EISMANN, Justice.
This is an appeal from a judgment holding that the Designated Project or Premises endorsement in a commercial general liability insurance policy purchased by a sporting goods store excluded coverage for a claim arising out of the sale of improperly reloaded ammunition. We affirm the judgment on the alternate ground that coverage was excluded under the Products-Completed Operations Hazard endorsement.
On May 31, 2007, Tom Erekson purchased from Elk Country Sports, Ltd. Co., a sporting goods store in Montpelier, a used Magnum Research BFR revolver chambered in.500 S & W Magnum. Along with the revolver, Mr. Erekson received various accessories that included three boxes of handloaded ammunition, all of which Elk Country Sports had purchased from the prior owner.
On June 11, 2007, Mr. Erekson and one of his sons went to a city-owned shooting range to shoot the revolver. Earlier in the day, he had obtained a key to the range from Elk Country Sports. Upon arriving at the range, Mr. Erekson loaded the five chambers in the cylinder with cartridges from a box of the reloaded ammunition. While using a two-handed hold, he cocked the hammer and fired the revolver. The cartridge aligned with the barrel discharged, and two cartridges to its right detonated simultaneously. When the cartridge under the loading gate detonated, it sheared off the loading gate, and a portion of the cartridge case rocketed rearward, striking Mr. Erekson in the forehead, penetrating his skull, and imbedding three inches into his brain. He also lost a portion of his left thumb.
The cause of the accident was the reloaded ammunition. With centerfire ammunition, there is a pocket in the center of the base of the cartridge case into which a primer is inserted. When the firing pin strikes the primer, it produces a flame within the cartridge case that ignites the powder. Cartridge cases for the .500 S & W Magnum were originally designed for use with large pistol primers, but some manufacturers later produced cases designed for use with large rifle primers. Because rifle primers are longer than pistol primers, inserting rifle primers in a case designed for pistol primers will result in the primer protruding above the case head (the base of the case). A protruding primer can be discovered by visual inspection or by running a finger across the case head. The cases that are designed for large rifle primers have an "R" on the headstamp on the case head to indicate that they are designed for rifle primers. The person who had reloaded the ammunition that Mr. Erekson obtained from Elk Country Sports had inserted rifle primers in cases designed for pistol primers. Upon firing the revolver, the recoil caused the base of the cartridge
Elk Country Sports had a policy of commercial general liability insurance issued by Markel International Ins. Co., Ltd., which brought this action seeking a declaratory judgment that the policy did not provide coverage for Mr. Erekson's injuries and damages. Markel International moved for summary judgment, contending that coverage was excluded pursuant to three endorsements attached to the insurance policy. For simplicity, they will be referred to as the "Designated Premises or Project Endorsement," the "Firearms Exclusion," and the "Products-Completed Operations Hazard Endorsement." The district court held that the Designated Premises or Project Endorsement excluded coverage and granted the motion for summary judgment.
Mr. Erekson moved for reconsideration, asking the court to also rule on the other two endorsements in the event there is an appeal from its ruling. The court held that the Firearms Exclusion was ambiguous and that the Product-Completed Operations Hazard Endorsement clearly did not exclude coverage. It reaffirmed its holding that coverage was excluded under the Designated Premises or Project Endorsement.
On October 26, 2010, the court entered a declaratory judgment holding that there was no coverage under the policy for the injuries or damages suffered by Mr. Erekson. During the proceedings, Mr. Erekson passed away, and his estate was substituted for him as a party. The estate appealed the court's ruling on summary judgment, and Markel International cross-appealed the court's ruling on the motion for reconsideration.
Whether a provision in an insurance policy is ambiguous is a question of law over which this Court exercises free review. Purdy v. Farmers Ins. Co. of Idaho, 138 Idaho 443, 445, 65 P.3d 184, 186 (2003). A provision is ambiguous if it is reasonably subject to differing interpretations. Id. If the provision is unambiguous, coverage must be determined in accordance with the plain meaning of the words used. Potlatch Grain and Seed v. Millers Mut. Fire Ins. Co., 138 Idaho 54, 58, 57 P.3d 765, 769 (2002).
The insurance policy includes a Designated Premises or Project Endorsement that provides as follows:
The endorsement includes a Schedule stating that the premises were "407 Washington St., Montpelier, ID 83254" and the project was "Sporting Goods Store."
