Court Opinion

ID: 9782360
Source: CourtListenerOpinion
Date Created: 2023-08-30 18:25:37.420532+00
Date Added: 2024-06-11T12:15:52.315958
License: Public Domain

EASTAUGH, Justice,
dissenting.
A. Introduction
I disagree with this court's conclusion that the insurance policy covered Raymond Carpenter's claims. I therefore respectfully dissent. The activity that injured Raymond Carpenter, cutting down a tree, was not one of the two classified operations-floor covering and sheet-metal work-covered by the policy. Nor is it reasonable to view this activity as an "incidental support activity" to the operations the policy actually did cover. Finally, I think it important not to confuse the operation that harmed Carpenter-cut*618ting down treee-with its purpose-gathering fuel.
B. Facts
Great Divide's insurance policy provided commercial general liability coverage to the Gowdys' business, a partnership doing business as Gowdy & Son. It covered liability for bodily injury "to which this insurance applies." This coverage was subject to this exclusion for bodily injury claims arising from non-classified business operations:
EXCLUSION-CLASSIFICATION LIMITATION
The following exclusion is added to COVERAGES A, B and C (Section D): This insurance does not apply to "bodily injury," ... for operations which are not classified or shown on the Commercial General Liability Coverage Declarations, its endorsements or supplements.
The policy's declarations pages described the Gowdys' business as "Floor Covering Installation" and specified premiums for the two categories of work listed under the policy's "Classification" declaration. The two listed classifications were "Floor Covering Installation-not ceramic, tile or stone" and "Sheet Metal Work-outside." Each of these two classifications specified code numbers, the bases for calculating the premium, the applicable premium rate, and the total premium. The premium charged for each classification was dependent on various bases, including payroll. These were the only premiums paid by the Gowdys for this policy.
The policy did not list tree-felling as a classified operation.
On September 8, 1998, Rick Ostman cut down the tree that struck Raymond Carpenter; it was to be used for firewood to help heat Elmer Gowdy's home, where Elmer performed administrative tasks for the partnership. Elmer also stored business equipment in the attached garage.
Findings of the superior court and the advisory jury establish that Ostman was working for Gowdy & Son at the time of the accident and that the accident occurred "during the course and scope" of the Gow-dys' business. In denying Great Divide's motion for a directed verdict on coverage, the superior court commented that, although "the connection to the business itself was not strong," gathering firewood to heat the business premises was sufficiently business-related that it "was not prohibited under the policy." 1 The superior court, in finding coverage, referred to opinions of Carpenter's insurance expert to the effect that the classified operations exclusion did not exclude coverage for business activities that are "necessarily ancillary" to the main business activities.
C. The Policy Did Not Cover Carpenter's Claims.
Great Divide argues that, as a matter of law, the policy excludes claims arising from this accident, even if Ostman was working for the business when he cut down the tree. It contends that the accident did not occur during a classified operation, and that the policy consequently does not cover Carpenter's injuries.
Carpenter responds that the superior court's findings of fact and the advisory jury's special verdict support the superior court's conclusion. But as Great Divide points out, it is not determinative that Ost-man was working for Gowdy & Son when he cut the tree down: that the tree was felled in the course of Gowdy & Son's business is a necessary but not sufficient condition for coverage.
Carpenter also argues that the firewood-gathering job was "reasonably incidental" to the Gowdys' classified operations and should therefore be covered by the policy, even though the policy does not explicitly cover incidental operations. This court accepts *619that argument.2 It affirms because it concludes that the tree-cutting activity that injured Raymond Carpenter "can reasonably be viewed as an incidental support activity" to a business that heats its premises by wood3 It reasons that this activity differed from a "revenue-earning activity" that would have been an "operation" subject to the classification limitation exclusion in the policy4 I disagree with these conclusions.
The question of coverage under the Great Divide policy presents a question of contract interpretation and does not turn on disputed fact issues.5
Great Divide supports its interpretation of the classification limitation by noting that the Gowdys' premium was computed solely with reference to the two classified operations. This cireumstance, in itself, would not preclude coverage. Courts have rejected attempts to deny coverage on the sole ground that the injury occurred outside listed classifications used for premium-setting purposes.6 Rather, courts have stated that an insurer wishing to limit coverage to classified activities should include an express exclusion to this effect.7
Great Divide included such an express exclusion in the Gowdy & Son policy. That exclusion provides: "This insurance does not apply to 'bodily injury' for operations which are not classified or shown on the ... Coverage Declarations." The question is therefore whether this express exelusion is sufficient. I think that it is. The language is plain enough on its face. Nothing implies that tree-felling, even if it is conducted for business as opposed to private purposes, is an operation that is within either of the two operations classified in the policy's coverage declarations.
