Domermuth Petroleum Equipment and Maintenance Corp. v. Herzog & Hopkins, Inc.

• Decision Date: 06 June 1985
• Citation: 490 N.Y.S.2d 54,111 A.D.2d 957
• Court: New York Supreme Court — Appellate Division
• Parties: DOMERMUTH PETROLEUM EQUIPMENT AND MAINTENANCE CORPORATION, Plaintiff, v. HERZOG & HOPKINS, INC., Defendant and Third-Party Plaintiff-Respondent; Lawrence Grant et al., Third-Party Defendants, and National Surety Corporation, Third-Party Defendant-Appellant.

Page 54

490 N.Y.S.2d 54

111 A.D.2d 957

DOMERMUTH PETROLEUM EQUIPMENT AND MAINTENANCE CORPORATION, Plaintiff, v. HERZOG & HOPKINS, INC., Defendant and Third-Party Plaintiff-Respondent Lawrence Grant et al., Third-Party Defendants and National Surety Corporation, Third-Party Defendant-Appellant.

Supreme Court, Appellate Division Third Department.

June 6, 1985.

James L. Pemberton, Schenectady, for third-party defendant-appellant.

Herzog, Nichols, Engstrom & Kaplovitz, P.C., Albany (Marilyn S. Raskin, Albany, of counsel), for defendant and third-party plaintiff-respondent.

Before MAIN, J.P., and CASEY, YESAWICH, LEVINE and HARVEY, JJ.

LEVINE, Justice.

Appeal from an order and judgment of the Supreme Court at Special Term, entered November 20, 1984 in Albany County, which, inter alia, granted third-party plaintiff's cross motion for summary judgment against third-party defendant National Surety Corporation.

On December 16, 1982, Herzog & Hopkins, Inc. delivered fuel oil to the residence of third-party defendants Lawrence and Ethlyn Grant. Later that day, the Grants informed Herzog & Hopkins that their fuel oil tank, which had recently been serviced by Herzog & Hopkins, had ruptured, discharging its contents into their basement. Herzog & Hopkins then contracted with Domermuth Petroleum Equipment and Maintenance Corporation to clean up the Grants' basement.

Herzog and Hopkins subsequently reported this incident to its insurer, National Surety Corporation, requesting payment of Domermuth's bill in the amount of $26,367.12. In reply, National Surety sent Herzog & Hopkins its check for $15,000, together with a document entitled a "Loan Receipt", stating that the sum was "a loan only" and that National Surety admitted no liability under Herzog & Hopkins' policy. It further stated that the "loan" would be repayable only if and to the extent that Herzog & Hopkins obtained payment from any third party, and it directed Herzog & Hopkins, at National Surety's expense, to sue any third party who might be liable for the loss. Herzog & Hopkins remitted the $15,000 to Domermuth. Domermuth then sued Herzog & Hopkins for the balance due of $11,367.12. When National Surety refused to defend Herzog & Hopkins, the latter commenced a third-party action against the Grants and National Surety. Special Term ultimately granted summary judgment in favor of Domermuth against Herzog & Hopkins and granted Herzog & Hopkins' cross motion for summary judgment against National Surety, holding that the oil cleanup cost was covered by Herzog & Hopkins' insurance policy.

On this appeal, National Surety argues that it was not liable for the cleanup expenses because the policy in question did not apply "to liability assumed by [Herzog & Hopkins] under any contract or agreement". It contends that Herzog & Hopkins voluntarily undertook to clean up the oil spill, thereby forming a contract for which National Surety was not liable. We cannot agree. Herzog & Hopkins' cleanup of the oil spill was not a voluntary act, but was instead an obligation imposed by statute.

Pursuant to Navigation Law § 181(1):

Any person who has discharged...