Simkins Industries, Inc. v. Lexington Insurance

Thompson, J., delivered the opinion of the Court. Simkins Industries, Inc. filed suit against Lexington Insurance Company, Continental Casualty Company, and Hartford Steam Boiler Insurance and Inspection Company to recover from those companies certain damages alleged to have been caused by a flood of its properties and allegedly covered by separate insurance policies issued by each of the companies. At the conclusion of the plaintiffs case in the ³⁹⁸ Circuit Court for Baltimore County, the trial judge granted each of the insurance companies’ motions for directed verdicts. Simkins appeals alleging that it proved damages which were covered by the policies.

We shall affirm as to Lexington and Continental but reverse as to Hartford. In order to appreciate the arguments it is necessary that we make a brief statement of facts. In June 1972 a tropical storm named Agnes occurred within the Patapsco River basin with precipitation measuring up to fourteen inches. As a result of this rain, the Patapsco River flooded much beyond prior floods.

The flood caused substantial damage to Simkins’ plants; which consisted of a power plant on the Howard County side of the river containing a boiler, generator, turbine, and other electrical equipment and a large manufacturing complex on the Baltimore County side of the river containing two large papermaking machines and many motors, generators, pulpers, and other related equipment. Prior to Agnes, all of the equipment in the plant was in good condition. The primary function of the power plant was to generate steam which was used first to run the turbine; it was then piped across the Patapsco River to the manufacturing plant where it was used to operate the papermaking machines and to heat the plant facilities. The steam crossed above the river on a steel truss bridge in a 12" steel pipe.

Also crossing the river on the bridge was a 4" steel condensate pipe which returned the steam and condensate to the boiler. On either side of the river, these pipes entered the buildings through holes in the walls. The plant was shut down and ¿11 electric power extinguished around midnight, June 21 and 22,1972, the night of the flood. David Garrity, the plant manager, and several other workmen remained on the upper levels of the plant throughout the night.

Armed with flashlights, they periodically inspected the water height and checked to ensure that no fires broke out. During the period following 1:00 a.m., Garrity was stationed at an upper level door on the river side of the manufacturing plant from which he could observe the river directly outside and the pipe bridge about 100 feet away. ³⁹⁹ Garrity saw two large trees bearing down on the bridge. By this time, the river level had risen to the bottom of the pipes. When these trees hit the bridge and the pipes he saw the building wall near him, through which the pipes entered the building, start to collapse, and he quickly retreated into the building.

Fifteen minutes later, he returned to his observation post and observed the destruction. The pipes and conduit crossing the river had disappeared along with the bridge. The wall through which the steel pipes had entered the manufacturing plant had been completely torn away. In addition, the river side wall of the power plant had been ripped away.

Flooding at the plant site was so common that a “flood drill” had been organized and had been utilized on a number of occasions. The plant had suffered flood damage prior to Agnes and was shut down for a six-week period in 1975 as a result of another flood associated with a hurricane. The evidence is clear, however, that the flood caused by Agnes was the worst to hit that area since records have been kept. There were in effect at the time of the flood three separate policies of insurance issued by Lexington, Continental, and Hartford.

As we have stated, the trial judge granted the motions of Lexington and Continental for directed verdicts on the grounds that the policies did not insure against the loss sustained. The court directed a verdict in favor of Hartford on the ground that the proof was insufficient to show that Simkins’ losses were “solely due to” the peril insured against. I Lexington and Continental Lexington and Continental issued named peril policies, as opposed to all risk policies, to the appellant. On the first page 1 it was provided: “INSURANCE IS PROVIDED AGAINST ONLY THOSE PERILS ...