My reading of the exclusion is confirmed by two cases applying New York law and upholding similar exclusions in commercial liability policies like Great Divide's. In Mount Vernon Fire Insurance Co. v. Chios Construction Corp., a United States district court applied New York law to a policy strue-tured exactly like the Gowdy & Son policy: a declarations page listed classified operations and a classification limitation endorsement excluded coverage for claims arising from anything else.8 The only classified operation was "Carpentry-Interior."9 The claimant *620sought coverage for injuries sustained while cleaning steel beams.10 Relying on the classification limitation, the court held that the insurance company had no duty to defend-much less indemnify-its insured, reasoning that "there is not even a metaphysical possibility that the ... injury is covered." 11
The Appellate Division of the Supreme Court of New York relied upon a similar classification limitation in Ruiz v. State Wide Insulation & Construction Corp.12 The classified operation in Ruiz was "painting." 13 Plaintiffs alleged personal injuries and property damage stemming from a fire that started while the third-party defendant was repairing their roof.14 Relying on the classification limitation, the appellate court reversed the trial court's denial of the insurer's motion for summary judgment, reasoning that "(tlhe terms of the policy are clear and unambiguous and their construction may be determined as a matter of law." 15
The parties have not directed us to any other cases interpreting similar language, and I am not aware of any. I find these cases persuasive.
Contrary to what this court thinks, it does not matter whether Gowdy & Son was to be paid for cutting down this tree."16 Whether the tree-felling activity was a separate source of revenue for the business is inconsistent with this court's justification for finding coverage; it is also irrelevant. It is inconsistent because the court's decision turns on its conclusion that Ostman's activity supported the floor-covering operation.17 That conclusion necessarily assumes that there was a business nexus, and thus that heating the business premises (and therefore by extension gathering fuel, and, by further extension, cutting the tree) advanced the business's profit-making purposes. If the applicability of the exclusion did turn on a business purpose, le., profit-making, it would have been satisfied by the court's inherent assumption that Ostman's activity advanced the floor-covering business. (The fact that the tree-felling activity was not revenue-generating nonetheless helps illustrate why this activity was so remote from any covered operations.)
And whether the business was to be paid for cutting the tree is also irrelevant to the words of the policy. No words in the exclusion imply that it turns on whether the unclassified activity is revenue-generating. It is hard to imagine all the "incidental" non-income generating business operations that might be covered on this theory. Cutting trees for use as fuel sometime in the future would seem no different than demolishing the old business premises, exeavating for and building new premises, driving a well to serve the business, or installing electrical power and gas lines. Some or all of these activities would seem to be unclassified operations. Just because these activities might not generate revenue should not determine whether they are unclassified operations.
In my view, timber felling, even for purposes of heating the business premises, is in the category of "operations which are not classified or shown" on the insuring declarations.
The next question is whether, as Carpenter argues, gathering firewood was "reasonably incidental" to the insureds' classified operations and is therefore covered even though the policy does not explicitly cover incidental operations. This court concludes that the tree-cutting activity that injured Raymond Carpenter "can reasonably be viewed as an incidental support activity" to a *621business that heats its premises by wood.18 It reasons that this activity differed from a "revenue-earning activity" that would have been an "operation" subject to the classification limitation exelusion in the policy.19
The first problem with this interpretation of the insurance contract is that the words of the contract do not support it. Likewise, this interpretation is hard to square with the results in Mount Vernon Fire Insurance Co.20 and Ruiz,21 discussed above. One would expect those cases to have ended differently if there were any legitimate basis for thinking such a policy covers incidental activities.
A second problem is that any incidental activity coverage must be somehow anchored in the policy language. I assume that some liability policies in Alaska can properly be read to provide some undefined coverage for some "incidental" activities. But any such "incidental activity" coverage must be consistent with the words of the policy. The only pertinent Alaska cases brought to our attention involved policies that did not contain an exclusion equivalent to the classification limitation exclusion in the Great Divide policy. In a case in which policy language did not explicitly provide for such coverage or attempt to exclude it, this court held that incidental activities were covered. Thus, we held in Hale v. Fireman's Fund Insurance Co. that a produce-stand owner's "premises-operations" policy provided coverage for "necessary and incidental" operations."22 Hale is distinguishable because the policy did not contain an exclusion like the one that controls here. Moreover, there we relied on extrinsic evidence in finding coverage: the policy in Hale had replaced an earlier policy which explicitly provided coverage for "nee-essary or incidental" operations."23 I am not aware of any extrinsic evidence here that permits an inference that the Gowdys thought they were purchasing specific coverage for tree-felling operations or general coverage for activities "incidental" to the two classified operations. There is instead evidence that Dan Gowdy had good reason to think he would not be covered for tree-felling, and indeed thought after the accident that the policy did not cover Carpenter's claims.
