Elston-Richards Storage Co. v. Indemnity Insurance Co.

• Decision Date: 02 February 1960
• Docket Number: Civ. A. No. 3323.
• Parties: ELSTON-RICHARDS STORAGE COMPANY, a Michigan corporation, Plaintiff, v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, a Pennsylvania corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

194 F. Supp. 673

ELSTON-RICHARDS STORAGE COMPANY, a Michigan corporation, Plaintiff, v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, a Pennsylvania corporation, Defendant.

Civ. A. No. 3323.

United States District Court W. D. Michigan, S. D.

February 2, 1960.

Schmidt, Smith, Howlett & Halliday, Laurence D. Smith, Kingston, Porter & Day, John R. Porter, Grand Rapids, Mich., for plaintiff.

Alexander, Cholette, Buchanan, Perkins & Conklin, Grand Rapids, Mich., William D. Buchanan, Edward D. Wells, Grand Rapids, Mich., for defendant.

STARR, Chief Judge.

Plaintiff, a Michigan corporation having its principal place of business in Grand Rapids, Michigan, is engaged in the warehousing business and the storage of goods as a bailee for hire. Defendant insurance company is a Pennsylvania corporation authorized to do business and issue insurance policies in Michigan. Plaintiff brings this action in pursuance of 28 U.S.C. § 2201 for a declaratory judgment determining its rights under a certain warehouseman's liability policy issued to it by defendant company. The action was tried to the court without a jury.

To present the issues before the court for determination, it is necessary to set forth briefly the factual situation out of which the action arises. On June 23, 1956, in consideration of the premium paid, the defendant issued its warehouseman's liability policy, Form B, No. 9 BWL 8331, in the principal amount of $250,000, thereby insuring plaintiff, subject to the terms of the policy, against legal liability as a warehouseman for the period of three years. The policy provided in part as follows:

"Indemnity Insurance Company of North America * * * agrees with the insured: * * *

"I. Liability for Property

"To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed by law upon him as a bailee, for loss or destruction of or damage to property of others contained in the premises;

"II. Investigation, Defense, Supplementary Payments

"(a) To investigate all claims for such loss, destruction or damage of which the company shall have notice as required herein;

"(b) To defend in the insured's name and behalf, any suits or other proceedings which may be brought against the insured to enforce such claims;

"(c) To pay, irrespective of the company's limit of liability stated in Item 4 of the declarations: the expense of adjusting all such claims or suits which may be settled at the option of the company without litigation; all expenses of litigation and all costs taxed against the insured in proceedings defended by the company. * * *

"Conditions * * *

"2. Limits of Liability. The company's aggregate liability for loss or damage arising out of all occurrences or events in any one policy year is limited to the amount specified in Item 4 of the declarations. The company shall not be liable hereunder for any claim or claims arising from any one event or occurrence unless the insured's total liability therefor, when determined, shall exceed the deductible amount stated in Item 4 of the declarations, in which event such stated amount shall be deducted from the insured's total liability, and the company shall be liable only in excess of such stated amount. * * *

"Declarations * * *

"Item 4. The limit of the company's liability under Insuring Agreement I shall be: * * * $250,000 subject to a deductible of $2,500."

The only one of plaintiff's several warehousing facilities involved in this action is its Freeman avenue warehouse in Grand Rapids, which was opened and began receiving goods for storage in May, 1956. Under an arrangement between them, the Whirlpool Corporation, a manufacturer, shipped from its factories washer and dryer and combination washer-and-dryer appliances, each packed in a heavy cardboard carton, to plaintiff's Freeman avenue warehouse for storage and for later reshipment by plaintiff upon the order of Whirlpool. These appliances were shipped by Whirlpool in railroad freight cars, each carload consisting of from 90 to 96 appliance units. During the period from about November 1, 1956, to July 19, 1957, Whirlpool shipped 636 carloads of appliances to plaintiff's warehouse for storage, and during that time, upon orders from Whirlpool, plaintiff shipped out 508 carloads, so that during that time plaintiff handled over 50,000 Whirlpool appliances, some of which were handled when received and again handled when shipped out. When a carload of cartoned appliances was received at plaintiff's warehouse, one of its employees would enter the freight car and remove the cartons with a hand truck and place them near the receiving door of the warehouse. Another employee, using a motorized lift truck with a carton-clamp assembly, would then pick up the cartons and remove them to designated areas in the warehouse and stack them in rows, usually four cartons high. When plaintiff received instructions from Whirlpool to ship out stored appliances, a motorized lift truck would be used to pick up the cartoned appliances from the stacks in the warehouse and place them near the warehouse door. The cartons were then loaded into railroad cars by use of hand trucks. In picking up and moving the cartoned appliances, the padded arms of the lift-truck clamp assembly might be pressed either against the sides or against the front and back of the appliance inside the carton. It appears that in lifting, lowering, and carrying the appliances with the lift truck, the plaintiff usually moved two cartons at a time, one on top of the other, with the clamps gripping the lower carton.

