Opinion ID: 1973398
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Heading: Terms of the Policy

Text: The policy the Moorheads purchased from Harford to protect themselves from potential lawsuits, commonly referred to as a comprehensive general liability insurance policy, provides that coverage shall extend to all sums which the insured shall become legally obligated to pay as damages because of (a) bodily injury, or (b) property damage to which this insurance applies. . . . Policy rider at L6395(a) (Ed. 1-73). This broad declaration of coverage is limited, however, by exclusions found elsewhere in the policy, to wit: It is agreed that such insurance as is afforded by the bodily injury liability coverage does not apply to bodily injury or property damage included within the completed operation hazard or the products hazard. Policy rider GL21 04-0766 (emphasis added). The latter of these exclusions is more specifically defined in a separate paragraph as follows: Products Hazard includes bodily injury and property damage arising out of the named insured's products or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others. Endorsement MP 00 90 (Ed. 07 77) (emphasis added). No other definitions of or references to the Products Hazard exclusion are offered. In interpreting this policy, we must remember that foremost among insurance laws regarding the reviewing court's determination of policy coverage, remain the general rules of policy construction. To promote stability and predictability between parties in a contractual relationship, the common law has assigned to the courts the task of interpreting the intent of the parties. DiFabio v. Centaur Ins. Co., 366 Pa.Super. 590, 593, 531 A.2d 1141, 1142 (1987). Words of an insurance policy which are unambiguous and clearly reflect the intent of the parties should be construed according to their plain and ordinary meaning, and we should give effect to that language. See Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 519 A.2d 385 (1986); Standard Venetian Blind Co. v. American Empire Ins., 503 Pa. 300, 469 A.2d 563 (1983); Pennsylvania Manufacturers' Assn. Ins. Co. v. Aetna Casualty and Surety Ins. Co., 426 Pa. 453, 233 A.2d 548 (1967). However, overly-subtle or technical interpretations may not be used to defeat reasonable expectations of insureds. See Huffman v. Aetna Life and Cas. Co., 337 Pa.Super. 274, 486 A.2d 1330 (1984). Thus, where reasonably intelligent people could differ as to the meaning of a contractual provision, the term may properly be characterized as ambiguous. Loomer v. M.R.T. Flying Service, Inc., 384 Pa.Super. 244, 247, 558 A.2d 103, 105 (1989); Musisko v. Equitable Life Assurance Society, 344 Pa.Super. 101, 496 A.2d 28 (1985). In light of the manifest inequality of bargaining power between an insurance company and a purchaser of insurance, see Standard Venetian Blind, supra, 469 A.2d at 567, ambiguities must be resolved contra proferentem, or against the insurer as drafter of the agreement. DiFabio v. Centaur, supra, 531 A.2d at 1142; see also Rusiski v. Pribonic, 511 Pa. 383, 515 A.2d 507 (1986). The instant dispute revolves around the interpretation of a provision which has been construed by this Court previously. In Friestad v. Travelers Indemnity Co., 260 Pa.Super. 178, 393 A.2d 1212 (1978), this Court was faced with the question of whether coverage under a similar comprehensive general liability insurance policy was precluded by an identical Products Hazard exclusion where an insured was sued for negligently installing a furnace. Friestad, supra, 393 A.2d at 1213. Writing for the majority, in a comprehensive opinion which traced the historical and evolutionary distinction between several typical policy exclusions, Judge Cercone reasoned that as the principal thrust of a products hazard [coverage] is the insured's manufacture or sale of a product, id. 393 A.2d at 1213 n. 2, it is more preferable by far to define the products hazard in terms of products liability law, and apply the exclusion only when a product, rather than a service, is the cause in fact of damages or injury to a third person. Friestad, supra, 393 A.2d at 1217. Thus, Judge Cercone concluded, where the insureds are sued merely for negligently servicing a product, the Products Hazard exclusion would not apply. Id., 393 A.2d at 1217. Numerous courts in other jurisdictions have reached similar conclusions in interpreting the language of the common Products Hazard exclusion found herein. The Arizona Court of Appeals, faced with a similar question of the applicability of the exclusion in Brewer v. Home Ins. Co., 147 Ariz. 427, 710 P.2d 1082 (1985), cogently summarized many of the leading cases on point, and concluded: The foregoing cases establish the following principles. Products Hazard coverage is intended to protect the manufacturer or seller of goods from claims for injury and damage arising out of the use of the insured's products. The risk which is being insured is that the product will not perform in the manner expected. If the product works as it is supposed to, but through other negligence the insured's product causes injury or damage, there is no coverage. Thus, where Products Hazard coverage is excluded, the insurer is not responsible for the failure of the insured's products or goods to work as anticipated. Id., 710 P.2d at 1086 (emphasis added) ( citing Viger v. Commercial Ins. Co., 707 F.2d 769 (3d Cir. 1983) (Products Hazard exclusion applicable where complaint alleged failure to warn of contaminated fish); Buckeye Union Ins. Co. v. Liberty Solvents & Chemicals Co., 17 Ohio App.3d 127, 477 N.E.2d 1227 (1984) (Products Hazard exclusion not applicable where complaint alleged negligent mishandling of waste product, not defective condition of product itself); K-C Mfg. Co. v. Shelby Mut. Ins. Co., 434 So.2d 1004 (Fla.Dist.Ct.App. 1983) (Products Hazard exclusion applicable where complaint alleged failure to warn of defective nature of go-cart); Aetna Cas. & Sur. Co. v. Richmond, 76 Cal.App.3d 645, 143 Cal.Rptr. 75 (1977) (Products Hazard exclusion not applicable where complaint alleged negligent and careless adjustment of ski bindings); Templet v. Goodyear Tire & Rubber Co., 341 So.2d 1248 (La.Ct.App. 1976)) (Products Hazard protection not available where complaint alleged seller failed to warn of dangers associated in mounting a tire from the wrong side of the rim); Cooling v. United States Fid. & Guar. Co., 269 So.2d 294 (La.Ct.App. 1972) (Products Hazard exclusion not applicable where complaint alleged failure to warn of need for using safety devices with products)); see also LaBatt Co. v. Hartford Lloyd's Ins. Co., 776 S.W.2d 795 (Tex.App. 1989) (Products Hazard exclusion applicable where complaint alleged failure to warn of dangerous chemical contained in food). We find the Brewer court's conclusion supported by relevant cases, and consistent with this Court's holding in Friestad. Alleged negligence which does not involve the sale of a defective product is of a type which occurs occasionally in the course of business and is a risk for which businesses buy general coverage. Cooling v. United States Fid. & Guar. Co., supra, 269 So.2d at 297. To construe a Products Hazard exclusion to apply in a suit later brought against an insured where the product sold was not the cause of the damage, but was merely an incidental instrumentality through which the damage was done, would defeat the purpose of purchasing such a policy by rendering meaningless much of the stated coverage. See Florida Farm Bureau Mutual Insurance Co. v. Gaskins, 405 So.2d 1013, 1015 (Fla.Dist.Ct.App. 1981). Thus, we conclude, as did this Court in Friestad, that the Products Hazard exclusion applies only when a product, rather than a service, is the alleged cause in fact of damages or injury to a third person.