This court has approvingly cited a federal district court decision which, applying Minnesota law, reasoned that parties to an insurance contract language containing a "loading-unloading" clause "most likely intended to cover ... all hazards from the initial loading until the goods were unloaded including all incidental and necessary parts of the unloading process." 24 Again, there was no exclusion like the one at issue here. Furthermore, there the incidental activity was at least closely related in time and place to the unloading process. Nonetheless, the Eighth Cireuit reversed on the ground the unloading process had been completed before the accident occurred."25 There is no such close connection here between the two classified operations and the activity that harmed Raymond Carpenter.
A third problem is that the court's conclusion that it is "reasonable" to find incidental activity coverage here seems at odds with the usual approach in interpreting an insurance policy. The court's conclusion seems to ignore the absence of policy language or extrinsic evidence implying coverage. But assuming we can look to post-formation circumstances, I am not willing to say as a matter of law that it is "reasonable" to find coverage for this activity. Cutting down trees in early September for future use in *622heating a home also used for administrative purposes seems too remote in purpose, time, and place to be "incidental" to Gowdy & Son's classified business operations.26 The activity was not conducted to fulfill any particular contract; it did not occur at the business premises or at a job site; it did not occur on a day when job work was being performed; and it seems to have taken place well in advance of the time the wood would be needed.
Carpenter's position might be more plausible had Ostman cut down the tree to obtain wood to be used for flooring for a specific floor-covering job. But virtually every business-related activity could be deemed "incidental" to the covered operations under the expansive view of the policy the court takes here. Accepting Carpenter's position vitiates the policy's classification scheme and transforms a limited policy into a comprehensive one. Conducting business activities at Elmer Gowdy's home is justifiably regarded as "incidental" to the classified operations. Perhaps the step-removed activity of stoking the wood stove is also. And perhaps stock-piling fuel on the premises should be also, although it is another step removed. But going onto someone else's land and cutting down trees for future use as fuel is far too attenuated to be "reasonably" held to be "incidental."
Inherent in the court's opinion is a conelusion that cutting down the tree was close enough to the revenue-generating activity of floor-covering to be incidental or supportive, and thus covered, but not so close that it can be deemed to be revenue-generating, and thus not covered. Both aspects of this conclusion are alien to the actual policy language. The policy said nothing about covering incidental or supporting activities, and the exclusion did not depend on whether a particular operation did (or would) generate revenue.
Finally, Ostman's activity was the sort that was subject to a separate classification, for a substantial additional premium.27 There are marked differences between the accident activity and the classified activity of floor-covering. Tree-felling poses altogether different personal injury hazards; the causes, frequency, and consequences of accidents differ greatly. Tree-felling requires different skills that are exclusive to that profession; it requires specialized training and equipment, and greater physical strength. Tree-felling is a separate profession. The activities are not related; they are not commonly performed by the same business. Ostman was cutting down trees. He was not simply using his hands to pick up wood that was already downed. Surely the policy would not have covered mechanized extraction of other fuels, such as coal or oil, to be used for heat. Common sense distinguishes this activity from activities that might be genuinely incidental.
Assuming that some activities which merely support the two classified activities are nonetheless within coverage, cutting down trees cannot be considered within the penumbra of either classification.
The court may assume that the coverage of such a policy is inherently broad. Certainly the result reached here has the effect of broadly providing coverage the policy does not expressly provide. A commercial general liability policy "affords specific coverage for specific losses."28 That the "incidental" coverage found here is not reasonable is confirmed by the annual premium. It was less than $2,000, little more than what many motorists pay for routine automobile coverage, even though this policy had facial liability limits of $1,000,000. Based on his own expe*623rience with the cost of a timber policy, Dan Gowdy did not think the policy covered this accident.
D. Conclusion
Having concluded that the insurance policy did not cover Raymond Carpenter's claims, I would reverse and remand for entry of judgment for Great Divide.29