During the period of time involved in this action the plaintiff used two motorized lift trucks with carton-clamp assemblies at its Freeman avenue warehouse. One of these trucks, herein referred to as the "old truck," had been used by the Whirlpool Corporation and was purchased by plaintiff from Whirlpool. The other truck, herein referred to as the "new truck," was purchased by plaintiff from the Morrison Industrial Equipment Company in May, 1956. The carton-clamp assembly on each of these trucks was attached to the front of the truck and consisted of two hydraulically-operated arms equipped with a pad, sometimes called a paddle, on each arm. By proper manipulation the arms on the clamp assembly could be moved together and thus caused to exert horizontal pressure on a carton placed between the open arms. When sufficient pressure was exerted by the padded arms against the carton to hold it firmly, the arms could be moved vertically to raise the carton so that it could be carried and stacked. In the same manner a carton could be removed from a stack, lowered to floor level, and carried.

Both arms of the carton-clamp assembly on the so-called old truck were operated and controlled by a single lever, and by moving the lever the arms of the carton clamp could be moved together or apart simultaneously. The amount of squeeze pressure to be exerted on the cartons by the padded arms of the clamp assembly on the old truck was controlled by a manually-operated pressure-relief valve, and the adjustment of pressure to be applied by both arms was made by turning a screw-type valve. The manager of plaintiff's warehouse had at various times adjusted the pressure-relief valve on the old truck to increase or decrease the squeeze pressure that was to be exerted by the arms of the clamp assembly on the cartons.

When plaintiff opened its Freeman avenue warehouse in May, 1956, it purchased the new lift truck with a carton-clamp assembly from the Morrison Industrial Equipment Company, and its purchase order indicates that the arms of the clamp assembly were to be equipped with pads 21 inches wide and 54 inches high and that the arms were to be independently operated. When this new truck was delivered, it did not have what is referred to as the new carton-clamp assembly, and a so-called "loaner" clamp assembly was installed on the truck. This loaner assembly was similar to the carton-clamp assembly on the old truck, in that one lever operated both arms of the clamp assembly. In October, 1956, the loaner clamp assembly on the new truck was removed and replaced by the seller with a new clamp assembly, the pads on this new assembly having square corners and being 21 inches wide and 54 inches high. It may be noted that the pads on the arms of the old truck were 27 inches wide and 54 inches high and had rounded corners. The operation of the arms on the new clamp assembly was controlled by two levers, which operated independently, each lever operating one arm. A main relief valve on the new clamp assembly fixed the maximum pressure that could be exerted by the arms at 1,200 pounds per square inch, and there was one manually-operated relief valve connected with one arm, which could be adjusted so as to apply any desired pressure below 1,200 pounds. The testimony indicates that this manually-operated relief valve was never adjusted by either the seller of the new truck or by the plaintiff, and it therefore appears that the new clamp assembly on the new truck was operated at the maximum pressure at all times prior to July 19, 1957. The testimony shows that when the levers which operated the arms on the new clamp assembly on the new truck were operated and moved simultaneously, the pressure-relief valve connected with one arm would operate automatically on both arms and thus control and equalize the squeeze pressure exerted by the pads on each arm. However, if the lever that operated the arm with the connected pressure-relief valve was moved and then returned to a neutral position, and the lever that operated the other arm was then moved, the pressure-relief valve on the controlled arm did not function, but the maximum pressure would be applied by the uncontrolled arm. In other words, if both levers were operated simultaneously, the pressure-relief valve connected with one arm would automatically control and equalize the pressure...