Inductotherm Corp. v. New Jersey Mfrs. Cas. Ins. Co., L--18456

• Decision Date: 01 May 1964
• Docket Number: No. L--18456,L--18456
• Citation: 200 A.2d 358,83 N.J.Super. 464
• Parties: INDUCTOTHERM CORPORATION, a Pennsylvania corporation, Plaintiff, v. NEW JERSEY MANUFACTURERS CASUALTY INSURANCE COMPANY, Defendant.
• Court: New Jersey Superior Court

Page 464

83 N.J.Super. 464

200 A.2d 358

INDUCTOTHERM CORPORATION, a Pennsylvania corporation, Plaintiff, v. NEW JERSEY MANUFACTURERS CASUALTY INSURANCE COMPANY, Defendant.

No. L--18456.

Superior Court of New Jersey, Law Division.

May 1, 1964.

Kenneth J. Dawes, Trenton, for plaintiff (Dawes & Dawes, Trenton, attorneys).

Theodore W. Geiser, Newark, for defendant (Pindar, McElroy, Connell & Foley, Newark, attorneys).

BARLOW, J.C.C. (temporarily assigned).

In this action, tried by the court sitting without a jury, and in which the essential facts were not disputed, plaintiff Inductotherm Corporation seeks reimbursement for monies paid by it to satisfy judgments entered against it in the State of Michigan, along with compensation for expenditures made by it in connection with defending the suits which resulted in such judgments, and counsel fees and expenses arising out of the instant case, alleging that a comprehensive public liability policy issued to it by defendant insured plaintiff against the accidents which formed the basis of the judgments entered against it and, further, obligated defendant to undertake the defense of the civil actions which produced the judgments.

Defendant declined to defend plaintiff against the claims originally asserted, or to pay the resultant judgments, on the ground that the policy in question specifically excluded coverage of the risk from which plaintiff's liability resulted.

On July 13, 1958 defendant issued to plaintiff a comprehensive public liability policy in which it agreed as follows:

'To pay on behalf of the insured, all sums which the insured shall become legally obliged to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom sustained by any person and caused by accident.'

With respect to the obligation to defend suits brought against the insured, the policy further provided:

'With respect to such insurance as is afforded by this policy, the company shall: (a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; * * *.'

The policy also contained an exclusion clause, as follows:

'It is agreed that the policy does not apply

1. to the products hazard as defined in the policy; * * *.'

The term 'products hazard' is defined in the Policy as:

'(1) goods or products manufactured, handled, or distributed by the named insured * * * if the accident occurs after possession of such goods or products has been relinquished to others by the named insured * * * and if such accident occurs away from the premises owned, rented or controlled by the named insured * * *'.

(2) operations, if the accident occurs after such operations have been completed or abandoned and occurs away from premises owned, rented or controlled by the named insured; provided, operations shall not be deemed incomplete because improperly or defectively performed or because further operations may be required pursuant to an agreement; * * *.'

Thereafter, and during the period in which the policy was in effect, plaintiff leased an induction melting unit manufactured by it to Superior Kendrick Bearings, Inc., a Michigan corporation (hereinafter referred to as 'Kendrick'), together with a number of ceramic crucibles to be used in conjunction with the induction melting unit.

On October 22 and 23, 1958 four of Kendrick's employees sustained injuries when certain of the crucibles supplied by plaintiff suffered bottom failures, splattering molten bronze on the floor of Kendrick's foundry, with the resultant injuries to its employees.

On April 2, 1959 plaintiff notified defendant that it had been advised that the workmen's compensation carrier for Kendrick's employees had announced its intention to collect its costs and expenses, and that the injured employees had retained counsel with a view toward instituting civil actions against plaintiff for damages by reason of the injuries so sustained. Following receipt of notice of such claims, on May 5, 1959 defendant notified plaintiff that it had completed its investigation of the claims, and that in its opinion the claims concerned only 'product's liability,' for which claims its comprehensive liability policy afforded no coverage. Again, on May 7, 1959 plaintiff wrote to defendant conceding that even though the 'product's liability' was not covered by the policy, it was concerned with an allegation contained in the complaint alleging negligence on the part of plaintiff by reason of its failure to 'advise the customer of a hazard.' Defendant replied on May 12, 1959, restating its original position, although in somewhat equivocal terms.

