Borden, Inc. v. Howard Trucking Co., Inc.
| Decision Date | 17 October 1983 |
| Docket Number | Nos. 83-C-0203,83-C-0238,s. 83-C-0203 |
| Parties | BORDEN, INC. v. HOWARD TRUCKING COMPANY, INC. and Northwest Insurance Company. |
| Court | Louisiana Supreme Court |
Rehearing Denied Sept. 14, 1984.
Lawrence A. Durant, Durant, Pierce & Malone, Baton Rouge, for applicant in No. 83-C-0203 and respondents in No. 83-C-0238.
Leon E. Roy, Jr., Hugh E. McNeely, Roy, Forrest & Lopresto, New Iberia, for respondents in No. 83-C-0203 and applicant in No. 83-C-0238.
Eugene R. Groves, Taylor, Porter, Brooks & Phillips, Baton Rouge, P. Albert Bienvenu, Jr., Bienvenu, Foster, Ryan & O'Bannon, New Orleans, for respondents in both cases.
Borden, Inc. manufactures methanol at its plant in Geismar, Louisiana on a twenty-four hours a day, seven days a week basis. Rather than halting production every time a minor problem develops with the equipment used in this process, these problems are noted and corrected during a "turn-around." A "turn-around" is a scheduled period for routine repairs and maintenance. Borden scheduled a "turn-around" for its methanol "B" plant to begin on October 26, 1976 and to end on October 30, 1976. As was its customary procedure, Borden contacted its repair contractor, Dresser Industries, Inc., and planned the routine maintenance of two compressors used in the manufacture of methanol. Dresser arranged with Howard Trucking Company, Inc. for the carriage of one of the compressors from Borden's plant to Dresser's repair and maintenance facility in Harahan, Louisiana.
While enroute to the Dresser facility, the Howard truck was involved in a one vehicle accident and overturned, killing the driver. Borden's compressor was damaged when it was thrown from the bed of the truck. In addition, the resumption of production was delayed at the Borden plant because of the additional repairs to the compressor necessitated by the accident.
On August 2, 1977 Borden filed suit against Howard and Northwest Insurance Company, Howard's comprehensive automobile general and contractual liability insurer, seeking recovery for the cost of repairing the compressor and for the loss of production of methanol due to the delay in getting the compressor back into operation. Howard's cargo insurer, Antoy William Ames, an Underwriter at Lloyd's, London, was named as an additional defendant and Dresser was added as a party plaintiff on April 20, 1978.
The trial court rendered judgment against Howard and Ames 1 in the sum of $174,203.63, and dismissed all claims against Northwest. 2 The court of appeal reversed, finding coverage under Northwest's policy for the loss of production and under Ames' policy for the physical damage to the compressor. Borden, Inc. v. Howard Trucking Co., Inc., 425 So.2d 893 (La.App.1983).
At the outset we agree with the finding of the lower courts that Howard was at fault for the damage suffered by Borden based upon the negligence of Howard's employee. The Howard vehicle drove off the traveled roadway and turned over in a one vehicle accident.
When a party has been damaged by the conduct of another arising out of a contractual relationship, he may choose to recover under either tort or contract. Federal Insurance Co. v. Insurance Company of North America, 262 La. 509, 263 So.2d 871 (1972). Here Borden had contracted with Howard, through its agent Dresser, to transport the compressor from Geismar to Harahan. The damage to Borden's property arose out of the performance of this contract. The lower courts found that Borden's action lay in tort, and that Borden was entitled to recover all foreseeable damages flowing from the accident. We affirm this finding.
Borden argues that it is entitled to two separate items of property damage stemming from the accident. The first is for physical damage to the compressor itself. The second claim is for the loss of production resulting from the damage to the compressor. Borden maintains that its right to use its compressor in its plant, free from the interference of others, was in itself property, independent and separate from the compressor itself. Thus, Borden asserts that the loss of production due to the damaged compressor was itself an additional item of property damage.
The lower courts agreed that Borden was entitled to recover all of its damages, both for the compressor and for the loss of production. The primary issue in dispute is whether Howard or its insurance companies are to pay the damages to Borden.
