Court Opinion

ID: 9707119
Source: CourtListenerOpinion
Date Created: 2023-08-26 02:02:49.491002+00
Date Added: 2024-06-11T18:22:28.289097
License: Public Domain

LARSEN, Justice,
dissenting.
I dissent and in support thereof adopt the opinion of the Court of Common Pleas of Mercer County, No. 32 C.D. 1983, authored by The Honorable Albert E. Acker.
The following is Judge Acker’s Opinion:
*430OPINION
ACKER, Judge.
This case is before this Court upon a Motion for Reconsideration in that Standard Venetian Blind Co. v. American Empire Insurance Co., [503] Pa. [300], 469 A.2d 563 (1983), reversed Hionis v. Northern Mutual Insurance Co., 230 Pa.Super. 511, 327 A.2d 363 (1974). Hionis is no longer the Pennsylvania law where a policy of insurance is written in unambiguous terms and the parties are not in a position of inequality of bargaining power. Both parties were given the opportunity to present testimony and declined.
The plaintiff does not contend the existence of an inequality of bargaining power between himself and the defendant insurance company.
The plaintiff admits in paragraph 5 of its Motion to Reconsider that the decision should be reconsidered because Hionis no longer espouses a correct standard, in view of Standard Venetian Blind Company v. American Empire Insurance Co., supra.
Our two previous Opinions and Orders were entered because of the failure of the defendant, through its Pleadings, Answers to Interrogatories, or Affidavits to explain to the plaintiff the exclusions (n), (o) and (p), which are relied upon by the defendant, as was required by Hionis v. Northern Mutual Insurance Company, supra. Since such an explanation is no longer required, this Court must now examine the other contentions previously raised by the plaintiff as to why a Summary Judgment should be entered which have not been considered.1
The two principal issues raised by the plaintiff are whether the plaintiff is entitled to coverage under the policy under the doctrine of reasonable expectation of coverage and whether policy exclusions (n), (o) and (p) are applicable *431to the negligent actions brought by the D’Augostines at 211 of 1981, and by Calaiaro, trustee at 1007 of 1982, Lawrence County Court of Common Pleas.
I. IS THE PLAINTIFF, GENE & HARVEY BUILDERS, INC., ENTITLED TO COVERAGE UNDER THE DOCTRINE OF REASONABLE EXPECTATION OF COVERAGE?
The doctrine of reasonable expectation of coverage was briefed and argued by counsel at the outset of this case. We did not previously consider or apply that doctrine in the resolution of the matter, for the case was decided under Hionis and its progeny. The plaintiff is again requesting application of the doctrine, but is faced with two sizeable problems. First, whether the reasonable expectation doctrine was ever a part of our law; and second, if it was, what is the state of health of the doctrine in view of the near demise of Hionis.
The closest that the plaintiff can state Pennsylvania has come to embracing the reasonable expectation doctrine was in Sands v. Granite Mutual Insurance Co., 232 Pa.Super. 70, 331 A.2d 711 (1974). Even in Sands, however, the plaintiff can only assert that the doctrine was “tacitly supported” in Pennsylvania.2 Sands, however, is readily distinguishable from the case at bar. In Sands the plaintiff had requested coverage so that he would be fully insured from an insurance agent which was found to be the representative of the defendant. The plaintiff signed an application form in blank, leaving the insurance agent to fill in the information. Prepayment was accepted and the application and monies were forwarded to the insurance company for approval. The insurance agent neither explained nor mentioned to the plaintiff that the insurance application carried *432a waiver of uninsured motorist coverage. This could have been obtained by the mere payment of two additional dollars. The agent, without instructions from the insured, checked the box indicating that the insured did not desire such coverage.
Subsequently, the Pennsylvania Legislature amended the statute [40 P.S. 2000 (1971)] by deleting the option of rejecting uninsured motorist coverage. Although Hionis v. Northern Mutual Insurance Co., supra, is not named in Sands, the principle is applied.3 In Sands it is noted that the agent never explained to the plaintiff that he was entitled to uninsured motorist coverage, much less what comprised that coverage. It is concluded that the plaintiff was entitled to coverage because, inter alia, the uninsured motorist coverage was never mentioned to him and his expressed desire to be “fully insured.”
