Fireman's Fund Ins. Co. v. Service Transp. Co.

• Decision Date: 13 March 1979
• Docket Number: Civ. No. B-77-2003.
• Citation: 466 F. Supp. 934
• Parties: FIREMAN'S FUND INSURANCE COMPANY, Plaintiff, v. SERVICE TRANSPORTATION COMPANY, Defendant and Third-Party Plaintiff, v. PAUL ARNOLD ASSOCIATES, INC., Third-Party Defendant.
• Court: U.S. District Court — District of Maryland

466 F. Supp. 934

FIREMAN'S FUND INSURANCE COMPANY, Plaintiff, v. SERVICE TRANSPORTATION COMPANY, Defendant and Third-Party Plaintiff, v. PAUL ARNOLD ASSOCIATES, INC., Third-Party Defendant.

Civ. No. B-77-2003.

United States District Court, D. Maryland.

March 13, 1979.

William C. Stifler, III, and Niles, Barton & Wilmer, Baltimore, Md., for plaintiff.

Joshua R. Treem, and Weinberg & Green, Baltimore, Md., for defendant and third-party plaintiff.

Louis G. Close, Jr., and Whiteford, Taylor, Preston, Trimble & Johnston, Baltimore, Md., for third-party defendant.

MEMORANDUM AND ORDER

BLAIR, District Judge.

This action for declaratory judgment is presently before the court on cross motions for summary judgment. The parties have stipulated the facts and briefed the issue and there is no need for a hearing under Local Rule 6.

The facts are undisputed. Service Transportation Co., the defendant, is a New Jersey trucking company which operates a terminal at 252 South Kresson Street in Baltimore, Maryland. Service is insured by the plaintiff, Fireman's Fund Insurance Company.

On or about June 9, 1977, four Service Transportation trailers transported bags of Nicaraguan coffee from New York to the South Kresson Street terminal in Baltimore. The coffee was shipped "in bond"; that is, under seal, since it had not cleared customs in New York. While the coffee was being held in Baltimore, United States Customs Officials inspected it and determined that there was no duty owed. Inspectors from the FDA examined the coffee and found first that it was infested with insects and later that it was possibly of substandard quality, containing excessive amounts of dirt and grit. The FDA ordered the coffee to be held at the terminal until further notice. Service duly notified the owner, J. Aron & Co., Inc., a New Orleans firm, that the coffee was being held in Baltimore.

Some three weeks later, on June 29, 1977, before any action was taken by the FDA, the coffee was severely damaged by a fire at the terminal. Service Transportation promptly notified its insurer of the loss. The owner of the coffee, J. Aron & Co., Inc., brought an action against Service Transportation in this court. The insurance company has taken the position that its policy does not cover the damage to the coffee, and has brought this action for a determination to that effect.

The insurance policy in question 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 course of transit within the contiguous states of the United States. . .

Stipulation, Exhibit 2. The only issue is whether the coffee was "in the ordinary course of transit" at the time of the fire.

Since this is a diversity case, the threshold question is what state's law controls the interpretation of the contract. The policy is silent in this respect. Nevertheless, the contract was "accepted" by Service Transportation in New Jersey, and the parties do not contend that any law other than that of New Jersey should apply.¹ This court is satisfied that New Jersey law controls the interpretation of the disputed language in the insurance contract.

Fireman's Fund contends that when the coffee came to rest in Service's Baltimore terminal, it passed out of "the ordinary course of transit" as specified in the insurance policy. The insurer cites as authority Boonton Handbag Co., Inc. v. Home Insurance Company, 125 N.J.Super. 287, 310 A.2d 510 (App.Div. 1973), affirming a lower court determination that certain goods were not "in transit." In that case, an employee of the insured left the insured's plant, picked up a shipment of handbags in New York and returned to the insured's plant. He arrived too late to unload, so he left the truck locked on the premises overnight. The truck and its contents were stolen. The court adopted the principle that:

Property is considered in transit when it is moving from one location to another. This does not exclude temporary stops, incidental delays, or some deviation from the planned route of travel. citation omitted. However, when the property to be transported has reached its destination it is generally no longer considered in transit.

310 A.2d at 511, quoting Lariviere v. New Hampshire Fire Insurance Co., 105 N.H. 73, 193 A.2d 13, 15 (Sup.Ct.1963).

Service Transportation contends that, even under the formulation adopted in Boonton Handbag, the coffee was only temporarily delayed in Baltimore by reason of the FDA's order: it had not reached the consignee, so it was still "in transit." The insured invites the court's attention to the New Jersey case of Deleson Steel Company, Inc. v. Hartford Insurance Group, 148 N.J. Super. 336, 372 A.2d 663 (1977), a "messenger" case, in which the issue was whether a payroll in the custody of the paymaster was "being conveyed" at the time of its theft. In that case, the plaintiff's job superintendent transported the construction company's payroll from the company office to a job site. He arrived some 45 minutes before the employees were to report for work, placed the payroll under the driver's seat of the company van, locked the van and proceeded to engage in some minor supervisory functions. Some 30 to 35 minutes later, he discovered that the van had been broken into and the payroll abstracted. By analogy to "frolic and detour" cases, the court considered the context in which the payroll was being transported and found that the payroll was being "conveyed" and that, accordingly, the theft was covered by the insurance policy. That case, limited as it expressly is to its own facts, throws little illumination upon the instant case. It in no way discredits the "destination" test announced in Boonton Handbag. Similarly, the other New Jersey cases cited by the insured, Den Gre Plastics Co., Inc. v. Travelers Indemnity Co., 107 N.J.Super. 535, 259 A.2d 485 (1969), and J. G. Ries & Sons, Inc. v. Automobile Insurance Co. of Hartford, Conn., 121 N.J.L. 493, 3 A.2d 610 (App. 1939), do not elucidate the applicable test. In Ries, the court found that a loaded truck which had stopped overnight en route was "carrying" goods and therefore covered. In Den Gre Plastics, the issue was whether "transit" had begun when a truck was loaded and moved ten feet. All these cases show is that which has been obvious from the start: that the determination whether property is "in transit" is a common-sense issue, one dependent on the peculiar facts and circumstances of the individual case.

It appears to be the position of the defendant that since it was undisputedly in custody and control of the coffee shipment, and since it is a common carrier, then the goods should be found to be in some manner of "constructive transit." This court finds no support for such a construction in New Jersey law. Under the very terms of the policy at issue, "custody" and "transit" are two distinct issues, each of which must affirmatively be shown in order to establish coverage.

"Custody" being undisputed, "transit" alone is at issue here. Under the formulation of Boonton Handbag, supra, 310 A.2d at 511, goods continue in transit notwithstanding temporary delays until they reach their destination. The critical question in this case is whether the South Kresson Street terminal in Baltimore was the "destination" of the coffee. This court...