Liberty Mutual Insurance Company v. Gwin

Decision Date27 December 1966
Docket NumberNo. 22910.,22910.
Citation370 F.2d 297
PartiesLIBERTY MUTUAL INSURANCE COMPANY, Appellant, v. Walter Gene GWIN, Barto L. Brown, Jr., and Earl W. Brown, d/b/a Mobile Supply Company, Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Thomas E. Twitty, Jr., Inge, Twitty, Duffy & Prince, Mobile, Ala., for appellant.

W. Borden Strickland, Mobile, Ala., for appellees.

Before TUTTLE, Chief Judge, and THORNBERRY and GOLDBERG, Circuit Judges.

THORNBERRY, Circuit Judge:

Appellee, Mobile Supply Company, instituted this action for declaratory judgment seeking a determination of coverage as the named insured under a comprehensive general liability policy issued by appellant, Liberty Mutual Insurance Company. The trial court entered judgment in favor of Mobile Supply, ruling that under the facts of the case coverage was not excluded by the "Exclusion of Products and Completed Operations Hazards" endorsement contained in the policy. We conclude that the trial court erred in this determination for the reasons hereinafter developed.

The pertinent facts underlying this controversy are undisputed. Appellee is engaged in the business of selling heating and air conditioning equipment, including gaseous refrigerants used in servicing air conditioning and refrigeration equipment. Appellee does not manufacture the refrigerants it sells, but purchases the gases in pressurized cylinders of various sizes from concerns engaged in the business of manufacturing such refrigerants. As a matter of established practice, these manufacturers require distributors such as appellee to pay a deposit of $12 per cylinder, which is refundable when the empty cylinder is returned to the manufacturer. The distributors are not obligated, however, to return the cylinders, and in the event a cylinder is not returned the manufacturer simply retains the deposit. Similarly, the distributors, including appellee, require their customers to pay, in addition to the gas, a deposit of $12 per cylinder which is also refundable if and when the customer returns the empty cylinder. As in the case of the distributor, the customer is under no obligation to return the cylinders. It is standard practice in the trade for distributors to accept a return of empty cylinders and to refund the $12 deposits regardless of the source from which the customer acquired the cylinders and regardless of the manufacturer who produced them. Likewise, any distributor may return an empty cylinder in good condition to any manufacturer and receive the standard $12 deposit, even though the distributor may not deal in that particular line of refrigerants. The manufacturers then reuse those cylinders which are in good condition.

It is not unusual for one of appellee's customers to have need for an empty cylinder to be refilled by the customer at his own place of business, and in such case, the customer can obtain an empty cylinder from appellee simply by paying the standard $12 deposit. Thus, regardless whether the cylinder is empty or full, the transaction is handled on the same refundable deposit basis — the customer may either retain the cylinder or return it for the deposit.

In June 1960, Mobile Gas Service Corporation, one of appellee's customers, paid the standard $12 deposit and procured an emply cylinder from appellee, after which time appellee had no further connection with the cylinder. After acquiring the empty cylinder, Mobile Gas Service Corporation changed the valve and filled the cylinder with ammonia gas for use in servicing refrigeration equipment. The cylinder, as modified, was used by Mobile Gas for approximately two years, during which time it was filled and refilled by Mobile Gas numerous times. In July 1962, however, the cylinder exploded, apparently as a result of exposure to the heat of the sun, injuring one Leon Phillips, an employee of Mobile Gas. In July 1963, Phillips instituted in the Alabama state courts a personal injury action against appellee, E. I. Dupont de Nemours & Company, and Kennic Chemical Company, the latter two defendants being the manufacturers and distributors of the cylinder. In November 1963, appellee commenced a suit in the Alabama state court seeking a declaratory judgment that appellant Liberty Mutual had a duty to defend and indemnify appellee against Phillips' claim and any judgment that might be obtained against appellee. The controversy was subsequently removed to the United States District Court for the Southern District of Alabama on the basis of diversity of citizenship.

The insurance policy in issue is styled "Comprehensive General Liability Policy" and contains the usual insuring agreements against bodily injury and property damage, various exclusions, declarations and conditions, and certain endorsements. Included among the endorsements is an "Exclusion of Products and Completed Operations Hazards," the interpretation of which represents the critical issue in this controversy. The endorsement provides in pertinent part as follows:

(c) Products Hazard — The term "products hazard" means goods or products manufactured, sold, handled or distributed by the named insured or by others trading under his name, if the injury, sickness, disease, death or destruction occurs after possession of such goods or products has been relinquished to others by the named insured or by others trading under his name and if such injury, sickness, disease, death or destruction occurs away from premises owned, rented or controlled by the named insured or on premises for which the classification stated in division 1 of Item 4 of the declarations excludes any part of the foregoing; provided, such goods or products shall be deemed to include any container thereof, other than a vehicle, but shall not include any vending machine or any property, other than such container, rented to or located for use of others but not sold.
* * * * * *
3. The policy does not apply to the products hazard * * * as defined herein.

It is undisputed that the injury was sustained away from appellee's premises, and the crucial inquiry thus becomes whether the cylinder in question constituted "goods or products manufactured, sold, handled or distributed" by appellee under the products hazard exclusion.

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2 cases
  • Southern Guaranty Ins. Co. v. Scott
    • United States
    • Alabama Supreme Court
    • August 31, 1972
    ...F.2d 181 (5th Cir. 1968); Loveman, Joseph & Loeb v. New Amsterdam Casualty Co., 233 Ala. 518, 173 So. 7 (1937); Liberty Mutual Insurance Co. v. Gwin, 370 F.2d 297 (5th Cir. 1966); and Inductotherm Corp. v. New Jersey Manufacturers Casualty Insurance Co., 83 N.J.Super. 464, 200 A.2d 358 By t......
  • Transamerica Insurance Co. v. J. Hungerford Smith Co., 20502
    • United States
    • U.S. Court of Appeals — Sixth Circuit
    • January 27, 1971
    ...was material. In our opinion, the District Court was correct in granting summary judgment in favor of Smith. Liberty Mutual Ins. Co. v. Gwin, 370 F.2d 297 (5th Cir. 1966), cert. denied 388 U.S. 910, 87 S.Ct. 2110, 18 L.Ed.2d The judgment is affirmed in each appeal. Costs are assessed agains......

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