Thereafter, in August 1959 four suits were instituted in the State of Michigan against plaintiff. The pleadings were immediately forwarded to defendant with the request that it defend such actions.

On August 26, 1959 defendant acknowledged receipt of the suits forwarded, but advised plaintiff of its determination not to undertake the defense. As a result of defendant's disclaimer, plaintiff was required to retain attorneys in Michigan to defend the cases.

The four complaints filed against plaintiff herein were identical, consisting of three counts each, and charging the plaintiff here, Inductotherm Corporation, with negligence, setting forth in detail the acts or failures to act alleged to have constituted the negligence complained of.

During the pendency of the suits institured in Michigan, plaintiff once again requested defendant to reconsider its position and undertake the defense of the cases. On February 16, 1960 defendant again declined to do so, advising plaintiff promptly, albeit cryptically, that 'our opinion is unchanged and with regret we must await the outcome of this case before doing so.'

The cases were consolidated and tried in Michigan, without a jury, in January 1963, and as a result the Circuit Court of Wayne County, Michigan, entered verdicts against Inductotherm Corporation in favor of the four plaintiffs, totalling $14,700, and a verdict for the workmen's compensation carrier, the Michigan Mutual Liability Company, in the sum of $2,391.76.

The court filed a written opinion which, after reciting the facts, included the following language:

'* * * It is the opinion of this court that the plaintiffs have proved by a preponderance of the evidence that the defendant was negligent, that such negligence was the proximate cause of the injury to the plaintiffs and that the defendant should be held liable for the injuries to the plaintiffs.

This rule is best stated in Comstock vs. General Motors Corporation, 358 Mich. 163 on Page 177 (99 N.W.2d 627, 78 A.L.R.2d 449) wherein Gerkin vs. Brown and Sehler Company (177 Mich. 45, 143 N.W. 48, 48 L.R.A., N.S., 224) is quoted, and especially the last paragraph on said page which states: 'If such duty to warn of a known danger exists at point of sale, we believe a like duty to give prompt warning exists when a latent defect which makes the product hazardous to life becomes known to the manufacturer shortly after the product has been put on the market. * * *'

On May 10, 1963 plaintiff paid the judgments, including costs, totalling $15,142, to the four employees of Kendrick; and on September 9, 1963 plaintiff also paid the sum of $2,391.76 to the Michigan Mutual Liability Company. In addition to satisfying the judgments as aforesaid, plaintiff was required to pay attorneys' fees to its Michigan counsel in the amount of $3,387.90, and claim additional expenses arising out of the defense of the case totalling $5,674.90, as well as other legal fees and expenses arising out of the instant case, in the amount of $5,000.

Here, plaintiff Inductotherm Corporaion insists that the Michigan complaint alleged negligence on its part outside of the 'product' involved; urging, in substance, that the negligence for which it was held to account was not negligence directly related to the 'product' itself and therefore within the exclusionary language, but, rather--as expressed in the Michigan court's opinion--negligence arising out of its failure to 'warn' Kendrick and its employees of an inherent defect in the 'product' or of a danger arising out of the use of the 'product,' and that, accordingly, defendant was obliged to undertake the defense of the suits and to satisfy any judgment arising therefrom.

Defendant contends, however, that the injuries suffered by the Michigan employees resulted from an accident squarely within the meaning of the exclusionary clause in its policy; that its policy does not provide coverage of the accident which resulted in the institution of the lawsuits in Michigan, and that, therefore, it properly declined to defend the suits or pay the judgments.

The specific allegations contained in the complaints filed in Michigan by Kendrick's employees were predicated upon the negligence of plaintiff and allege the following...