Court Opinion

ID: 3058199
Source: CourtListenerOpinion
Date Created: 2015-10-14 00:23:13.383541+00
Date Added: 2024-06-11T09:06:12.531106
License: Public Domain

[DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT
                     _________________________           FILED
                                                U.S. COURT OF APPEALS
                             No. 10-14983         ELEVENTH CIRCUIT
                                                     MARCH 21, 2012
                         Non-Argument Calendar
                                                       JOHN LEY
                      _________________________
                                                        CLERK

                   D. C. Docket No. 5:09-cv-00751-IPJ

UNITED STATES STOVE COMPANY,

                                               Plaintiff-Counter Defendant-
                                                                  Appellee,

    versus

STEADFAST INSURANCE COMPANY,

                                               Defendant-Counter Claimant-
                                                                Appellant.

             _________________________________________

                Appeal from the United States District Court
                   for the Northern District of Alabama
             _________________________________________

                            (March 21, 2012)

Before EDMONDSON, BARKETT and ANDERSON, Circuit Judges.
PER CURIAM:

      Steadfast Insurance Company (“Insurer”) appeals the district court’s grant

of summary judgment in favor of the insured, United States Stove Company (“US

Stove”), and against Insurer’s counter-claim for payment of the deductible on

claims paid by Insurer. No reversible error has been shown; we affirm.

      US Stove manufactures solid fuel stoves and furnaces. Insurer issued US

Stove a commercial general liability insurance policy (the “Policy”) which

provided insurance coverage to US Stove for liability arising from defective

products. US Stove’s Model 6300 stove had a design defect -- soot emissions

caused property damage to purchasers’ homes -- that resulted in 128 claims being

filed against US Stove. The claims began to be received by US Stove around

November 2008; the claims were separated in time, location, and the extent of

damages. US Stove then designed a “fix” that was applied to the Model 6300 to

prevent soot emissions.

      The parties agree that the Policy covers US Stove’s liability for claims

arising from the Model 6300 defect. The parties also agree that no material facts

are in dispute and filed cross-motions for summary judgment. The crux of the

parties’ disagreement -- and the issue on appeal -- is what deductible applies to the

128 claims filed against US Stove. US Stove maintains -- and the district court

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concluded -- a single deductible applies to all sooting claims arising from the

design defect. Insurer maintains that a separate deductible applies to each sooting

claim arising from the defect.

      The Policy provided commercial general liability coverage for bodily injury

and property damage caused by an occurrence. And the Policy defined an

“occurrence” as “an accident, including continuous or repeated exposure to

substantially the same general harmful conditions, that results in ‘bodily injury’ or

‘property damage.’” Endorsement No. 5 to the Policy, entitled “Deductible

Endorsement,” sets out a deductible of $25,000. And, about that deductible,

Insurer offered US Stove a choice of a per claim or per occurrence deductible.

Endorsement No. 5 reads:

      (A) PER CLAIM BASIS - If the deductible is on a “per claim”
      basis, the deductible amount applies to all damages and “defense
      costs” because of “bodily injury”, “property damage”, “personal
      injury” and “advertising injury” sustained by one person or
      organization as a result of any one “occurrence” or offense.

      (B) PER OCCURRENCE BASIS - If the deductible is on a “per
      occurrence” basis, the deductible amount applies to all damages and
      “defense costs” because of “bodily injury”, “property damage”, “personal
      injury” and “advertising injury” as the result of any one “occurrence” or
      offense regardless of the number of persons or organizations who sustain
      damages and “defense costs” because of that “occurrence” or offense.

                                          3
US Stove opted for the “per occurrence basis” for computing the applicable

deductible.

      The parties advanced competing interpretations of the term “occurrence” in

the Policy; the district court concluded that the language of Endorsement No. 5

resolved any ambiguity that might otherwise exist. As the district court observed,

Endorsement No. 5 draws a clear distinction between “claims” and “occurrences.”