We question whether Pennsylvania has ever endorsed, tacitly or otherwise, a so-called reasonable expectations doctrine. It would appear that if the reasonable expectations doctrine does exist in Pennsylvania, it is but a branch of the Hionis tree which has undergone severe, if not life-taking, surgery. Further, if Pennsylvania has embraced the reasonable expectations doctrine, we question its state of health in view of Standard Venetian Blind Co. v. American Empire Co., supra.
The court in Standard Venetian Blind, supra, stated that Hionis, supra, held, “ ‘Where a policy is written in unambiguous terms, the burden of establishing the applicability of the exclusion or limitation involved proof that the insured was aware of the exclusion or limitation, and that the effect thereof, was explained to him/ ” (Emphasis added.) Therefore, for the Hionis doctrine to be applicable, there must be a policy written in unambiguous terms.
The reasonable expectations doctrine has been discussed, but not applied in several federal cases decided in Pennsyl*433vania under Pennsylvania law. In Kravitz v. Equitable Life Assurance Society of the U.S., 453 F.Supp. 381 (E.D. Pa.1978) it was held that where there is an ambiguity through a lack of clarity, the Court is obligated to look beyond the language in interpreting the contract. If there is a defense based on an exception or an exclusion of the policy, the defense is an affirmative one and the burden is upon the defendant to establish it, citing Weissman v. Prashkar, 405 Pa. 226, 175 A.2d 63 (1961). As to when the reasonable expectations doctrine might be applied, the Court in Kravitz, went on to state, “Pennsylvania courts will rely on public policy and overriding explicit terms in the insurance contract, at least when the contract terms would operate to defeat the reasonable expectations of the insured.” Id. at 383, citing Sands v. Granite Mutual Insurance Co., supra. In Kravitz, however, coverage was denied.
Similarly, coverage was denied in Taylor v. Phoenix Mutual Life Insurance Co., 453 F.Supp. 372 (E.D.Pa.1978). The court held that where the language of a policy is clear and unambiguous, it cannot be construed to be other than that what it says, and it must be given a plain and ordinary meaning.
The plaintiff has not endeavored to supply proof to establish that it would be against public policy to enforce exclusions (n), (o) and (p) in this case, nor do we believe them to be unenforceable. The policy of insurance involved is a standard policy and exclusions (n), (o) and (p) are standard exclusions. The only remaining issue is whether the exclusions (n), (o) and (p) are applicable in this case.
II. ARE EXCLUSIONS (n), (o) and (p) APPLICABLE TO THE NEGLIGENCE ACTIONS BROUGHT BY THE D’AUGOSTINES AT No. 211 of 1981 and CAL AIARO, TRUSTEE AT No. 1007 of 1982 IN THE COURT OF COMMON PLEAS OF LAWRENCE COUNTY?
The exclusions (n), (o) and (p) were previously held not to be applicable by this Court because they were not explained *434as required by Hionis. The rejection of Hionis by the Supreme Court wipes the slate clean for a fresh consideration of these three exclusionary clauses.
The policy of insurance is known as a general liability policy. It is the standard form. It is intended to grant comprehensive general liability insurance coverage. It obligates the insurance company to pay up to the face amount of the policy and to defend lawsuits filed against the insured if the facts giving rise to the cause of action asserted against the insured constitute an “occurrence”4 and if they are not within one of the exclusions, inter alia, (n), (o) and (p).
A court will not rewrite an insurance policy or construe clear and unambiguous language to mean other than what it says. Blocker v. Etna [Aetna] Casualty & Surety Co., 232 Pa.Super. 111, 332 A.2d 476 (1975); Pfeiffer v. Grocers Mutual Insurance Co., 251 Pa.Super. 1, 379 A.2d 118 (1977).
An insurance policy should be construed according to plain meaning of words used so as to avoid ambiguity while at the same time giving effect to all of its provisions. Blocker v. Etna [Aetna] Casualty & Surety Co., supra; David v. Nat. Union Fire Insurance Co., 206 Pa.Super. 78, 211 A.2d 66 (1965). The language of an insurance policy should not be tortured to create ambiguities, but should be read to avoid ambiguities if possible. Monti v. Rockwood Insurance Co., 303 Pa.Super. 473, 450 A.2d 24 (1982). Where the construction of an insurance policy is involved, the long-standing policy of the law is that the insurance *435policy is to be construed liberally in favor of the insured in close and/or doubtful cases. Habecker v. Nationwide Insurance Co., 299 Pa.Super. 463, 445 A.2d 1222 (1982); See also, Raybestos-Manhattan, Inc. v. Industrial Risk Insurers, 289 Pa.Super. 479, 433 A.2d 906 (1981).
