Keith Fulton & Sons, Inc. v. Continental Ins. Co. of City of NY, Civ. A. No. 65-349-G.

• Decision Date: 27 September 1967
• Docket Number: Civ. A. No. 65-349-G.
• Citation: 273 F. Supp. 486
• Court: U.S. District Court — District of Massachusetts
• Parties: KEITH FULTON & SONS, INC., Plaintiff, v. CONTINENTAL INSURANCE COMPANY OF the CITY OF NEW YORK, Defendant.

273 F. Supp. 486

KEITH FULTON & SONS, INC., Plaintiff, v. CONTINENTAL INSURANCE COMPANY OF the CITY OF NEW YORK, Defendant.

Civ. A. No. 65-349-G.

United States District Court D. Massachusetts.

September 27, 1967.

John O. Parker, Daniel B. Bickford, Ely, Bartlett, Brown & Proctor, Boston, Mass., for plaintiff.

Thomas D. Burns, Burns & Levinson, Boston, Mass., for defendant.

MEMORANDUM AND INTERLOCUTORY ORDER

GARRITY, District Judge.

Plaintiff, Keith Fulton & Sons, Inc. ("Fulton"), a trucking company, has sued the defendant, Continental Insurance Company of the City of New York ("Continental"), on a liability insurance policy issued by the defendant. The plaintiff allegedly became liable to one of its customers, Bethlehem Steel Corp. ("Bethlehem"), when part of a lathe belonging to Bethlehem fell from the plaintiff's truck and was damaged. Jurisdiction of this court has been invoked on the basis of diversity of citizenship, which has been established. At a pretrial the issues of liability and damages were severed and a trial without jury was held on issues of liability only.

The loss occurred while the plaintiff, on Monday, May 27, 1963, was hauling a large crate containing the lathe from the pier at East Boston to Bethlehem's plant at Quincy, Massachusetts. The machine had been manufactured for Bethlehem at Frankfurt, Germany, by Meuser & Company and was in transit under a uniform straight bill of lading to Bethlehem as consignee. On the previous Saturday, the plaintiff had loaded two large crates directly from the ship's gear onto the plaintiff's flatbed trailer. The smaller crate, 14' long, was loaded on the trailer first and pushed as far forward as possible. The larger, 23' 3" long, 5' 6" high and 7' 10" wide, was loaded to the rear. When pushed as far forward as it could go, 4' 3" of it extended beyond the end of the trailer, which was 33' long.¹ The crates were marked "machinery" but there was no marking or description as to the number of pieces in them nor were they marked "fragile." They were part of a total shipment of 10 crates whose average weight, according to the plaintiff's quotation for the job, was about 20 tons. The weight of the crate which overhung the end of the trailer was 18 tons. It was mounted on 6' × 6' and 6' × 8' skids. The tractor hauling the trailer left the pier at about 7:30 A. M. and drove along the Southeast Expressway at a speed of 10-15 miles per hour through congested traffic. The driver knew he was hauling machinery, though he didn't know the type. When the truck and trailer passed over an expansion joint which crossed the entire width of the roadway, creating a bump about 2" high, the bottom of the part of the crate overhanging the back of the trailer broke open and the tailstock of the lathe fell to the ground, a distance of about 3', and was damaged. The surface of the highway was also damaged such that an entire section of it was thereafter repaved and the bump eliminated.

The liability insurance policy in effect at the time of the accident had been issued to the plaintiff by the defendant in 1959 and was entitled "Motor Truck Merchandise Floater." It contained among others the following material terms and conditions:

1. To cover only the liability of the Assured as hereinafter provided in respect to all kinds of lawful goods and/or merchandise accepted by the Assured for transportation, consisting principally of reinforcing steel rods, miscellaneous building supplies and machinery.

2. While the goods and/or merchandise are in the custody and control of the Assured and are:

(a) In or on Motor Trucks, Trailers and/or Semi-Trailers operated by and/or for the Assured

(1) In transit between points and/or places within the Continental limits of the United States and/or Canada, and/or

(2) Temporarily located in garage or garages for a period of time not exceeding forty-eight (48) hours, plus intervening Sunday and Legal Holidays, and/or

(b) In or on Landing Sheds, Depots, Stations and/or Platforms during the course of transfer between the above specified conveyances but only while actually in the custody and control of the Assured.

