Slay Warehousing Co., Inc. v. Reliance Ins. Co., No. 72-1039.

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: GIBSON and LAY, Circuit , and DURFEE, United States Court of Claims
• Citation: 471 F.2d 1364
• Parties: SLAY WAREHOUSING COMPANY, INC., a corporation, Appellant, v. RELIANCE INSURANCE COMPANY, a corporation, Appellee.
• Docket Number: No. 72-1039.
• Decision Date: 18 January 1973

471 F.2d 1364 (1973)

SLAY WAREHOUSING COMPANY, INC., a corporation, Appellant,
v.
RELIANCE INSURANCE COMPANY, a corporation, Appellee.

No. 72-1039.

United States Court of Appeals, Eighth Circuit.

Submitted November 13, 1972.

Decided January 18, 1973.

Rehearing Denied February 8, 1973.

John J. Stewart, Clayton, Mo., for appellant.

Joseph L. Leritz, St. Louis, Mo., for appellee.

Before GIBSON and LAY, Circuit Judges, and DURFEE, United States Court of Claims Judge.

LAY, Circuit Judge.

This is an action brought by Slay Warehousing Company, Inc., a Missouri

471 F.2d 1365

corporation, against Reliance Insurance Company under an endorsement attached to an inland marine policy which provides warehousemen coverage against liability to third parties. The endorsement covers "loss and destruction of or damage to property of others contained in the premises." The primary issue is whether the insurer is liable for expenses incurred by Slay Warehousing in taking reasonable means to protect chemicals stored in its warehouse from damage due to exposure following the collapse of the warehouse wall. The chemicals were owned by the Monsanto Company. The insurer settled Monsanto's claim for approximately $38,000 but refused to pay its assured for its expenses in protecting the exposed chemicals from further damage.¹ The trial court held in favor of the insurer and Slay Warehousing has appealed. We reverse and remand for consideration of the damages incurred

The evidence shows that in July of 1964 the north wall and roof of the assured's warehouse, located in St. Louis, Missouri, collapsed exposing stored chemicals to elements of the weather. It is undisputed that if either of the two chemicals, Salt Cake and Santosite, both stored in dry bulk, became wet, they would have solidified and turned "hard as concrete."

Slay Warehousing immediately notified its liability carrier of the structural collapse and sought its consent to use all reasonable means to protect and salvage the chemicals from further loss or destruction. The company sent an insurance adjustor, George Kaja, to the site for the purpose of handling the claim. According to Kaja his duties included "complete investigation as to cause, the property involved, its value, condition of salvage." The evidence is conflicting as to Kaja's response to the assured's request for the company to assist in protecting the chemicals from further damage. Kaja claimed that he told warehouse officials "it was strictly their baby."² Officials of Slay Warehousing on the other hand contended that Kaja's response was that he would forward the request to the company. Despite repeated demands extending over a period of several months, the company failed to respond directly as to whether it would assume the expense involved.

There is no dispute that the warehouse company undertook immediate and reasonable means to prevent further damage to the chemicals. According to Slay Warehousing's statement, costs and expenses were incurred, inter alia, for labor, transportation charges in removing the chemicals to another warehouse, moving debris, replacing tarps on the roof, rental of a portable hopper and conveyor for removing the damage, and storage charges at another warehouse.

Slay Warehousing urges that it should be reimbursed by reason of the policy terms which require the assured to "take all reasonable means to protect, safeguard and salvage the property." The argument is made that the immediate efforts to protect the chemicals prevented a greater loss to the insurance company. The company's response in essence is that the policy protects the assured only from liability to third parties, that the assured had a duty to mitigate its loss and that under the terms of the policy the assured could not incur any expense without the written consent of the insurance company.

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The present policy reads: "To pay on behalf of the Assured all sums which the Assured shall become legally obligated to pay by reason of liability imposed . . ."³ The Supreme Court of Pennsylvania has construed similar language within a liability insurance policy to require reimbursement of expenses incurred by a landowner in arresting a threatened landslide and preventing more serious damage. Justice Musmanno, in discussing a New Hampshire decision, explained:

"The policy was not limited in its terms as the one in Desrochers v. New York Casualty Co., 99 N.H. 129, 106 A.2d 196, 198, relied upon by the defendant. There the carrier agreed —

`to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages * * * because of * * * destruction of property.\' (Emphasis supplied).

The instant policy is not so limited. By its terms the defendant agreed to pay such sums as the plaintiff became obligated to pay `by reason of\' the liability imposed upon him by law for damages because of injury to or destruction of property." Leebov v. United States Fidelity & Guaranty Co., 401 Pa. 477, 165 A.2d 82, 84 (1960).

The Pennsylvania Supreme Court went on to say:

"If the plaintiff had not taken immediate and substantial measures to remedy the perilous situation, disastrous consequences might have befallen the adjoining and nearby properties. If that had happened, the defendant would have been required to pay considerably more than is involved in the present lawsuit. It would be a strange kind of argument and an equivocal type of justice which would hold that the defendant would be compelled to pay out, let us say, the sum

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of $100,000 if the plaintiff had not prevented what would have been inevitable, and yet not be called upon to pay the smaller sum which the plaintiff actually expended to avoid a foreseeable disaster." Id. at 84.

A similar result was reached by a Louisiana Court of Appeals under a different exclusion clause⁴ where the court observed:

"It might be argued that the exclusionary clause is included as a part of a contract which does not contain any specific contractual obligation on the insurer to bear the expense of rescue, salvage and preservation. The sole answer to this contention is that an insured is entitled to reimbursement of the expenses incurred in protecting his insurer against loss by application of general principles of law and equity." Harper v. Pelican Trucking Co., 176 So.2d 767, 773 (La.App. 1965).

See generally Teeples v. Tolson, 207 F.Supp. 212 (D.Or.1962).

Obviously, each case must be examined in light of the specific insuring agreement and the law of the particular jurisdiction. Some jurisdictions have denied recovery of expenditures under liability policies. Cf. Farr v. Traders & General Insurance Co., 235 Ark. 185, 357 S.W.2d 544 (1962); J. L. Simmons Co. v. Lumbermen's Mutual Insurance Co., 84 Ill. App.2d 98, 228 N.E.2d 227 (1967). See 33...