No. 81-3-478, Appeal from Order of the Superior Court dated August 21, 1981, at No. 4 Philadelphia, 1981, affirming the Order of the Court of Common Pleas of Luzerne County at No. 1005 of 1978, 295 Pa. Super. 576, 435 A.2d 926 (1981).
Joseph A. Quinn, Jr., Wm. F. Anzalone, Wilkes-Barre, for appellant.
Louis Shaffer, Wilkes-Barre, Mitchell S. Greenspan, Philadelphia, for appellee.
Philip A. Ryan, Philadelphia, amicus curiae.
Roberts, C.j., and Nix, Larsen, Flaherty, McDermott, Hutchinson and Zappala, JJ. Hutchinson, J., files a concurring opinion in which Flaherty, J., joins. Nix, J., files a dissenting opinion.
This appeal presents the question of whether appellee Standard Venetian Blind Company (Venetian), the insured under a policy of liability insurance issued by appellant American Empire Insurance Company (American), may avoid the effect of a clear and unambiguous exclusion clause in the insurance contract by showing that it was neither made aware of nor understood the effect of the exclusion. We conclude that the lack of knowledge or understanding of a clearly drafted exclusion clause in a written contract of insurance executed by both parties does not render the clause unenforceable. Hence we reverse the Superior Court's determination to the contrary, and remand the record to the Court of Common Pleas of Luzerne County with the direction that judgment be entered in favor of American.
The present controversy has its origin in an action in assumpsit filed by D.H. Evans against Venetian and one of its partners, appellee Sheldon B. Morris, in which Evans sought to recover for damages to a portico installed by a subcontractor of Venetian pursuant to a contract between Venetian and Evans. The portico had been installed in April of 1974 on property owned by Evans, and was destroyed completely in January of 1978 when it collapsed during a heavy snowstorm. The collapse of the portico also caused damage to property owned by Evans which had been stored underneath the portico. Evans' complaint, which alleged breaches of implied and express warranties, sought damages of $13,826.56, the cost of replacing the portico, and additional damages of $880, the cost of repairing the items stored beneath the portico plus the cost of labor needed to remove the collapsed structure.
At the time of the filing of the action in assumpsit, Venetian was the insured under a liability policy issued by American in May of 1975. The contract was executed on behalf of Venetian by appellee Morris and on behalf of American by Boris H. Levitsky, an employee of Block Brothers Insurance Company, which acted as agent for American. The policy, which took effect May 1, 1975, provided personal injury and property damage liability coverage for all "sums which the insured shall be legally obligated to pay as damages . . . ." The policy further provided that American had "the right and the duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage" up to the policy limits.
Immediately below the coverage provision was a section captioned "Exclusions." Under this section, conspicuously displayed and sequentially listed, were set forth the types of claims and losses for which American was not obliged to defend or indemnify Venetian. Exclusions (n) and (o) provided:
"This insurance does not apply:
(n) to property damage to the named insured's products arising out of such products;
(o) to property damage to work performed by or on behalf of the named insured arising out of the work or any portion thereof or out of materials, parts or equipment furnished in connection therewith."
The policy defined the phrase "named insured's products" as "goods or products manufactured, sold, handled or distributed by the named insured or others trading under his name . . . ."
In a deposition made a part of the record, Sheldon Morris testified that he has a high school education, can read the English language, and has been a self-employed businessman since 1946. He also testified that, although he had received a copy of the policy, he had never read it. He stated that he had not read the policy because he had relied
on the judgment of the Block Brothers Insurance Agency and because he had indicated to Block Brothers that "we wanted full coverage on everything we have."
Immediately upon receiving the complaint in assumpsit, Morris filed answers on behalf of himself and Venetian and promptly notified American of the claim. American agreed, on Venetian's behalf, to indemnify Evans for the cost of the damaged property which had been stored beneath the portico as well as the cost of labor, but refused to defend the assumpsit action or tender payment for the cost of the portico itself. American's refusal was based on its assertion that, while the policy provided coverage for damage caused by products of Venetian, the policy expressly excluded coverage for damage to Venetian's products themselves. Trial then commenced on the breach of warranty action, at the conclusion of which a jury returned a verdict against Venetian and Morris in the amount of $13,094.64.
While trial on the action in assumpsit was still pending, Venetian commenced the present proceedings by filing a petition for a declaratory judgment. The court of common pleas found that exclusions (n) and (o) set forth in the policy were "plain and free of ambiguity," and that these provisions expressly excluded coverage for damage to the portico. Nonetheless, the court of common pleas, relying on language in the Superior Court's decision in Hionis v. Northern Mutual Insurance Co., 230 Pa. Super. 511, 327 A.2d 363 (1974), held that because Venetian had neither been made aware of the exclusions nor had their meaning been explained to it, coverage existed under the policy for the full amount of the judgment entered against Venetian. A panel of the Superior Court affirmed, also on the authority of Hionis, and this appeal followed.