. The advisory jury answered "yes" to this special verdict question: "Did the accident resulting in injury to Raymond Carpenter occur during the course and scope of business of Elmer and Dan Gowdy d/b/a Gowdy and Son?"
Although the issue was hotly contested at trial, Great Divide does not appeal the superior court's finding that Ostman was working for Gowdy & Son when he cut down the tree.

. Op. at 606.

. Op. at 606-607.

. Id.

. We review findings of fact under the clearly erroneous standard. Alaska Foods, Inc. v. Am. Mfrs. Mut. Ins. Co., 482 P.2d 842, 848 (Alaska 1971). We use our independent judgment to determine the legal significance of those facts. Alaska Travel Specialists, Inc. v. First Nat'l Bank of Anchorage, 919 P.2d 759, 762 (Alaska 1996). ''The construction of an insurance contract is a matter for the court, unless its interpretation is dependent upon the resolution of controverted facts." State v. State Farm Fire & Cas. Co., 939 P.2d 788, 790 (Alaska 1997). Even when facts are disputed, we review the words of any contract de novo. Tsakres v. Owens, 561 P.2d 1218, 1222 (Alaska 1977). We treat insurance contracts as contracts of adhesion, resolving ambiguities against the insurer. Makarka v. Great Am. Ins. Co., 14 P.3d 964, 966 (Alaska 2000). We construe insurance contracts to provide coverage that a layperson would have reasonably expected. Id. To determine reasonable coverage expectations, we look to the language of the disputed provision, the language of the other provisions of the policy, relevant extrinsic evidence, and case law interpreting similar provisions. Hale v. Fireman's Fund Ins. Co., 731 P.2d 577, 580 (Alaska 1987).

. See, eg., Mount Vernon Fire Ins. Co. v. Belize NY, Inc., 277 F.3d 232, 239 (2d Cir.2002) (holding that insurer cannot rely upon classification scheme to deny coverage because policy fails to provide that classifications define covered risks); Feurzeig v. Ins. Co. of the West, 59 Cal.App.4th 1276, 69 Cal.Rptr.2d 629, 634 n. 5 (1997) (collecting cases and holding that rating classification could not be construed as additional limitation on coverage absent express language indicating that such construction was intended by parties).

. E.g., Mount Vernon Fire Ins. Co., 277 F.3d at 239 (noting that "[if [insurer] wished to limit the coverage based on classifications, it should have done so specifically"); Thompson v. Harold Thompson Trucking, 12 Kan.App.2d 449, 748 P.2d 430, 435 (1987) (collecting cases and stating that "an insurance company wishing to limit the scope of coverage to that classification of operations listed in the declarations can do so by express exclusion") (citations omitied).

. 1996 WL 15668, *1 (S.D.N.Y. Jan.17, 1996).

. Id.

. Id. at *2.

. Id. at *3. The court noted the "heavy burden" borne by an insurer seeking to avoid its obligation to defend, concluding that the insurer met that burden by showing that the policy exclusion was "stated in clear and unmistakable language, .. subject to no other reasonable interpretation, and applie{d] in the particular case." Id. at *1, *3 (citation omitted).

. 269 AD.2d 518, 703 NYS.2d 257, 258 (N.Y¥.App.Div.2000).

. Id.

. Id.

. Id. at 259.

. Cf. Op. at 606-607.

. Op. at 606.

. Op. at 606-607.

. Id.

. 1996 WL 15668 at "3.

. 703 NY.S.2d at 259.

. 731 P.2d 577, 580 (Alaska 1987).

. Id. at 580.

. See Marwell Constr., Inc. v. Underwriters at Lloyd's, London, 465 P.2d 298, 304 (Alaska 1970), quoting from the district court's decision, Johnson, Drake & Piper v. Liberty Mut. Ins. Co., 258 F.Supp. 603, 610 (D.Minn.1966), rev'd, 390 F.2d 410, 413 (8th Cir.1968). The ground for the Eighth Circuit's reversal, that the unloading process had been completed before the accident, is irrelevant to the case before us.

. Johnson, Drake & Piper, 390 F.2d at 413.

. Rick Ostman testified that Elmer Gowdy performed administrative tasks for the business at his home. Ostman also testified that Elmer stored floor covering equipment and materials in the garage, but that none of the wood-burning stoves used to burn firewood were located in the garage. But even if the garage were heated by wood-burning stoves, and assuming that equipment storage is sufficiently connected to the classified operations to be deemed "reasonably incidental" thereto, the firewood-gathering operation-which is itself at most incidental to an activity that is already incidental to the classified operation-would still be too attenuated.

. Dan Gowdy testified that he previously had a timber liability policy for a firewood operation that he used to run. He testified that the policy's insurance premiums were "exorbitant."

. Friar v. Statutory Trs. of Kirkwood Sports Ass'n, Inc., 959 S.W.2d 808, 811 (Mo.App.1997).

. Given my conclusion that the policy does not cover these claims, it is necessary to reach Carpenter's alternative argument that Great Divide's conduct estops it from denying coverage. I would hold as to that issue that Great Divide's conduct does not estop it from denying coverage. See Lloyd's & Inst. of London Underwriting Cos. v. Fulton, 2 P.3d 1199, 1212-15 (Alaska 2000) (Eastaugh, J., dissenting). Because I conclude that there was no coverage, it is not necessary for me to reach the other issues addressed in the court's opinion.