Under the “per claim” deductible, each claim for damages sustained by one entity

as a result of an “occurrence” is subject to a separate deductible. And under the

“per occurrence” deductible, all damages sustained by all entities as a result of a

particular event are subject to a single deductible. US Stove opted for a “per

occurrence” deductible; it rejected the “per claim” option.

      Citing Kuhn’s of Brownsville, Inc. v. Bituminous Cas. Co., 270 S.W.2d 358

(Tenn. 1954), Insurer argues that Tennessee law1 requires the court to look to the

effect of an occurrence rather than its cause. Under the “effects” test, adopted by

a minority of states, the number of occurrences is determined from the vantage

point of the injured party. The majority of states have adopted the “cause” test;

under the cause test the number of occurrences is determined from the vantage

point of the insured.

      1
          The parties agree that Tennessee law applies.

                                                 4
      In Kuhn’s of Brownsville, the Tennessee Supreme Court ruled that a single

act by the insured -- a building excavation -- that resulted in two separate building

collapses on opposite sides of the excavation site two days apart were two separate

“accidents” under a liability policy’s “per accident” limitation of liability. Insurer

asserts that under Kuhn’s, it is clear that Tennessee has adopted the “effects” test

to determine whether damages are the result of a single or multiple occurrences,

and under the “effects” test each instance of sooting damage resulting from the

single design flaw represents a separate occurrence for purposes of determining

the applicable deductible.

      Applying general principles of contract interpretation and insurance law, the

district court rejected Insurer’s arguments. We agree. Kuhn’s is distinguishable:

it addressed a liability limitation -- not a deductible provision -- and it involved no

policy provision that differentiated specifically between a “claim” and an

“occurrence.” Insurer concedes that, under the particular facts of the present case,

the position it advocates would render the distinction drawn in Endorsement No. 5

between “claims” and “occurrences”meaningless: the same deductible would be

owed under the “per claim” and “per occurrence” options in the Policy. But as the

district court observed, to accept Insurer’s position would eviscerate Endorsement

No. 5; it would fail to give effect to the intention of the parties as reflected by the

                                           5
choice offered by Endorsement No. 5 and the “per occurrence” option selected by

US Stove.2

       Insurer argues that it is only the peculiar facts of the present case that render

Endorsement No. 5 meaningless; hypothetical scenerios are offered where the

Endorsement would have meaning if we were to accept Insurer’s construction of

the Policy. But these hypotheticals are strained. The unambiguous purpose of

Endorsement No. 5 was to draw a distinction between “claims” and “occurrences”

for purposes of determining the applicable deductible. Insurer elected to draft a

policy that allowed the insured to select which deductible option would apply.3

US Stove selected a per occurrence option. The plain and ordinary meaning of the

Endorsement, as well as the intent of the parties, support a construction of the

       2
         It is the obligation of the court to determine and effectuate the intention of the parties.
See U.S. Bank, N.A. v. Tennessee Farmers Mut. Ins. Co., 277 S.W.3d 381, 386-87 (Tenn. 2009)
“Insurance contracts, being subject to the same rules of construction as contracts generally,
should be interpreted and enforced as written. Absent fraud or mistake, the terms of a contract
should be given their plain and ordinary meaning, for the primary rule of contract interpretation
is to ascertain and give effect to the intent of the parties.” (Internal citations omitted).
       3
         The “per occurrence” language in Insurer’s policy earlier was construed in Parker
Hannifin Corp. v. Steadfast Insurance Co., 445 F. Supp. 2d 827 (N.D. Ohio 2006). In that case,
the district court concluded as a matter of law that the malfunction of plaintiff Parker’s gaskets --
which caused damages to unrelated claimants over a period of time -- arose from a single
occurrence. Insurer seeks to nullify the significance of Parker Hannifen by arguing that Ohio --
unlike Tennessee -- uses the “cause test.” We do not rely on the Parker Hannifen decision in our
resolution of the instant appeal; but it does reinforce our construction of the Policy. And, as the
Parker Hannifen court noted, Insurer, as draftsmen of the Policy, could have avoided this result.

                                                  6
Policy that imposes a single deductible for all claims flowing from a single design

defect occurrence.

      AFFIRMED.

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