CARTER, J. I dissent.
It is my considered opinion .that there is sufficient evidence to support the findings and judgment of the trial court. That court found that the cement used to make the “scratch” and “brown” layers of the stucco application was defective and caused it to disintegrate. It also determined that the oral and documentary evidence offered to interpret the insurance contract implied that the contract covered the loss.
In reversing the judgment of the trial court the majority holds that the damage was within exclusion (g) of the policy for two reasons:
(1) The cracks in the stucco first appeared before Mr. Hoover took possession of the house which was then “property in the care, custody, or control of the insured.”
(2) The damage was to a product “manufactured, sold, handled or distributed ... by the named insured” and “work completed by or for the named insured.”
The holding of the majority is highly technical and is not supported by either the facts or law.
Although the stucco was slightly cracked before Mr. Hoover took over the house, he and Volf agreed that the damage was not so serious as to require another stucco application. Only a bit of paint was needed to repair the damage. Only after Mr. Hoover moved into the house did rainfall make the disintegration bad enough to require a new application of stucco. Therefore the damage which made Volf liable for the new application occurred while Mr. Hoover resided in the house. Had the rainfall not caused this additional disintegration, Volf would not have been liable for the cost of a stucco application. According to the majority’s interpretation, exclusion (g) encompasses any flaws in a completed building which later becomes so aggravated as to require repair. It would also include damage to other parts of the same building which are affected by the original flaw. This is hardly consistent with the observation of the writer of the majority opinion that “. . . it must not be forgotten that the primary function of insurance is to insure.” (Bollinger v. National Fire Ins. Co., 25 Cal.2d 399, 405 [154 P.2d 399].)
[378]The majority also relies on exclusion (g)(4) which excludes injury to or destruction of “. . . any goods or products manufactured, sold, handled or distributed or premises alienated by the named insured, or work completed by or for the named insured, out of which the accident arises. ...” (Emphasis added.)
Preliminarily it must be said that the emphasized phrase modifies the entire subsection and not only “or work completed by or for the named insured. ...” If it were meant to relate only to the latter phrase the comma would properly be omitted.
The trial court found that the accident arose from the cement used in the first stucco application. This exclusion may be construed to avoid liability for the cement itself, although its identity disappeared when it was mixed with other materials to make stucco. The majority has ignored the phrase “out of which the accident arises” which is the key to understanding the holding of the trial court. My disagreement with the majority lies here. I have four reasons for this interpretation :
(1) The clear intent of Volf and defendant’s agent was to provide “full coverage as far as materials and workmanship” were concerned for a building contractor. Other statements similar in implication to the quoted phrase were made by Volf and his wife in their negotiations with the agent. The latent defects involved in this ease are typical construction problems. Volf asked for a form of complete protection and relied on defendant to provide it. It is hardly possible to enumerate the multitude of particular incidents which may arise out of a business so complex as that of a building contractor. What was not discussed by Volf and the agent does not imply that those things were not meant to be covered. Volf asked for full coverage “like Lodato.” This implies that he thought Lodato was “fully covered.” The agent showed Volf Lodato’s policy and said Volf was “equally covered.” Volf’s reasonable interpretation of this was that both he and Lodato were fully covered. This oral evidence is important in determining the meaning of the language used in the contract.
(2) Under coverage “D” Volf was protected against “Products Hazard.” The contract defines this as: “. . . the handling or use of, the existence of any condition in or a warranty of goods or products manufactured, sold, handled or distributed by the named insured, other than equipment rented [379]to or located for use of others but not sold, if the accident occurs after the insured has relinquished possession thereof to others and away from premises owned, rented or controlled by the insured or on premises for which the classification stated in the company’s manual excludes any part of the foregoing. . . .”
Note that this paragraph includes coverage for “. . . the existence of any condition in . . . goods or products manufactured, sold, handled or distributed by the named insured. ...” The majority cites this language of exclusion D: “‘manufactured, sold, handled or distributed by the named insured’ ” as taking a thing out of the policy. If this is correct, products hazard coverage as defined in the policy is removed completely by the very same words in the exception! By giving meaning to the phrase “out of which the accident occurred” this anomaly would be avoided. It should not be assumed the company, in bad faith, meant the definition of “products hazard” to be meaningless.
(3) The meaning of the phrase “out of which the accident arises” is made clearer by the fact that the person buying and using a defective product may recover its value from the seller. In this ease Volf can recover the value of the defective cement from the Nielsen Company. This implies that the phrase in question applies only to the cement in this case, not to the other ingredients of the stucco.
(4) “An insurance policy is to be construed most favorably to the insured, in such manner as to provide full coverage of the indicated risk rather than to narrow the protection. (Olson v. Standard Marine Ins. Co., 109 Cal.App.2d 130, 135 [240 P.2d 379]; Miller v. United Ins. Co., 113 Cal.App.2d 493, 497 [248 P.2d 113]; Pendell v. Westland Life Ins. Co., 95 Cal.App.2d 766, 769 [214 P.2d 392] ; Fageol Truck & Coach Co. v. Pacific Indem. Co., 18 Cal.2d 748, 751 [117 P.2d 669].) The courts will not sanction a construction of the insurer’s language that will defeat the very purpose or object of the insurance. (Miller v. United Ins. Co., supra, at p. 497; Narver v. California State Life Ins. Co., 211 Cal. 176, 180 [294 P. 393, 71 A.L.R. 1374].) . . . Normally a businessman who takes ‘comprehensive’ insurance with express coverage of ‘products property damage’ would expect his ordinary transactions to be covered. If the insurer would create an exception to the general import of the principal coverage clauses, the burden rests upon it to phrase that exception in clear and unmistakable language. (Pendell v. Westland Life Ins. Co., supra, at [380]p. 770.) If this is not done any ambiguity or uncertainty is resolved in favor of the policyholder. Indeed an exception must be couched in terms which are clear to the ordinary mind (Pendell v. Westland Life Ins. Co., supra, at p. 770) or any doubts as to the meaning will be resolved against the insurer.” (Ritchie v. Anchor Casualty Co., 135 Cal.App.2d 245, 257-258 [286 P.2d 1000].) In view of the foregoing rule defendant should not be permitted to exclude the very type of coverage desired by plaintiffs by an exclusionary clause worded ambiguously and not called to their attention.