The exclusions of the policy relied upon by the defendant are:
“(n) to property damage to the named inssured’s products arising out of such products or any part of such products;
(o) to property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof, or out of the material parts or equipment furnished in connection therewith;
(p) to damages claimed for the withdrawal, inspection, repair, replacement or loss of use of the named insured’s products or work completed by or for the named insured, or of any property of which such products or work form a part, if such products, work or property are withdrawn from the market or from use because of any known or suspected defect or deficiency therein.”
In the trustee’s complaint at No. 1007 of 1982, it is alleged:
Paragraph 11,
“That defects have become apparent in recent months in said construction of dwelling, and in the land caused by undermining for minerals and substances as a result of said undermining.”
This same allegation appears in Paragraph 9 of the original and amended complaint of the D’Augostines.
Paragraph 13 of the trustee’s complaint, being Paragraph 11 of the original and amended complaint of the D’Augostines, states:
“That sinkholes and subsidence were apparent on said land and said condition was known, or should have been *436known to Merritt Estates, Inc., and Gene & Harvey Builders, Inc____”
Paragraph 18 of the trustee’s complaint, which does not appear in the original or amended complaints of the D’Augostines, reads,
“That as a result of the above, the said land has become unfit for its intended purpose; that it is uninhabitable; and its value completely diminished; that the residence has been affected by subsidence; and the lawn is unsafe to occupy; and the proximity of the residence to subsidence renders said dwelling unfit for its intended purpose.”
Paragraph 31 of the trustee’s complaint reads,
“That Gene & Harvey Builders, Inc., Defendant second named, constructed said premises with knowledge of the defects in said land and with knowledge of said subsidence in said land, and misrepresented the true condition of said premises and concealed its true condition, all of which more specifically set forth in Paragraphs 11 and 13 of the Complaint.”
Paragraphs 11 and 13 were previously quoted herein.
Negligence may be established in the suit of the trustee by showing that the insured failed to discover the subsidence and correct it prior to the erection, thereby making the house uninhabitable. It is not claimed that the insured did anything overt towards bringing about the damage, with the exception of filling in the hole which it is alleged, denied to the property owners the opportunity to know of this subsidence. It is claimed that the dwelling has become useless and uninhabitable because of its proximity to the subsidence.
Exclusions (n), (o) and (p) are not new and novel exclusions in insurance law. Exclusion (n) was dealt with in Pittsburgh Plate Glass Co. v. Fidelity and Casualty Co. of New York, 281 F.2d 538 (3d Cir.1960). There, a manufacturer of Venetian blinds claimed damages due to paint that had flecked from the blinds, leaving metal exposed. The *437insurance company defended by asserting that by exclusion (n), there was no coverage for injury to or destruction of any goods or products manufactured, sold, or distributed by the named insured, out of which the accident arose. It was held that the lower court erred in refusing coverage. The court cited Cadallader v. New Amsterdam Casualty Co., 396 Pa. 582, 589, 152 A.2d 484, 488 (1959), and quoted that “where a claim may potentially become one which is within the scope of the policy, the insurance company’s refusal to defend at the outset of the controversy is a decision it makes at its own peril.” It held that once paint had been baked on, it became part of the finished product and, therefore, there was coverage.
Exclusion (o) is the subject of Liberty Building Co. v. Royal Indemnity Co., — Cal.Distr.Ct.App.-, 346 P.2d 444 (1959). There stucco had been improperly mixed and applied to buildings by the insured. It was held that, by an exclusion as to work completed, which applied to any goods or products manufactured, sold, handled or distributed out of which the accident occurred, coverage was properly denied. Similarly, a lower court was reversed in Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 405 A.2d 788 (1979), concerning a construction of exclusions (n) and (o). That court noted that there had been twenty years of judicial treatment of what is known as the “business risk” exclusion. Such an exclusive denies coverage for faulty workmanship on products where damages claimed were the cost of correcting the work itself. It was held that the exclusions were not ambiguous and, therefore, coverage was denied.
