Pennsylvania National Mutual Casualty Insurance v. Bierman

McWilliams, J., delivered the opinion of the Court. On 27 June 1967 a large metal hopper, hanging from the boom of a crane, was being eased into place in a building on South Wolfe Street in Baltimore. The operation was being supervised by Willard N. Lave (Lave), a vice president of the contractor, Charles A. Gareis, Inc. (Gareis). The crane, owned by Arundel Crane Service ⁴²² Corp. (Arundel), had been leased to Gareis.

It had been manufactured by Koehring Company (Koehring) and it had been sold to Arundel by L. B. Smith, Inc. (Smith). Elmer C. Bierman, an ironworker and an employee of Gareis, was inside the hopper. Something gave way causing the hopper to drop from the boom of the crane. Bier-man was tumbled about sustaining injuries for which he claimed and received workmen’s compensation.

The appellant (Penn National) which had issued a workmen’s compensation policy to Gareis has paid and is paying the compensation benefits. In March 1969 Bierman “individually and to the use of” Penn National sued Arundel for negligently “providing a crane which was not capable of handling the weight of the hopper” and which was otherwise defective. Arundel promptly impleaded Koehring, Smith and Lave, and Bierman thereupon amended his declaration to include them as parties defendant. Lave then called upon Penn National to defend him under a comprehensive liability policy it had issued to Gareis.

In June 1970 Penn National, having refused both coverage and defense, filed its amended bill for a declaratory decree asking the court to construe the policy and to determine whether “Lave is an insured under the policy” and “whether coverage would be excluded under the personal injury claim of” Bierman. The statement of facts (edited) which follows was agreed to by all of the parties: 1. On June 27, 1967, Bierman, an employee of Gareis, sustained an accidental injury arising out of and during the course of his employment with Gareis. 2. On June 27, 1967, Gareis had in force and effect a Workmen’s Compensation policy issued by Penn National. 3.

As a result of the accident, Bierman received Workmen’s Compensation benefits from Gareis, through its Workmen’s Compensation policy issued by Penn National. ⁴²³ 4. There is presently pending in the Baltimore City Court a suit by Bierman to his own use and to the use of Penn National against Smith, Arundel, Koehring and Lave for damages arising out of the accident of June 27, 1967. 5. On June 27, 1967 Gareis also had in force and effect Comprehensive Liability Policy No. CL4 24 32 issued by Penn National. 6. Lave is an executive officer of the named insured, Gareis, and qualifies as an insured under the policy issued to Gareis.

The case came on for trial in June 1971 before Perrott, J., without a jury. In December Judge Perrott filed an order declaring that the policy afforded coverage to Lave “to the extent of the monetary limits therein set forth” in respect of Bierman’s suit for damages. This appeal followed. The provisions of the policy with which we shall be concerned are: “Insuring Agreements” * * * “Coverage B — Bodily Injury Liability — Except Automobile.

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by accident.” * * * “Exclusions “This policy does not apply: * * * “ (f) under coverages A and B, to any obligation for which the insured or any carrier as his insurer may be held liable under any workmen’s compensation, unemploy ⁴²⁴ ment compensation or disability benefits law, or under any similar law; * * * “(h) under coverage B, except with respect to liability assumed by the insured under a contract as defined herein, to bodily injury to or sickness, disease or death of any employee of the insured arising out of and in the course of his employment by the insured * * * “Conditions” * * * “8. Severability of Interests. The term ‘the insured’ is used severally and not collectively, but the inclusion herein of more than one insured shall not operate to increase the limits of the company’s liability.” Penn National argues here as it did below that, since “[t]he unqualified word ‘insured’ includes the named insured and also includes under . . . [Coverage B] any executive officer,” subsections (f) and (h) of the “Exclusions” preclude liability. Lave contends (as do Arundel, Koehring and Smith) that the “Severability of Interests” clause requires a finding that the exclusions are to be applied only against the insured for whom coverage is sought.

Because Bierman was not an employee of Lave (nor was Lave under obligation to pay workmen’s compensation benefits) at the time of the accident, he (Lave) argues that Penn National must defend him. Since we seem never to have considered this question before, a review of the decisions of other courts will serve to inform our decision. The cases present a diversity of opinion. We find persuasive, however, the decisions of those courts which, in similar circumstances, have afforded coverage.

In undertaking the construction of contracts of insurance we must, if we can, ascertain the intention of ⁴²⁵ the parties from the policy as a whole. We do not follow the rule applied in many jurisdictions that, absent ambiguity, the policy is to be strictly construed against the insurer. H. R. Weissberg Corp. v. N. Y. Underwriters Ins. Co., 260 Md. 417, 426 (1971) ; Government Employees Ins.

Co. v. DeJames, 256 Md. 717, 720 (1970) ; Allstate Ins. Co. v. Humphrey, 246 Md. 492, 496 (1967) ; Ebert v. Millers Mut. Fire Ins. Co., 220 Md. 602, 610-11 (1959).

Here neither party asserts ambiguity and, indeed, Judge Perrott did not think the words “the insured” were susceptible of different meanings. We are of like mind. It is necessary, therefore, to view the policy in its entirety if the intention of the parties is to be ascertained. It seems to us that the “Severability of Interests” clause must govern here if it is to have any real effect.

To hold otherwise, we think, would result in a failure to construe the policy as a whole and, indeed, to do so would be to run counter to what seems to be the clear trend of the weight of authority. Prior to 1955 insurance policies did not contain “Severability of Interests” clauses. Exclusions similar to subsections (f) and (h), supra, were prevalent, however, and courts were frequently called upon to decide who was the insured for purposes of the exclusion. Even absent the “Severability of Interests” clause, the decisions are by no means uniform.

Compare, e.g., Ginder v. Harleysville Mut. Cas. Co., 49 F. Supp. 745 (E. D. Pa. 1942), aff’d, 135 F. 2d 215 (3d Cir. 1943), and Kaifer v. Georgia Cas. Co., 67 F. 2d 309 (9th Cir. 1953), both affording coverage, with Standard Sur. & Cas.

Co. of N. Y. v. Maryland Cas. Co., 281 App. Div. 446 , 119 N.Y.S.2d 795 (1953), denying coverage. Some policies, either originally or as a result of an unfavorable court decision, contained language denying coverage under such circumstances. These clauses usually were held sufficient to protect the insurer.

See, e.g., Malisfski v. Indem. Ins. Co. of North America, 135 F. 2d 910 (4th Cir. 1943). The cases will be found in 50 A.L.R.2d 78 , 97-104 (1956).

The advent of the “Severability of Interests” clauses ⁴²⁶ in 1955 served only to compound the difficulty courts were experiencing in deciding who was the insured under various provisions of comprehensive liability policies. As might be expected two positions evolved. General Aviation Supply Co. v. Insurance Co. of North America, 181 F. Supp. 380 (E. D. Mo. 1960), aff’d 283 F. 2d 590 (8th Cir. 1960), cited and to a large extent relied upon by Lave, took the position that where a policy of insurance contains a “Severability of Interests” clause such as the one in the case at bar, “the exclusion within the policy as to employees