I think Hauenstein v. Saint Paul-Mercury Indent. Co., 242 Minn. 354 [65 N.W.2d 122], supports plaintiff. The court held the plaster sold by the plaintiff was the element causing the damage in that ease. The court held that plaintiff could not recover for damage to the plaster itself, but it could recover for damage to the building. It is an inconsequential distinction that the plaster had to be removed in the Hauenstein case but the damaged stucco in this case was merely covered over. The crux is that because of the damage the building’s market value decreased. (Id., p. 125.) “No one can reasonably contend that the application of a useless plaster, which has to be removed before the walls can be properly replastered, does not lower the market value of a building. ...” (Id.) The court held a proper measure of damages to be the cost of removing the defective plaster and restoring the building to its former condition. I interpret this to mean restoration with proper plastering.
It can be argued that the Hauenstein ease is distinguishable because the building damaged was not built by the insured. A company publication of the National Underwriters Company,* the “F. C. & S. Bulletins,” dated August, 1955, entitled “Products Liability Insurance,” interprets the exclusion here scrutinized. This publication is written for sellers of insurance. After discussing the Hauenstein case it says:
“A common source of argument—not answered by any decisions, at present—is liability arising out of a piece of equipment with several distinct parts, all sold or installed by the same insured at the same time. . Should a defect in one part or a faulty installation of that part damage the balance of the equipment, it is not clear whether the exclusion would deny coverage for damage to the entire piece of equipment or only to the portion causing the damage.”
[381]Thus it is obvious that underwriters themselves are not certain what the paragraph in issue means. The policy to interpret ambiguous clauses in insurance contracts in favor of the insured is clearly invoked.
I conclude that there was sufficient evidence before the trial court to justify its finding that the policy in issue covered this loss.
It will be recalled that the trial court awarded plaintiffs the sum of $1,309.15 together with court costs. Defendant contends that even if it is liable under the policy, it is liable only to the extent of $1,000 under the “each accident” clause. The policy, under the heading “Conditions” sets forth, in paragraph 6, “Limits of Liability, Coverage D. The limit of property damage liability stated in the declarations as ‘ aggregate operations’ is the total limit of the company’s liability for all damages arising out of injury to or destruction of property, including the loss of use thereof, caused by the ownership, maintenance or use of premises or operations rated upon a remuneration premium basis or by contractors’ equipment rated on a receipts premium basis. . . .
“The limit of property damage liability stated in the declarations as ‘aggregate contractual’ is the total limit of the company’s liability for all damages arising out of injury to or destruction of property, including the loss of use thereof, with respect to each contract.
“These limits apply separately to each project with respect to operations being performed away from premises owned or rented by the named insured. ’ ’
Paragraph 5 provides “Limits of Liability—Products, Coverages B and D. The limits of bodily injury liability and property damage liability stated in the declarations as ‘aggregate products’ are respectively the total limits of the company’s liability for all damages arising out of the products hazard. All such damages arising out of one prepared or acquired lot of goods or products shall be considered as arising out of one accident.” “Products Hazard” (3(f)) as defined by the policy is quoted supra.
The trial court found that by the terms of the contract of insurance defendant agreed to pay on behalf of plaintiffs all sums which they should become legally obligated to pay because of loss caused to property including the loss of use thereof “by reason of the handling or use of, the existence of any condition in, or a warranty of goods or products manufactured, sold, handled or distributed by the insured plain[382]tiffs. ...” Under the unquestionably ambiguous provisions heretofore quoted, it cannot be said that the finding is unsupported by the record. An insurance policy is to be construed most favorably to the insured, in such a manner as to provide full coverage of the indicated risk rather than to narrow the protection (Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, 437-438 [296 P.2d 801, 57 A.L.R.2d 914] ; Ritchie v. Anchor Casualty Co., 135 Cal.App.2d 245, 257 [286 P.2d 1000] ; Glickman v. New York Life Ins. Co., 16 Cal.2d 626, 634 [107 P.2d 252, 131 A.L.R. 1292]). If the insurer would create an exception to the general import of the principal coverage clauses, the burden rests upon it to phrase that exception in clear and unmistakable language. (Pendell v. Westland Life Ins. Co., 95 Cal.App.2d 766, 770 [214 P.2d 392].)
In view of the foregoing it would seem that if, as stated by Mr. Justice Traynor in Bollinger v. National Fire Ins. Co., 25 Cal.2d 399, 405 [154 P.2d 399], ‘‘that the primary function of insurance is to insure,” the judgment here should be affirmed.
A profit-oriented insurance enterprise.