In holding that this endorsement excludes coverage, the district court wrote, "The Court plainly sees the policy in this case as a premises liability policy which limits liability to activities and conduct related [to] the premises, not the business." In so holding, the court erred. In reaching its decision, the district court construed the premises and the project as being identical. That is contrary to the clear wording of the endorsement, especially when construed in the context of the entire policy.
The declaration page of the policy states that Elk Country Sports, Ltd. Co., purchased insurance that provided "Commercial General Liability" coverage and "Commercial Property" coverage, with separate amounts charged as premiums for each coverage.
For a limited liability company such as Elk Country Sports, an insured also includes its members, "but only with respect to the conduct of your business"; its managers, "but only with respect to their duties as your managers"; and its employees, "but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business." In the policy, the words "you" and "your" refer to the named insured, Elk Country Sports. Thus, the policy provides coverage to Elk Country Sports for the actions of its members with respect to the conduct of the business, for the conduct of its managers with respect to their duties as managers in the business, and for the conduct of its employees acting within the scope of their employment while performing duties related to the conduct of the business.
The Designated Premises or Project Endorsement states that the policy applies only to bodily injury "arising out of: 1. The ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises; or 2. The project shown in the Schedule." The word "or" between the two numbered phrases is "[a] disjunctive particle used to express an alternative or to give a choice of one among two or more things." Frasier v. Frasier, 87 Idaho 510, 514, 394 P.2d 294, 296 (1964) (quoting Black's Law Dictionary (4th ed. 1957)). Thus, the policy covers bodily injury arising out of either the "ownership, maintenance or use of the premises" or the "project." The use of the disjunctive shows that the premises and the project do not mean the same thing. Otherwise, there would be no need for the disjunctive. Likewise, the two phrases are in the disjunctive, not conjunctive. For there to be coverage for bodily injury arising out of the project, the bodily injury need not also arise out of the ownership, maintenance or use of the premises.
The word "project" is not defined other than as stated in the endorsement, which is "Sporting Goods Store." The only reasonable construction of the endorsement is that the Sporting Goods Store is the business conducted on the premises. Thus, this endorsement provides coverage for bodily injuries that arise out of the business, which is a sporting goods store. The allegation in this case is that Elk Country Sports was negligent in selling Mr. Erekson the reloaded ammunition, either by failing to inspect the handloaded ammunition to see if it was safe or by failing to warn. That is a claim that arises out of the business being conducted by Elk Country Sports. Therefore, this endorsement does not exclude coverage for that claim.
The insurance policy includes a Product-Completed Operations Hazard Endorsement. It is applicable to the commercial general liability coverage, and it states, "This Insurance does not apply to `bodily injury' or `property damage' included within the `products-completed operations hazard'." The phrase "products-completed operations hazard" is defined in the policy to include "all `bodily injury' and `property damage' occurring away from premises you own or rent and arising out of `your product'...." The words "Your Product" are defined as "[a]ny goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by ... [y]ou ... includ[ing] ... [t]he providing of or failure to provide warnings or instructions." In this case, the bodily injury occurred away from the premises of Elk Country Sports, and it arose out of
The district court held that this endorsement did not apply based upon this Court's decision in Chancler v. American Hardware Mut. Ins. Co., 109 Idaho 841, 712 P.2d 542 (1985). In Chancler, the insured had purchased a used crane, modified it by adding a ten-foot extension to the boom, and then sold it without providing any safety information regarding the maximum weight loads for the crane as modified. An employee of the purchaser was severely injured while operating the crane when the modification to the boom collapsed because the load the crane was carrying exceeded its carrying capacity. The seller of the crane had an insurance policy which excluded coverage for "products hazard," which was defined as including "bodily injury and property damage arising out of the named insured's products ..., but only if the bodily injury or property damage occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others." Id. at 844-45, 712 P.2d at 545-46. We held that the exclusion did not exclude coverage for negligent failure to warn.
In holding that the exclusion did not exclude coverage for negligent failure to warn, the Court relied heavily upon the fact that failure to warn was not mentioned in the policy. The Court stated as follows:
Id. at 846-47, 712 P.2d at 547-48.
In the present case, the Product-Completed Operations Hazard Endorsement expressly excludes coverage for failure to warn. The policy's definition of the insured's product includes "[t]he providing of or failure to provide warnings or instructions." Therefore, Chancler does not apply to the policy in this case.