The principles governing our interpretation of a contract of insurance are familiar and well settled. The task of interpreting a contract is generally performed by a court rather than by a jury. See Gonzalez v. United States Page 305} Steel Corp., 484 Pa. 277, 398 A.2d 1378 (1979); Community College of Beaver County v. Society of the Faculty, 473 Pa. 576, 375 A.2d 1267 (1977). The goal of that task is, of course, to ascertain the intent of the parties as manifested by the language of the written instrument. See Mohn v. American Casualty Co. of Reading, 458 Pa. 576, 326 A.2d 346 (1974). Where a provision of a policy is ambiguous, the policy provision is to be construed in favor of the insured and against the insurer, the drafter of the agreement. See Mohn v. American Casualty Co. of Reading, supra. Where, however, the language of the contract is clear and unambiguous, a court is required to give effect to that language. See Pennsylvania Manufacturers' Ass'n Insurance Co. v. Aetna Casualty & Surety Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967). "[I]n the absence of proof of fraud, 'failure to read [the contract] is an unavailing excuse or defense and cannot justify an avoidance, modification or nullification of the contract or any provision thereof.'" Olson Estate, 447 Pa. 483, 488, 291 A.2d 95, 98 (1972), quoting Orner v. T.W. Phillips Gas & Oil Co., 401 Pa. 195, 199, 163 A.2d 880, 883 (1960).*fn*
Application of these precepts to the insurance contract in this case requires the conclusion that Venetian is bound by the agreement it signed. As found by the court of common pleas, the exclusions at issue are "plain and free of ambiguity," and could have been readily comprehended by Mr. Morris had he chosen to read them. Those provisions expressly excluded coverage for "property damage to the named insured's products arising out of such products," and for "property damage to work performed by or on behalf of the named insured arising out of such work . . . or out of materials, parts or equipment furnished in connection therewith," the very types of losses sustained here. It has
not been suggested, much less shown, that either exclusion is contrary to law or to regulations of the Insurance Department. Manifestly, to allow Venetian to avoid application of the clear and unambiguous policy limitations in these circumstances would require us to rewrite the parties' written contract.
In Hionis v. Northern Mutual Insurance Co., 230 Pa. Super. 511, 327 A.2d 363 (1974), upon which both the court of common pleas and the Superior Court relied, the Superior Court stated:
"[W]here a policy is written in unambiguous terms, the burden of establishing the applicability of the exclusion or limitation involves proof that the insured was aware of the exclusion or limitation and that the effect thereof was explained to him."
230 Pa. Super. at 517, 327 A.2d at 365. Venetian maintains that this Court should adopt this language as a rule of insurance law, as the Superior Court has done here and in other cases decided since Hionis. See, e.g., Kelmo Enterprises, Inc. v. Commercial Union Ins. Co., 285 Pa. Super. 13, 426 A.2d 680 (1981); Klischer v. Nationwide Ins. Co., 281 Pa. Super. 292, 422 A.2d 175 (1980). See also Brokers Title Company, Inc. v. St. Paul Fire and Marine Ins. Co., 610 F.2d 1174 (3d Cir.1979).
We believe that the burden imposed by Hionis fails to accord proper significance to the written contract, which has historically been the true test of parties' intentions. By focusing on what was and was not said at the time of contract formation rather than on the parties' writing, Hionis makes the question of the scope of insurance coverage in any given case depend upon how a factfinder resolves questions of credibility. Such a process, apart from the obvious uncertainty of its results, unnecessarily delays the resolution of controversy, adding only unwanted costs to the cost of procuring insurance. Thus, Hionis, which would permit an insured to avoid the application of a clear and unambiguous limitation clause in an insurance contract, is not to be followed.
Although on this record we reject Hionis, we note that in light of the manifest inequality of bargaining power between an insurance company and a purchaser of insurance, a court may on occasion be justified in deviating from the plain language of a contract of insurance. See 13 Pa.C.S. § 2302 (court may refuse to enforce contract or any clause of contract if court as a matter of law deems the contract or any clause of the contract to have been "unconscionable at the time it was made"). This record does not present such an occasion. We hold only that where, as here, the policy limitation relied upon by the insurer to deny coverage is clearly worded and conspicuously displayed, the insured may not avoid the consequences of that limitation by proof that he failed to read the limitation or that he did not understand it.
The order of the Superior Court is reversed and the record is remanded to the Court of Common Pleas of Luzerne County with the direction that judgment be entered in favor of appellant.
HUTCHINSON, Justice, concurring.
I concur in the result. I write separately because I believe a general liability policy protects the policyholder by covering him against claims made by third parties for injuries to their person or property resulting from the policyholder's negligence. A liability policy does not provide a guarantee of the policyholder's workmanship.*fn1 Such a guarantee is not within its coverage. I do not believe a businessman of ordinary intelligence could reasonably expect*fn2
to obtain a defense against and indemnity for the cost of properly performing his contract or replacing his failed product under a liability policy. Of course, such a holding would not negate general liability coverage for damage to third persons, their property, or the insured's other property, where that damage to others or other property is caused by the insured's improper performance of his contract or his delivery of a defective product. In short, this case involves an absence of coverage itself not an ...