. He testified, in response to a hypothetical question, and over objection, that the loosening of the plate under the trap so as to permit ammonia to escape in order to clean the screen in the trap constituted a purging of the system. On cross-examination he also testified that the trap was part of a purging system for the removal of impurities from the system, but not for removal of the ammonia refrigerant itself; that purging consisted of the removal of foreign materials or contaminants from the system, and that the escape of ammonia was only incidental to the purging operation. Plaintiffs offered no evidence to the contrary. Indeed, plaintiffs agree that the definition of purge includes (1) To rid of whatever is impure or undesirable; cleanse; purify to rid, clear or free; (3)    (4) To remove by cleansing or purifying. Citing The Random House Dictionary, 1166-1167. Under this definition, it would appear to be clear that while the term purging may include the removal of ammonia from a refrigeration system, it also includes the cleaning of screens in traps to remove particles of slag, oil, or other impurities in the refrigeration system. In view of this concession by plaintiffs, there can be no reasonable contention that the term purging was intended to be limited to the removal of ammonia or other refrigerant from the system or any part of it or that it was not intended to extend to and include the cleaning of oil, slag or other impurities from the screens, in traps in the refrigeration system, as in this case. The sole basis for defendant's contention of noncoverage is that the loosening of the bolts on the bottom of the trap, so as to clean the screen in the trap, resulting in the discharge of ammonia from that part of the system, was a purging of the refrigeration system or its equipment or apparatus, within the terms of the exception to coverage as provided in the policy. Thus, defendant contends that there is no evidence that the shut-off valves did not operate properly, but that regardless of whether or not they leaked or otherwise malfunctioned or whether they operated properly, but were not closed completely by Mr. Orgain, this was all part of the same [`purging'] operation, the closure of the valves being merely the first step in cleaning or purging the screen. Plaintiffs contend, to the contrary, that a reasonable construction of the contract would limit the exclusion from coverage to losses that occurred as a result of a purging of the system or a portion of the system where the amount of ammonia introduced was that very amount intended to be released by the purging operation, but that this would not preclude coverage where the purging operation in and of itself did not cause the damage, as in this case. Thus, plaintiffs contend that the evidence in this case establishes that this loss resulted from causes other than a purging. At the time of argument counsel for defendant, when asked what risks were intended to be covered by the insurance policy, answered that the intent was to cover the risk of ammonia escaping. At the same time, he contended that the policy did not cover the escape of ammonia resulting from a purging operation. As previously noted, defendant contends that this result must follow regardless of whether or not the shut-off valves malfunctioned during a purging operation. In resolving these conflicting contentions, we must bear in mind that although an insurance company is ordinarily entitled to the enforcement of an insurance policy as written by the company if its terms are clear and unambiguous, in the event of an ambiguity in the terms of an insurance policy, any reasonable doubt will be resolved against the insurance company and in favor of extending coverage to the insured. Farmers Mut. Ins. Co. v. Union Pac. Ins. Co., 206 Or. 298, 305, 292 P.2d 492 (1956). In addition, we must also bear in mind that while the primary rule of contract interpretation, including insurance contracts, is to ascertain the intent of the parties, if possible, it is nevertheless established in Oregon that an insurance policy should be construed    in the sense in which the insured had reason to suppose it was understood. Borglund v. World Ins. Co., 211 Or. 175, 181, 315 P.2d 158, 161 (1957). See also Jarrard v. Continental Casualty, 250 Or. 119, 126-127, 440 P.2d 858 (1968). Viewing the facts of this case in the light of that rule, we find it difficult to believe that the plaintiffs, as the insured parties to this insurance policy, would have had reason to suppose, upon reading the policy as a whole, that although one provision of the policy undertook to insure against loss resulting from the contact or permeation of insured property by ammonia or refrigerant, the following policy provision was intended to exclude from coverage not only any loss from contact or permeation of insured property by ammonia resulting from the deliberate release of the amount of ammonia that would normally be released in a purging operation, but also excluded from coverage losses resulting from the wholly unintentional and accidental escape of ammonia because of some accident during a purging operation. In other words, it is our opinion that it is one thing for the parties to have intended by that provision to exclude from coverage damage resulting from the release of ammonia in a normal purging operation, in which larger or smaller amounts of ammonia may be released, depending upon the nature and extent of the purging operation. It is quite another matter, however, for the parties to have intended by that provision to exclude from coverage damage resulting from the accidental release of ammonia as the result of some defect or malfunction in the refrigeration during the course of a purging operation. We therefore conclude that the terms of the exclusion from coverage of any sudden and unforeseen damage resulting from any testing or purging of any refrigeration system or of the equipment or apparatus used solely within said system are ambiguous, depending upon the intention of the parties. We also conclude that while the insured had reason to believe that this provision would exclude from coverage damage resulting from the release of the amount of ammonia deliberately released during a purging operation, the insured also had reason to believe that all damage resulting from the accidental escape of ammonia would be covered by the general definition of occurrence and would not be excluded from coverage by this provision, even if occurring during a purging operation. This leaves for determination the question whether there was evidence in this case from which the jury could properly have found that the escape of ammonia through the shut-off valve was accidental in that it occurred because the valve malfunctioned when plaintiff's engineer attempted to close the shut-off valves. No specific instruction was submitted to the jury on that question and none was apparently requested by either party. The jury was instructed, however, to find for the defendant if it found that the damage resulted from plaintiffs' purging of the refrigeration equipment or apparatus used solely within the system. We are fully aware of defendant's contention that there was no evidence in this case that either valve was defective or malfunctioned. Since, however, Mr. Orgain testified that he attempted, without success, to shut the valves (which were designed as hand-operated valves), but that the ammonia continued to escape from the bottom of the trap, we conclude that the jury could properly have found that one of the valves malfunctioned and that this was the cause of the escape of ammonia in a quantity large enough to result in damage to the pears in this case. For these reasons, and after examining the entire record, we conclude that there was sufficient evidence to support a finding by the jury that the damage in this case resulted from the accidental escape of ammonia and did not result from a purging of the refrigeration system. We must presume, after the verdict in favor of plaintiffs, that the jury made such a finding. We therefore conclude that the damage to plaintiffs' pears was covered by the insurance policy in this case. Defendant also contends that the trial court erred in its instruction to the jury regarding the burden of proof of coverage, for various reasons. At the time of trial, however, the only exception made by defendant's counsel was that the instruction as given, was inaccurate because it fails to qualify properly the instruction with respect to whether it was an occurrence within the definition of the policy and should have explained that the mere fact that the pears were exposed to contamination or permeation by ammonia and there was damage would not automatically establish coverage. While that exception may have indirectly involved some of the contentions now made by defendant on appeal, any such reference was far too remote and unclear so as to adequately point out such contentions to the trial judge, as required in order to constitute a good and sufficient exception. See Mays v. Huling Buick Co., 246 Or. 203, 424 P.2d 679 (1967), and Ross v. Cuthbert, 239 Or. 429, 438, 397 P.2d 529 (1964). It follows that this assignment of error must fail for lack of a proper exception at the time of trial. Upon examining this instruction as a whole, however, we conclude that it was consistent with the pleadings in this case, including the affirmative defenses alleged by defendant.