Home Ins. Co. v. Aetna Cas. & Sur. Co.
| Decision Date | 13 January 1976 |
| Docket Number | Nos. 319,320,D,s. 319 |
| Citation | 528 F.2d 1388 |
| Parties | The HOME INSURANCE COMPANY, Plaintiff-Appellee, v. The AETNA CASUALTY AND SURETY COMPANY and Diamond Shamrock Corporation, Defendants-Appellants. ockets 75--7357, 75--7359. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert A. Dwyer, New York City (J. Robert Morris, New York City, of counsel), for appellant Aetna.
Horace P. Moulton, New York City (P. Jay Flocken, Thomas E. Moseley, Cadwalader, Wickersham & Taft, New York City, of counsel), for appellant Diamond Shamrock.
Philip D. Pakula, New York City (Townley, Updike, Carter & Rodgers, New York City, of counsel), for plaintiff-appellee.
Before KAUFMAN, Chief Judge, and SMITH and MESKILL, Circuit Judges.
Appellee, the Home Insurance Company ('Home'), sought a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202 to determine the extent of its liability to indemnify its insured, appellant Diamond Shamrock Corporation ('Diamond'). Jurisdiction was based on diversity of citizenship. Agreeing that no genuine issue of material fact existed, both sides moved for summary judgment. The district court granted plaintiff's motion, ruling that the interpretation of a contract was a question of law for the court and that extrinsic evidence offered by the defendants as to the contractual intent of the parties and the custom of the insurance industry was to be excluded from consideration. We reverse the granting of summary judgment in this case.
The facts leading up to the insurance claim are not in dispute. Diamond produces superconcentrated Vitamin D3 resin at its plant in New Jersey. The resin is melted to form a blend, some of which is sold in that form, some of which is mixed in corn oil and sold, and some of which is mixed with corn oil and shipped to Diamond's plants in Kentucky, Arkansas, and California, for the production of dry Vitamin D3 concentrates. As a result of production errors made at the New Jersey plant, two lots of inactive superconcentrated Vitamin D3 resin were produced, mixed with corn oil and antioxidants, and shipped to Diamond's Kentucky plant where they were sprayed onto corn cob fractions to make four lots of Nopdex '200,' a livestock food supplement. Diamond sold the four lots to Central Soya Corporation ('Central Soya') which used them in making chicken feed. Central Soya sold the feed to numerous chicken farmers who ultimately suffered damages when their poultry's ingestion of the defective feed resulted in various afflictions, some resulting in death. Diamond concedes its liability to Central Soya for damages paid to the farmers.
Diamond was insured during this period by both appellant Aetna Casualty and Surety Company ('Aetna') and Home. The Aetna 'Underlying Policy' insured against liability for damage to the property of others up to $250,000 per occurrence, subject to a deductible of $100,000 per occurrence. The number of occurrences is dependent on two provisions in the policy. The first is the definition of 'occurrence': "Occurrence' means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.' Endorsement $33 to the policy, known as a 'batch clause,' provided in part:
'* * * as respects products liability for * * * property damage coverage:
'All such damage arising out of one lot of goods or products prepared or acquired by the named insured or by another trading under his name shall be considered as arising out of one occurrence.'
The Home 'Excess Policy' insured Diamond for liability for property damage in excess of that covered by the Aetna Underlying Policy, up to $3,000,000 per occurrence; 'occurrence' was defined as in the Aetna policy.
The parties to this action disagree over the number of occurrences which arose out of these undisputed events. Home contends that there were four occurrences, one for each of the...
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