Court Opinion

ID: 9574848
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:08:55.878304+00
Date Added: 2024-06-11T12:45:49.013001
License: Public Domain

WARREN, P. J.,
concurring in part; dissenting in part.
I agree with the majority regarding its disposition of the dispute between Ranger Insurance Company (Ranger) and Globe Seed & Feed Co. (Globe). As to Ranger, we hold that the policy should be reformed to exclude claims for property damage and that that exclusion results in no coverage under Ranger’s policy. Given that, the claim was necessarily one for property damage. The majority takes the untenable position that the loss in this case was property damage under one insurance policy, but not property damage under the other. I disagree, therefore, with its reversal of the judgment for Underwriters at Lloyd’s London (Lloyd’s) on Globe’s third-party claim. Accordingly, I dissent from that portion of the opinion.
Lloyd’s “Seedsmens Errors and Omissions Insurance” policy includes coverage
“[f]or failure of seed sold by the Assured to conform to the variety or quality specified or to be suitable for the purpose specified by reason of any negligent act, error or omission of the Assured or its employees in the conduct of the Assured’s business[.]” (Emphasis supplied.)
The preface to the policy explains that the purpose of errors and omissions insurance is to ensure the reputation of a professional, which is at the “core of his livelihood.”
Exclusion (e) of the Lloyd’s policy provides that it will not pay sums that Globe shall be legally obligated to pay arising out of any claims for “damage to or destruction of the property of any person.” Damage to property is not defined in the policy. Lloyd’s argues that the weed infestation was property damage that was repaired by the removal of the weeds from the property, so that the policy does not cover Globe’s claim. Although Globe had argued to the trial court that the weed infestation was property damage under Ranger’s general liability policy, Globe takes a contradictory position here by arguing that the infestation is not property damage under the errors and omissions policy exclusion. *335Globe argues that property damage is limited to actual physical damage, such as a supplier’s truck harming a storage facility. Globe also argues that the exclusion is ambiguous and must be construed against the insurer.
Under Idaho law, when the policy language is clear and unambiguous, insurance coverage must be determined according to the plain meaning of the words employed. Aid Ins. Co. (Mut.) v. Armstrong, 119 Idaho 897, 811 P2d 507 (Ct App 1991). The court must determine what a reasonable person in the position of the insured would have understood the language to mean. 119 Idaho at 900. Whether policy language is ambiguous is a question of law for the court to determine. Foster v. Johnstone, 107 Idaho 61, 63, 685 P2d 802 (1984). I conclude that the exclusion is not ambiguous and that it excludes coverage for the damage claimed by Globe in this action.
The parties have not cited and I have not found cases in Idaho or any other jurisdiction dealing with the scope of a property damage exclusion in an errors and omissions insurance policy. The Idaho courts have not discussed the definition of property damage in any type of insurance policy.
The cases cited by the parties deal with general liability policies. In that context, a number of courts have construed the undefined term “property damage” to include the broadest coverage for the insured, including crop losses from the diminution of the crop yield. See, e.g., St. Paul Fire and Marine Insurance Co. v. Northern Grain Co., 365 F2d 361 (8th Cir 1966); Safeco Ins. Co. v. Munroe v. Cogswell Agency, 165 Mont 185, 527 P2d 64 (1974); General Ins. Co. v. Gauger, 13 Wash App 928, 538 P2d 563 (1975). None of those courts held that the undefined term “property damage” was ambiguous.
Lloyd’s suggests that, as a reaction to decisions such as those just cited, broadly construing property damage coverage in general liability policies, insurance companies have changed general liability policies to limit the definition of property damage to “tangible” and “physical” damage, so as to exclude coverage for economic losses. See, e.g., Wyoming Sawmills v. Transportation Ins. Co., 282 Or 401, 578 P2d 1253 (1990). It argues that the restriction of property damage *336coverage to physical damage in general liability policies leaves intangible damages such as economic loss uninsured, giving rise to the need for errors and omissions coverage to protect against purely economic losses.
Both Globe and Lloyd’s rely on Hardison Seed Co. v. Continental Casualty Co., 56 Tenn App 644, 410 SW2d 729 (1966), to support their arguments. The plaintiff had sold green lima bean seeds, which produced a large percentage of the wrong type of beans that could not be sold. The plaintiff was sued for breach of warranty. The general liability carrier argued, and the court agreed, that the insurance policy “Products Hazard” coverage for damages “because of injury to or destruction of property” caused “by accident” did not cover the claim. The court said that the claim alleged was a misrepresentation of quality resulting in an inability to sell the product, a classic breach of warranty case, and not one of accidental property damage.
Globe argues that the infestation in the current case is similar to a crop loss, because both involve the loss of use of real property, and that neither is property damage. Lloyd’s argues that the loss described in Hardison Seed Co. is the kind of loss that errors and omissions insurance is intended to cover: a customer’s business loss because the goods delivered were of less than the quality warranted. Lloyd’s argues that that kind of loss did not occur in this case.
I find Lloyd’s analogy to damage caused by pollution helpful. In AIU Ins. Co. v. Superior Court, 51 Cal 3d 807, 274 Cal Rptr 820, 799 P2d 1253 (1990), the California Supreme Court held that liability for cleanup of hazardous wastes from disposal sites, the groundwater beneath the sites, the aquifers beneath adjoining property and surrounding surface waters was property damage under a standard comprehensive general liability policy. See also Intel Corp. v. Hartford Acc. & Indem. Co., 952 F2d 1551 (9th Cir 1991). A similar example of property damage is the effect of methamphetamine vapor permeating porous materials, such as drapes, carpets and walls. Largent v. State Farm Fire & Casualty Co. (A71495), 116 Or App 595, 842 P2d 445 (1992), rev den 316 Or 528 (1993). In Largent, a general liability insurance policy that limited property damage to “accidental direct physical loss” covered the vapor contamination.
*337General liability policies ordinarily cover property damage. I am persuaded that the weed infestation in this case would come within the usual property damage coverage of a general liability policy, because it is physical damage to tangible property. Ranger’s policy, however, specifically excluded such damage. Globe has offered no reasonable explanation why, in the absence of a definition of the term, the meaning of “property damage” in an errors and omissions policy should be different than that of a general liability policy. It is reasonable that an errors and omissions policy that covers economic loss would exclude the same property damage that is ordinarily covered by general liability policies. It is beyond dispute in this case that neither the insured nor the insurers intended there to be property damage coverage. The question is whether what happened here was property damage. The majority inconsistently concludes it was. I would hold that the term “property damage” is not ambiguous, because in the context of the facts of this case, there is not more than one reasonable interpretation of the words employed in the Lloyd’s policy. Therefore, I would affirm the trial court’s holding that the Lloyd’s policy does not cover the Forest Service claim.