THIS INSURANCE COVERS

The liability of the assured as a common carrier or private carrier or under bills of lading or shipping receipts, for loss of and/or damage to the goods and/or merchandise caused by:

a. Fire, including self-ignition and internal explosion of the conveyance and lightning.

b. Collision, i. e., accidental collision of the conveyance with any other vehicle or object.

c. Overturn and/or upset of the conveyance.

d. Collapse of Bridge or Culvert.

f. Flood, meaning rising navigable waters.

g. Perils of the seas, lakes, rivers, and/or inland waters while on ferries only.

h. Collision; but this extension of coverage shall not apply to reinforcing steel rods. (added by endorsement #1)

i. Tornado, cyclone, or windstorm, excluding loss or damage caused by hail, rain, sleet or snow, sand or other dust, whether driven by wind or not, unless there shall first be an actual damage to roof or walls of a terminal building or of a fully enclosed wood or metal truck or trailer body by the direct action of tornado, cyclone, or windstorm, and then only for such loss or damage as may be caused by hail, rain, sleet or snow, sand or other dust entering through openings in the roof or walls made by the direct action of tornado, cyclone or windstorm. (added by endorsement #1)

The above provisions of the policy govern the first aspect of the dispute between the parties, that is, whether the accident was a peril within the coverage of the policy. The position of the plaintiff has been that there was a collision between the machinery and the highway when the bottom broke away from the overhanging crate. The defendant has submitted that there was no collision within the meaning of peril "h" and that the policy covered collisions only while cargo was "in or on" the truck as provided by paragraph "2a."

The second basic dispute between the parties is whether the plaintiff, assuming arguendo that the loss was covered, became liable to Bethlehem and complied with provisions of the policy respecting settlement. The uniform bill of lading pursuant to which the plaintiff handled the shipment included in Section 1-b the usual exception to the carrier's liability, for damage caused by the act or default of the shipper or owner. The policy contained the following clauses:

7. It is the purpose of this insurance, subject to the foregoing provisions and to the conditions of the basic policy, to indemnify the Assured only to the amount which the Assured shall become liable to pay and shall pay in respect of the merchandise and/or goods.

8. The Assured shall not make any settlement of any claim, for which liability is assumed under the policy, without the written consent of this company. The Company, however, shall have the right to settle any claim or suit at its own cost at any time. The Assured, whenever requested, shall aid in securing information and evidence and the attendance of witnesses and shall cooperate with this Company (except in a pecuniary way) in all matters which this Company may deem necessary in the defense of any claim or suit or appeal from any judgment in respect of any loss for which this Company is liable under this policy.

On the day of the accident Bethlehem sent a freight claim report to the plaintiff reporting the accident and stating that the damaged machinery would be repaired. The next day the plaintiff sent a notice of loss to its insurance agent, who forwarded a copy to the Marine Office of America ("Marine Office"), which was the duly authorized agent of the defendant in all matters pertaining to this controversy. The Marine Office assigned an adjuster to investigate the claim. There was no further communication between the parties until January 1965, when the plaintiff received a detailed claim from Bethlehem for damages totalling $22,644. Bethlehem had returned the damaged part to Meuser & Co. at Frankfurt, Germany, for repairs. The Bethlehem claim also included transportation costs, customs charges, overseas telephone calls, labor expenses and other expenses connected with repairing the damage. On January 8, 1965 the plaintiff's insurance agent forwarded a copy of Bethlehem's claim to the Marine Office of America, which on January 12 replied that the claim was not within the scope of the policy terms and conditions. On February 5 and March 8 Bethlehem wrote to the plaintiff asking when its claim would be paid. On March 25 the Marine Office wrote to the plaintiff's insurance broker confirming a previous telephone conversation that coverage was not afforded under the policy because the damage had not been fortuitous but something that could have been anticipated with the method of packing. The plaintiff turned the matter over to its attorney, who wrote to the Marine Office on April 1 requesting payment of the claim. Its reply dated April 12 disclaimed liability. On April 29 plaintiff's attorney wrote again stating his opinion that the plaintiff was liable to Bethlehem for the full amount of the damage claimed; that the plaintiff was prepared to pay Bethlehem; that if the defendant had any objections he would appreciate receiving them before May 14; and that the plaintiff planned to institute suit against the defendant. On May 7 counsel for the Marine Office wrote in reply that they proposed to look into the matter and...