Prior to the decision in Chancler, we issued our opinion in Parma Seed, Inc. v. General Ins. Co. of America, 94 Idaho 658, 496 P.2d 281 (1972). In that case, a retail seller's supplier delivered the wrong product, which the retailer sold to its customers as a weedkiller. It was more potent than the product that had been ordered, and it destroyed the crops upon which it was applied. The issue was whether the "Products and Completed Operations Exclusion" in the retail seller's liability policy excluded coverage. That endorsement excluded liability for claims or expenses arising out of
94 Idaho at 659, 496 P.2d at 282.
The insured (retail seller) argued that liability arose not from the product, but from the insured's negligent failure to discover that it had received the wrong product from its supplier, and thus the exclusion did not apply. Id. at 660, 496 P.2d at 283. This Court disagreed, holding that the exclusion applied. In doing so, we stated as follows:
94 Idaho at 662, 496 P.2d at 285.
Thus, in Parma Seed, the exclusion did not mention negligence, but we held that an exclusion for "goods or products manufactured, sold, handled, or distributed by the named insured" still applied even to a claim that the retail seller was negligent in failing to discover that it had received the wrong product before selling it. It was not necessary that the exclusion expressly mention negligence in order to apply to the conduct excluded.
After the decision in Chancler, this Court issued the decision in Continental Casualty Co. v. Brady, 127 Idaho 830, 907 P.2d 807 (1995). In that case, the day after a settlement was reached an attorney convinced his clients to sign a new contingent fee agreement that increased the amount of attorney fees to which the attorney was entitled to receive from the settlement. His clients later sued to recover a portion of the fees based upon unjust enrichment, the Consumer Protection Act, breach of fiduciary duty, and lack of consideration for the new contingent fee agreement. The attorney's liability insurance policy excluded coverage for "any fine, penalty, or claim for return of fees." The attorney argued that this was not merely a fee dispute. We held that the exclusion applied, stating:
Id. at 833, 907 P.2d at 810.
Thus, in Continental Casualty, we held that the theory of liability is immaterial when the policy excludes coverage for the relief requested. As we stated, "[I]t is immaterial what the actual theory of recovery is since the policy flatly excludes `all claims' for the return of fees." Id.
In this case, the Product-Completed Operations Hazard Endorsement excludes coverage for "all `bodily injury' and `property damage' occurring away from premises you own or rent and arising out of `your product'...." The words "Your Product" are defined as "[a]ny goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by ... [y]ou ... includ[ing] ... [t]he providing of or failure to provide warnings or instructions." That exclusion applies to the bodily injury alleged in this case. It arose out of Elk Country Sports's product as defined in the policy.
"Where the lower court reaches the correct result by an erroneous theory, this Court will affirm the order on the correct theory." Nampa & Meridian Irr. Dist. v. Mussell, 139 Idaho 28, 33, 72 P.3d 868, 873 (2003). We affirm the judgment of the district court on the ground that the Product-Completed Operations Hazard Endorsement excludes coverage. Because coverage is excluded under that endorsement, we need not address the Firearms Exclusion.
We affirm that portion of the judgment which states: "Markel has no duty or obligation to indemnify Elk Country for the damages sought by Erekson in Bear County District Court case number CV-2009-0073" and "Markel is not obligated and has no duty to defend Elk Country in Bear County District Court case number CV-2009-0073 from the claims of Erekson." We award costs on appeal to respondent.
Chief Justice BURDICK, Justices J. JONES and HORTON concur.
W. JONES, J., specially concurring.
I concur in the majority Opinion that the Products Completed Operations Hazard Endorsement excludes insurance coverage in this case, and I also concur with the Majority that the Designated Premises or Project Endorsement is written in the disjunctive as noted by the Majority and with the conclusion that the Project portion of the Endorsement does not exclude coverage. I write separately only to point out that the district court apparently believed that the Designated Premises portion of the Endorsement precluded coverage simply because the "bodily injury" occurred off the premises owned or used by the insured. I simply want to express my opinion that the fact that the injury occurred off the Designated Premises is not conclusive as to whether that portion of the Endorsement excludes coverage or not. Other factors must be considered besides the location at which the injury occurred to determine whether the Designated Premises portion of the Endorsement does or does not bar coverage. The Majority seems to express no opinion on that particular issue; rather, it focuses on the fact that the Project portion of the Endorsement is a different matter and does not bar coverage. I write this concurrence only to alert readers explicitly that the Majority does not appear to express any opinion on the Designated Premises portion of the Endorsement and neither do I.
