Murray Oil Products, Inc. v. Royal Exchange Assur. Co.
| Decision Date | 22 February 1968 |
| Citation | 21 N.Y.2d 440,288 N.Y.S.2d 618 |
| Parties | , 235 N.E.2d 762 MURRAY OIL PRODUCTS, INC., Appellant, v. ROYAL EXCHANGE ASSURANCE CO., Respondent. |
| Court | New York Court of Appeals Court of Appeals |
Copal Mintz, New York City, for appellant.
Abraham J. Asche, New York City, and Steven E. Gross, New York City, for respondent.
On November 20, 1963, the plaintiff delivered 300,600 pounds of vegetable oil to the Harbor Tank Storage Co. for storage in its tanks. The following month the storage company became insolvent and was found to have insufficient oil in its possession to return all the oil the plaintiff had deposited. As a result, the plaintiff lost 70,000 pounds of oil, the value of which it now seeks to recover from Harbor Tank's insurance carrier.
An insurance policy had been issued by the defendant to Harbor Tank on December 31, 1961, and renewed the following year. It covered the storage company against 'physical loss, physical damage or expense resulting and/or arising from, through, or in connection with the Assured's legal liability * * * in respect to oils and similar commodities the property of others under their control ald/or care, custody or possession and for which they may be legally liable in any way.' (Emphasis added.) The plaintiff is not named as as insured in the policy but brings this suit under a clause providing for direct payment to any claimants in the event of the storage company's insolvency.
The oil with which we are concerned was, of course, a fungible commodity and the deposits of the various bailors, including the plaintiff, were not kept segregated but were commingled in the several large tanks of Harbor Tank. The entire amount of oil was treated as a community pool, from which all of the depositors would withdraw discrete amounts as they desired but in which it could not be determined whose oil was in any tank at a particular time. The only physical measurement of the amount of oil in this pool was by 'gauging'--measuring the depth of the oil in the tanks and then by multiplying by various mathematical factors. Over a 10-year period, this method indicated a consistent stortage of 90,000 to 110,000 pounds. At the time of the insolvency, the oil was actually weighed, and a shortage of 85,000 pounds was discovered. No evidence was presented to explain this shortage.
The Supreme Court, New York County, entered judgment for $24,000 for the plaintiff upon a jury verdict. On appeal, the Appellate Division reversed, one Judge dissenting, and dismissed the complaint. The court held that the insurance policy covered only a physical loss of the oil by the storage company and that the plaintiff had failed to show that such a loss had occurred within the policy period.
The plaintiff argues, as did the dissenting Justice at the Appellate Division, that physical delivery of the oil in question was made during the period in which the policy was in effect and that the failure to return the oil on demand was a 'physical loss' within the meaning of the policy. The defendant argues on the other hand that this policy was, in essence, a casualty policy, that the term 'physical loss' refers to such loss as destruction by fire and that the plaintiff has failed to establish that a loss of this kind took place here.
Essential, of course, to the construction of the phrase in question is an examination of the entire contract to determine its purpose and effect and the apparent intent of the parties (Kurek v. Port Chester Housing Auth., 18 N.Y.2d 450, 276 N.Y.S.2d 612, 223 N.E.2d 25; Matter of Schmith's Estate, 19 N.Y.2d 398, 280 N.Y.S.2d 365, 227 N.E.2d 290; see, also, 13 Appleman, Insurance Law and Practice, § 7383). In making such an examination, we note first that the provision immediately following the clause in question excepts specifically from coverage some eight different contingencies under which the bailee would not have been liable to the bailor. None of these contingencies is alleged to or could reasonably have accounted for the loss in question. In addition, the contract, unlike an ordinary casualty policy, provides coverage if the bailee is induced by fraud to give the property of the bailor to a third party.
These clauses demonstrate that the primary purpose of the policy was to cover every possible contingency under which the insured would be liable to the bailor if it was not able to deliver the oil due to a physical loss of any kind. Under these circumstances we cannot say that the loss of the oil delivered by the bailor to the insured was not a physical loss within the meaning of the policy (cf. Employers Cas. Co. v. Holm, 393 S.W.2d 363, 367 (Texas...
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