INDICATED BELOW BY A PREMIUM CHARGE AND AGAINST OTHER PERILS ... ONLY WHEN ENDORSED HEREON OR ADDED HERETO.” ⁴⁰⁰ Below that language, the following table appears: PREPAID TERM ANNUAL PAYMENT PERIL(s) PREMIUM DUE DUE UNDER Insured Against “AMOUNT RATE • AT INCEPTION PREM. PAY. PLAN & Coverage(s) Provided (Insert $2,500,000.00 Name of Each) .225 $41,978.00 $ Fire & Lightning $Incl. $ Extended Coverage $Incl. $ VMM Total(s) $Incl. $41,978.00 $ $ Sprinkler Leakage All of the covered perils are enumerated in Section II of the policy.

They are: 1) Fire; 2) Lightning; 3) Wind or Hail; 4) Sprinkler Leakage; 5) Explosion; 6) Riot, Civil Commotion, Vandalism, Malicious Mischief; 7) Acts of the civil authority to prevent the spread of fire; 8) Impact of vehicles; 9) Impact of aircraft; 10) Sonic Boom; 11) Smoke; 12) Molten Materials. Section I contains exclusions as follows: “This Policy does not cover loss or damage: * * * * Resulting from flood or the release of water from natural or man-made bodies of water, whether or not caused by or contributed to by an insured peril. However, liability is specifically assumed for loss or damage by fire, sprinkler leakage, explosion, or accident, all as defined and limited elsewhere in this Policy, resulting from flood or the release of water from natural or man-made bodies of water. For the purpose of this Policy, flood includes but is not limited to tidal wave, wave wash, high water, or overflow, surface or rising water, all whether or not driven by wind.” To support its contention that the policies provided ⁴⁰¹ coverage for the losses incurred during the flood here in question, appellant relies upon a weak reed, that is, the language of the exclusionary clause quoted above which, after excluding loss or damage from flood, said, “liability is specifically assumed for loss or damage by fire, sprinkler leakage, explosion, or accident, all as defined and limited elsewhere in this Policy, resulting from flood....” It is settled in Maryland law that absent ambiguity the construction of an insurance contract is a matter of law for the court.

Government Employees Insurance Company v. DeJames, 256 Md. 717, 720 , 261 A. 2d 747 (1970). See also, Winterwerp v. Allstate Insurance Co., 277 Md. 714, 717 , 357 A. 2d 350 (1976) and Keyworth v. Industrial Sales, 241 Md. 453, 456 , 217 A. 2d 253 (1966). The standard for interpretation in Maryland is somewhat different from that of many other states. The Court of Appeals set it out in Government Employees Insurance Company v. DeJames, supra: “It is well settled that in interpreting insurance contracts, words are to be given their customary and normal meaning.

State Farm Mut. Auto Ins. Co. v. Treas, 254 Md. 615 , 255 A. 2d 296 (1969); American Home Assurance Co. v. Erie Ins. Exchange, 252 Md. 116, 248 A. 2d 887 (1969); Offutt v. Liberty Mut.

Ins. Co., 251 Md. 262 , 247 A. 2d 272 (1968); Harleysville Mut. Cas. Co. v. Harris & Brooks, Inc., 248 Md. 148, 151 , 235 A. 2d 556 (1967), and cases there cited.

Absent ambiguity the construction of the contract remains within the province of the court and Maryland has not adopted the rule, followed in many jurisdictions, that an insurance policy is to be most strongly construed against the insurer, American Cas. Co. v. Aetna Cas. & Surety Co., 251 Md. 677 , 248 A. 2d 487 (1968); Mateer v. Reliance Ins. Co., 247 Md. 643 , 233 A. 2d 797 (1967); Ebert v. Millers Mut. Fire Ins.

Co., 220 Md. 602 , 155 A. 2d 484 (1959). If the language of an insurance contract is ambiguous, however, construction is for the jury, Ebert v. Millers Mut. Fire Ins. Co., supra, 220 Md. at 610 ; Eagle Star & British Dominions Ins.

Co. v. ⁴⁰² Fleischman, 175 Md. 433 , 2 A. 2d 424 (1938); 22 Appleman, Insurance Law and Practice § 12853 (1947) at 7, and the ambiguity is to be resolved against the company which prepared the policy and in favor of the insured, American Cas. Co. v. Aetna Cas. & Surety Co., supra, 251 Md. at 684; Allstate Ins. Co. v. Humphrey, 246 Md. 492, 496 , 229 A. 2d 70 (1967).” 256 Md. at 720 . We see no ambiguity in the present case within the meaning of the rule that an ambiguous contract must be submitted to the jury for determination.