Exclusion (n) was used in Vernon Williams & Sons Construction, Inc. v. Continental Insurance Co., 591 S.W.2d 760 (Tenn 1979) to deny coverage. That action was grounded upon faulty workmanship or materials, and it was for the cost of correcting itself.
Saint Paul Fire & Marine Insurance Co. v. Coss, 80 Cal.App.3d 890 [888], 145 Cal.Rptr. 836 (1978), also contained similar exclusions to our (n) and (o). That court *438concluded that when the policy and all endorsements were properly read together, they could not have led the insured to believe that he had products liability coverage.
Exclusion (p) is construed in Ohio Casualty Insurance Co. v. Terrace Enterprises, Inc., 260 N.W.2d 450, (Minn. 1977). There, coverage was permitted for the settling of an apartment building as a result of faulty construction due to negligent backfilling. This was held to be an occurrence and the exclusion was not applicable. The poor backfilling was done by one other then the insured, and it threatened not only to lower- the value of the building, but to cause its destruction as well. Coverage was permitted. Boggs v. Etna [Aetna] Casualty & Surety Co., 272 S.C. 460, 252 S.E.2d 565 (1979) involved an effort to recover damages against a contractor where basement walls leaked due to the position of the residence on the property. Plaintiff alleged the contractor was negligent in locating a house on a lot exposed to water seepage. This was held to be an “occurrence” within the scope of the contractor’s liability policy. As such, the event need not be sudden to be an occurrence, but may be over a period of time.
Similarly, in the instant case, an occurrence is described as an event which is continuous or repeated, causing exposure to conditions. Liability was found in Hauenstein v. St. Paul Mercury Indemnity Co., 242 Minn. 354, 65 N.W.2d 122 (1954), where the insured was a distributor of plaster which was sold to a contractor who used it in the construction of a hospital. The plaster shrunk and cracked, necessitating its removal and considerable expense for repair. The court held that the insurance carrier was responsible for such damages.
It is the conclusion of this Court that the alleged negligent conduct in constructing a house on a lot with a subsidence of the lot is not within any of the named exclusions in (n), (o) or (p), and is an “occurrence” within the definition of the policy for which coverage is owing. We have no substantial doubt in this case. If we did have doubt, however, this would not change our conclusion.
*439In case of doubt, as to whether the allegations of a complaint against an insured state a cause of action within the coverage of a liability policy sufficient to compel the insured to defend the action, that doubt will be resolved in the insured’s favor, 44 Am Jur.2d, Insurance, § 1141, p. 355 (1982).
WHEREFORE, we reaffirm the Orders previously entered in this case.

. Prior to oral argument upon the most recent Motion for Reconsideration, both parties agreed that this Court can decide the Motion for Reconsideration even though the matter is on appeal. This position is in accordance with the view expressed in this Court's second Opinion which was rendered after the appeal had been perfected.

. The plaintiff by brief, pp. 22-24 cites the authorities and cases from 20 Am Jin:. Proof of Facts, 2d 59 (1979), which it is claimed have adopted the reasonable expectation doctrine. Pennsylvania is not among those states listed. By that authority, Pennsylvania has “tacitly supported” the doctrine in Sands v. Granite Mutual Insurance Co., supra.

. Sands v. Granite Mutual Insurance Co., supra, was decided December 22, 1974. Hionis v. Northern Mutual Insurance Co., supra, was decided September 23, 1974.

. An occurrence means "... 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.” This Court's first Opinion discusses the nature of the claim against the insured noting that although there are allegations of an intentional act, there are also allegations of a negligent act. Occurrence is defined and dealt with in Barber v. Harleysville Mutual Insurance Co., 304 Pa.Super. 355, 450 A.2d 718 (1982); See also, Lancaster Area Refuge Auth. v. Transamerica Insurance Co., 437 Pa. 493, 263 A.2d 368 (1970), accepting the language of the dissent as found in 214 Pa.Super. 80, 83, 251 A.2d 739, 741 (1969). The subject of an "occurrence” was discussed in the first Opinion on pp. 13-14.