Northwest, Howard's liability insurer, contends that it is not liable to Borden. The insurance company argues that there is no coverage for either type of property damage under the policy issued to Howard because of the exclusions in its policy. Northwest had issued a standard multifaceted liability policy to Howard. The policy contains three basic types of coverage: (a) comprehensive automobile liability insurance; (b) comprehensive general liability insurance; and (c) contractual liability insurance.
COVERAGE D--PROPERTY DAMAGE LIABILITY
The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of
C. bodily injury or
D. property damage
to which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use, including loading and unloading, of any automobile, ...
* * *
Exclusions
This insurance does not apply:
* * *
(d) to property damage to
(1) property owned or being transported by the Insured, or
(2) property rented to or in the care, custody or control of the Insured, or as to which the Insured is for any purpose exercising physical control, other than property damage to a residence or private garage by a private passenger automobile covered by this insurance.
..."
Under the comprehensive general liability insurance coverage it was provided that:
"COVERAGE A--BODILY INJURY LIABILITY
COVERAGE B--PROPERTY DAMAGE LIABILITY
The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of
A. bodily injury or
B. property damage
to which this insurance applies, caused by an occurrence ...
* * *
Exclusions
This insurance does not apply:
* * *
(k) to property damage to
* * *
(3) property in the care, custody or control of the Insured or as to which the Insured is for any purpose exercising physical control;
* * *
(m) to loss of use of tangible property which has not been physically injured or destroyed resulting from
(1) a delay in or lack of performance by or on behalf of the Named Insured of any contract or agreement, or
(2) the failure of the Named Insured's products or work performed by or on behalf of the Named Insured to meet the level of performance, quality, fitness or durability warranted or represented by the Named Insured;
but this exclusion does not apply to loss of use of other tangible property resulting from the sudden and accidental physical injury to or destruction of the Named Insured's products or work performed by or on behalf of the Named Insured after such products or work have been put to use by any person or organization other than an Insured;
..."
Finally, under the contractual liability insurance coverage, it was provided that:
"COVERAGE YY--CONTRACTUAL BODILY INJURY LIABILITY
COVERAGE ZZ--CONTRACTUAL PROPERTY DAMAGE LIABILITY
The Company will pay on behalf of the Insured all sums which the Insured, by reason of contractual liability assumed by him under any written contract relating to the business of the Named Insured as stated in the declarations, shall become legally obligated to pay as damages because of
bodily injury or
property damage to which this insurance applies, caused by an occurrence, ...
* * *
Exclusions
This insurance does not apply:
* * *
(g) to property damage to
(3) property in the care, custody or control of the Insured or as to which the Insured is for any purpose exercising physical control;
* * *
(i) to loss of use of tangible property which has not been physically injured or destroyed resulting from
(1) a delay in or lack of performance by or on behalf of the Named Insured of any contract or agreement, or
(2) the failure of the Named Insured's products or work performed by or on behalf of the Named Insured to meet the level of performance, quality, fitness or durability warranted or represented by the Named Insured;
but this exclusion does not apply to loss of use of other tangible property resulting from the sudden and accidental physical injury to or destruction of the Named Insured's products or work performed by or on behalf of the Named Insured after such products or work have been put to use by any person or organization other than an Insured;
..."
Howard does not argue that the above coverages extended to the actual physical damage to the compressor. That damage was clearly excluded under the Northwest policy for it was incurred while the property was "being transported" by Howard, and while the compressor was under the "care, custody or control" of Howard.
Howard claims that the physical damage to the compressor was covered under its cargo policy with Ames. Antoy Williams Ames had issued a policy of insurance to Howard covering damage to cargo which was in the custody or control of the insured. This policy specifically did not cover loss of use, loss resulting from delay in production or any other consequential or remote loss. The Ames Motor Cargo Liability Policy provides as follows:
"This policy covers the liability of the insured for loss or damage to lawful goods and merchandise while in the custody or control of the insured (and while in the custody of connecting carriers) in the ordinary...
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