Smedley Co. v. Employers Mut. Liability Ins. Co. of Wis.

Decision Date19 June 1956
Citation123 A.2d 755,143 Conn. 510
CourtConnecticut Supreme Court

Clarence A. Hadden, New Haven, with whom, on the beief, was William L. Hadden, New Haven, for appellant (defendant).

Sidney L. Goldstein, New Haven, with whom, on the brief, was Paul J. Goldstein, New Haven, for appellee (plaintiff).


O'SULLIVAN, Associate Justice.

The facts are undisputed. They may be stated in this fashion: The plaintiff, to be called Smedley, owns and operates a public warehouse in New Haven. In the early part of 1950, Smedley had in storage for the American Maize-Products Company certain products known by the trade names 'Frodex' and 'Flufftex.' During February, 1950, the Maize-Products company ordered Smedley to turn over to an independent trucker twenty-five bags of Frodex for delivery to the New London and Mohegan Dairies Corporation, hereinafter called Mohegan. Smedley's records show that twenty-five bags of Frodex were placed upon the warehouse platform and that they were subsequently picked up by the independent trucker. On May 25, 1950, Smedley was served with a writ in an action brought by Mohegan to recover $12,000 damages. The complaint, sounding in tort, alleged among other things that Smedley was negligent in delivering to the trucker twenty-five bags of Flufftex rather than of Frodex. It further alleged that Frodex, unlike Flufftex, is a substitute for sugar and that, after the delivery of the Flufftex at New London, Mohegan used it in the manufacture of a large quantity of ice cream, all of which was thereby ruined. The complaint finally alleged that the damage to the ice cream was caused 'by the neglect or careless conduct of * * * The Smedley Company and * * * its agents and servants in that they failed to exercise reasonable care * * * to guard against releasing from its warehouse and turning over to a carrier wrong or incorrect products.' On July 24, 1950, Smedley was served with a writ in an action brought by the Maize-Products company. The complaint also sounded in tort and alleged, in substance, that the Maize-Products company incurred liabilities to the extent of $12,000 as a result of the negligence of Smedley in turning over to the trucker twenty-five bags of the wrong product which, after delivery to New London, were used in the manufacture of ice cream with disastrous results.

On December 31, 1949, the defendant had issued to Smedley a comprehensive general liability policy, to remain in force for one year. Under its terms, the defendant agreed to 'pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property * * * caused by accident.' The defendant further agreed to 'defend any suit against the insured alleging such injury * * * or destruction and seeking damages on account thereof, even if such suit is groundless.' There was attached to the policy an indorsement stating that 'the policy does not apply: * * * to the products hazard as defined in the policy.' Shortly after being served, Smedley, in each instance, notified the defendant of the lawsuits, but it refused to defend either action. Smedley then retained its own attorneys, who successfully defended the action brought by Mohegan and obtained a withdrawal of the other action. The case at bar was subsequently instituted by Smedley to recover the reasonable value of the services of the attorneys whom it had retained. The court rendered judgment for Smedley, and the defendant has appealed.

In its brief the defendant states the issue raised on the appeal as follows: Where the plaintiff, a warehouseman, had been sued for negligently placing in the hands of a deliveryman goods other than those ordered, was the defendant, as the plaintiff's insurer, justified in refusing to defend the actions against the plaintiff because of the 'products hazard' exclusion in the policy of insurance issued by the defendant to the plaintiff? Before we examine this question, it should be observed that there is no room for construing an insurance policy when its terms are plain and clear. Lyon v. Aetna Casualty & