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August 14, 1959

Felix CLAUSS, Jr., Thomas F. Clauss and Anna M. Clauss, t/a Felix Clauss and Sons

The opinion of the court was delivered by: EGAN

This is an action brought under the Declaratory Judgment Act (28 U.S.C.A. ยง 2201) to determine the questions of coverage and the duty to defend under two comprehensive liability policies. It is necessary to relate the factual background of this case to intelligently comprehend the two basic issues involved. There is diversity of citizenship and the required jurisdictional amount is indicated.

The plaintiffs, during the year 1957, were engaged in the construction of certain sewers and other work on Roosevelt Boulevard, Philadelphia, pursuant to a contract with the City of Philadelphia. The sewer project was completed on October 18, 1957 and a final inspection was made by the City engineers on October 20, 1957. Final payment for the project was received on March 11, 1958.

 On or about June 30, 1958 a suit was instituted by Paul Rumer against the City of Philadelphia, seeking damages for personal injuries he sustained in an accident which occurred on February 1, 1958 when a tractor-trailer which he was operating was forced out of control into a tree by reason of an alleged defective condition in Roosevelt Boulevard. Thereafter the City filed a third-party complaint against the plaintiffs herein, as additional defendants in that action, and alleged as follows:

 '2. The defendant, City of Philadelphia, has joined Thomas F. Clauss, Felix H. Clauss, Jr., and Anna M. Clauss, Thomas F. Clauss, and Felix H. Clauss, Jr., Executors of the Estate of Felix H. Clauss, also known as Felix H. Clause, Sr., individually and trading as Felix Clauss and Sons, as additional defendants and avers that the said additional defendants negligently cause, allowed and permitted the hazardous, unsafe and dangerous condition complained of by the plaintiff, to exist.'

 The third-party complaint was forwarded to the defendant, American Automobile and Insurance Company, Felix Clauss and Sons' insurer, which raised a question of coverage under the policy. After the plaintiffs executed a document entitled 'Agreement to Defend,' the defendant undertook the defense of the action in the Court of Common Pleas. However, the defendant, on December 3, 1958, advised the plaintiffs that it would no longer continue the defense of that action and that it was directing its attorney to withdraw his appearance in said action. On February 13, 1959, the Court of Common Pleas granted leave to defendant's attorney to withdraw his appearance. Since that Court did not pass on the question of coverage and defense, this present action was instituted to declare the rights and liabilities of the parties under two policies.

 At the outset, the question relating to policy No. K-213 4758 can be disposed of very quickly. This policy ran from November 1, 1956 until November 1, 1957. Under 'Insuring Agreements' IV, it states:

 'Policy Period, Territory -- This policy * * * applies only to accidents or occurrences which take place during the policy period * * *'

 Since the suit in the Court of Common Pleas arises out of an accident which occurred on February 1, 1958, it is obviously beyond the policy period.

 The second policy, No. K-215 0621, was in effect at the date of the accident and this opinion will deal with the question of coverage and the duty to defend under it.

 The two issues must be treated separately since the question of coverage involves an interpretation of the policy and the determination of duty to defend requires reading the complaint filed by the City of Philadelphia, together with the policy.

 In answers to interrogatories, plaintiffs have admitted completion of the sewer construction project by October 18, 1957, well before the date of the accident in question. Therefore the Insurance Company denies coverage on the ground that the accident arose out of a completed operation and that the policy clearly provides no coverage in this situation. Plaintiffs allege that the policy is ambiguous. By following the general rule of construing the policy in its favor in case of such ambiguity, the clause in the policy 'Sewer Construction -- All Operations,' would include coverage for a completed operation.

 However, before going on to answer the various arguments adduced, it would be well to set forth some of the pertinent language of the policy relating to coverage.

 On page 1, under 'Insuring Agreements' it states the general coverage provisions:

 'I. Coverages: * * *

 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.' However, on a separate page, the coverage becomes more specific and reads as follows: "Declarations General Liability Schedule Description of Hazard Estimated Premiums Coverage B Coverage D (a) Premises -- Operations As per schedule attached 1173.78 939.66 (b) Elevators No exposure at inception of policy (c) Independent Contractors Construction Operations -- Contractor (not railroads) excluding operations on board ships 74.00 32.80 (d) Products (including completed operations) Not covered hereunder


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