The opinion of the court was delivered by: LASKER
These are cross motions for partial summary judgment as to liability, pursuant to Rule 56(c), on the part of the insured, Lee & Palmer, Inc. and the insurer, Employers Commercial Union Insurance Company, Inc. ("ECU"). The sole issue is whether Lee & Palmer's risk is excluded from coverage by virtue of either the G-304 exclusion n.1 [Footnote Omitted] or exclusion (d) of the policy. The parties agree that no issues of fact are in dispute.
The action arises out of a series of law suits instituted by the owners of the SS Fortaleza against Lee & Palmer for its alleged negligent lashing and securing of cargo on board the Fortaleza. ECU, from whom Lee & Palmer purchased a "Comprehensive General Liability Insurance" ("Comprehensive") disclaimed coverage for liability, and refused to defend Lee & Palmer in the litigation. After proceeding to defend the actions on its own, Lee & Palmer thereafter settled the cases for $50,000. It then brought this action seeking to recover the sums paid in settlement and the attorney's fees paid in defending the Fortaleza cases.
I. The G-304 Exclusion (Completed Operations Hazard)
Whether or not Lee & Palmer is covered depends on the meaning of the "Completed Operations Hazard" exclusion. A "Completed Operations Hazard" is defined by the policy as follows:
"'Completed Operations Hazards' includes . . . property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the . . . property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured . . .".
"The completed operations hazard does not include . . . property damage arising out of
(a) Operations in connection with the transportation of property, unless the . . . property damage arises out of a condition in or on a vehicle created by the loading or unloading thereof, . . .".
Lee & Palmer contends that since the property damage in the Fortaleza cases arose out of "operations in connection with the transportation of property", it is excepted from the Completed Operations Hazard exclusion, and, therefore, falls within the Comprehensive policy.
ECU does not dispute the proposition that the property damage involved in the Fortaleza cases is covered under the Comprehensive policy unless it falls within one of two recognized exclusions discussed below. Nor does ECU contest that the damage arose out of "operations in connection with the transportation of property." ECU does argue, however, that the exception is inapplicable here because the property damage "arose out of a condition in or on a vehicle created by loading or unlaoding thereof." Stated differently, ECU's position is that the above exception to the exception applies and that, therefore, the damage falls back into the Completed Operations Hazard definition. Lee & Palmer's riposte to this is that the damages neither involve a "vehicle" nor "loading and unloading". The questions to be resolved are accordingly narrowed to whether under the terms of the policy, a vessel may be termed a "vehicle" and whether the lashing and securing of cargo may be characterized as "loading and unloading". We think the answer to both questions is no. Therefore, we find that Lee & Palmer's actions do not fall within the Completed Operations Hazard exclusion and that, unless it is excluded from coverage by exclusion (d) (See II below), the loss is covered under the policy.
The general rule in New York
is that where an insurance policy contains ambiguous words, such words will be construed strictly against the insurer -- especially in cases of exclusion from coverage. In National Screen Service Corp. v. United States Fidelity & Guaranty Co., 364 F.2d 275 (2d Cir. 1966), the Second Circuit had occasion to review the applicable New York law on this subject:
"In Sincoff v. Liberty Mutual Ins. Co., 11 N.Y. 2d 386, 230 N.Y.S. 2d 13, 183 N.E. 2d 899 (1962) the New York Court of Appeals held that where there is an ambiguous word in an insurance policy, the burden which the defendant insurer must carry is to show that the construction it urges is such 'that it would be unreasonable for the average man reading the policy to conclude ' that a meaning other than that urged by the insurance company was possible and 'that its own construction was the only one that fairly could be placed upon the policy. ' 230 N.Y.S. 2d at 16. Thus it would seem that in New York the insurance company can avail itself of the plain meaning rule only in those cases where 'such a definition was the only one that could "fairly be placed thereon". 230 N.Y.S. 2d at 15. The appellant has not met that test in this case. When that condition is not satisfied the rule is that where an ambiguous word is used, 'such ambiguity should . . . resolved in favor the insured. ' Sincoff v. Liberty Mutual Ins. Co., supra, 230 N.Y.S. 2d at 16; And as the New York Court noted in Sincoff, supra, "this rule [of favoring the insured] has particular application where exclusions are involved. " 230 N.Y.S. 2d at 16. (Citations omitted) The rule would seem to have special vigor when applied to a policy such as the one involved here which is by its own terms denominated a 'comprehensive general liability policy. ' Cf. Sincoff, supra, 230 N.Y.S. 2d at 16, where it was said that 'a vague exclusion . . . should not be permitted to prevent indemnity ' where the policy was of the kind denominated 'all risks' by the insurance company."
Applying these principles to the case at hand, we find that at the most it is ambiguous whether the word "vehicle" in the policy is intended to apply solely to land conveyances or whether it is intended to encompass both land and water conveyances. First, the policy itself does not define the word "vehicle". An examination of the policy does not resolve the ambiguity. We do not agree with ECU that the policy's reference (at "Definitions" -- "mobile equipment") to "land vehicle" implies the possibility of the existence of "water vehicles". In fact, the word "vehicle" is never used in the policy in the context of water conveyances. Since it would do violence to the commonplace, natural meaning of the word, to classify a vessel as a "vehicle", and since the very great weight of authority appears to limit "vehicles" to conveyances on land (See 1 U.S.C. § 4 (Def. of vehicle); 1 U.S.C. § 3 (Def. of vessel); Burford-Toothaker Tractor Co. v. Curry, 241 Ala. 350, 2 So. 2d 420 (1941); People v. Curnuch, 177 Misc. 606, 607, 31 N.Y.S. 2d 105, 107 (County Ct. ...