Appellant argues that the policy does not define the word accident and, therefore, the word should be given its customary and normal meaning, citing Harleysville Mutual Casualty Co. v. Harris & Brooks, Inc., 248 Md. 148 , 235 A. 2d 556 (1967). In that case, the Court of Appeals quoted the definition of accident found in Webster’s Twentieth Century Dictionary (1950), as follows; “A happening; an event that takes place without one’s foresight or expectation; an event which proceeds from an unknown cause, or is an unusual effect of a known cause, and therefore not expected____” Harleysville, supra at 151 . From that premise appellant concludes that the unprecedented destruction of its property resulting from the largest flood to occur in that area, at least since records have been kept, constituted.an “accident” resulting from a flood and was therefore within the coverage of the policy. Appellant cites several cases for. the proposition that damage caused by unexpected weather conditions is covered by an insurance policy providing for “accident's.” City of Aurora, Colorado v. Trinity Universal Insurance Co., 326 F. 2d 905 (10th Cir. 1964); Baker v. American Insurance Co. of Newark, New Jersey, 324 F. 2d 748 (4th Cir. 1963); Albuquerque Gravel Products Co. v. American Employers Insurance Co., 282 F. 2d 218 (10th Cir. 1960); Cornell Wood Products Co. v. Hartford Steam Boiler Inspection and ⁴⁰³ Insurance Co., 62 F. Supp. 303 (N.D. Ill. 1945); Arthur A. Johnson Corp. v. Indemnity Insurance Co. of North America, 7 N.Y.2d 222 , 196 NYS 2d 678 , 164 N.E.2d 704 (1959); Hey v. Guarantors' Liability Indemnity Co. of Pennsylvania, 181 Pa. 220 , 37 A. 402 (1897).

What appellant overlooks is that in every one of those cases the insurance policy clearly and specifically covered accidents in general and there was no exclusion of coverage for flood damage. More appropriate to the resolution of the present case is the view expressed in 12 Couch on Insurance, § 44:416: “When a policy exception itself contains an ‘exception’ clause, the effect of the latter is to restrict the sphere of operation of the exception and thus make the exception inapplicable and allow recovery if the harm sustained is otherwise within the coverage of the policy. For example, an exception in an elevator accident insurance policy of accidents to persons making additions, alterations, or extraordinary repairs, except ‘ordinary repairs,’ means that anyone making ordinary repairs is covered by the policy the same as any person, but his injuries are not covered, unless they occurred in a manner which would bring them within the risk insured against as outlined in other provisions of the policy. " 2 (Emphasis added.) Applying this principle to the case at bar we see that the language upon which appellant relies is no more than an exception to the broad exclusion of flood damage from coverage under the policy.

The “harm sustained,” flood damage, was clearly not “otherwise within the coverage of the policy.” 3 ⁴⁰⁴ Appellant correctly points out that in interpreting a contract a court will try to give effect to all of the agreement’s provisions. Sagner v. Glenangus Farms, Inc., 234 Md. 156, 157 , 198 A. 2d 277 (1964); Jeffrey Sneider-Maryland, Inc. v. LaVay, 28 Md. App. 229, 240 , 345 A. 2d 79 , cert. denied, 276 Md. 746 (1975). The same authorities also hold that particular provisions of a contract are not to be read in isolation but rather the document is to be read as a whole to discover its true import. A further maxim of the law of contracts is that courts will attempt to reconcile apparently conflicting provisions in construing an agreement.

Chew v. DeVries, 240 Md. 216 , 213 A. 2d 742 (1965); Mattingly Lumber Co. v. Equitable Building & Saving Ass'n., 176 Md. 403 , 5 A. 2d 458 (1939). These principles, applied to the present case, dictate affirmance of the lower court’s ruling with respect to Lexington and Continental. To give the words “accident... resulting from flood” the effect urged upon us by appellant would contradict not only the specific exclusion within which the phrase appears but also the entire tenor of the policy. It is true that the magnitude of the flood occurring in this case was unexpected, but appellant in its reply brief specifically disclaims any argument that the flood itself was the accident and the phrase “accident ... resulting from flood” does not mean that coverage is provided if the flood itself can somehow be characterized as an accident.

Rather, the accident would have to have been an unforeseeable unexpected event, given the magnitude of the flood. As there was no evidence here that the damage done to appellant’s plant was other than the expected result of a flood of that dimension, that damage was excluded from coverage under the policy. Appellant next argues that the policy shows a premium was paid for “extended coverage” which it says includes an accident resulting from floods. We note that in the policy provisions all of the covered losses are specifically listed in Section II of the policy.

An accident is not included therein but appellant argues that as extended coverage is not defined in the policy, under the Maryland cases the contract is ambiguous and thus its construction is for the jury. Mateer ⁴⁰⁵ v. Reliance Insurance Co., Inc., 247 Md. 643 , 233 A. 2d 797 (1967); Government Employees Insurance Company v. DeJames, supra and Aetna Casualty & Surety Co. v. Brethren Mutual Insurance Co., 38 Md. App. 197 , 379 A. 2d 1234 (1977). Citing C & H Plumbing and Heating, Inc. v. Employers Mutual Casualty Co., 264 Md. 510 , 287 A. 2d 238 (1972), it says that in determining whether the terms are ambiguous we must consider how the words would be understood by a reasonably prudent person applying for insurance, rather than from the view of a lawyer. Appellant then cites Allstate Insurance Co. v. Humphrey, 246 Md. 492 , 229 A. 2d 70 (1967) for the proposition that inasmuch as insurance policies are prepared by insurance companies ambiguities should be construed against the company.

We do not think that a layman would consider the policy ambiguous when the coverages for which the company paid a premium are specifically set out and do not include, other than in an exclusion clause, any language which would sustain the appellant’s argument. In other words, it is only the strained legalistic argument of the appellant that gives any suggestion of ambiguity. Neither are we impressed by the appellant’s argument that the location of the alleged conferral of coverage within an exclusionary clause is immaterial. We agree entirely with the appellees that the cases cited by appellant to support this portion of the argument simply fail to do so.

In McEvoy v. Security Fire Insurance Co., 110 Md. 275 , 73 A. 157 (1909), an exclusion in a fire insurance policy excluded coverage for loss by earthquake. The exclusion was itself limited in that coverage would be provided for fire caused by earthquake. This exception within an exclusion in no way extended coverage beyond that originally provided. In Koser v. American Casualty Co., 162 Pa.

Super. 63 , 56 A. 2d 301 (1948) the policy provided coverage for accidental injuries incurred in the operation of an automobile. The policy excluded motorcycles and airplanes from the definition of automobile. The Court held that the exclusionary clause showed clearly that the term automobile was used in its generic sense as meaning any self-propelled vehicle and that a tractor was ⁴⁰⁶ intended to be covered. We do not think the exclusion in definition is in any way apposite to an exclusion from loss.

In addition, appellant directs our attention to the following language appearing on the face page of the policy, providing insurance not only-for “ ‘those coverages indicated below by a premium charge’ but in addition ‘other perils and ... other coverages ... when endorsed hereon or added hereto’, (emphasis added)”. It then argues that the “explicit assumption of liability for ‘accident ... resulting from flood’ ” constitutes coverage added thereto. Once again appellant is trying to use an exclusion to extend coverage when the policy plainly on its face shows which perils were covered and which were not. We do not think language found only in an exclusionary clause can be reasonably construed as adding additional coverage pursuant to the provision just quoted.

In summary, we hold that the Lexington and Continental policies insured against damage resulting from certain named perils. Flood damage was absent from the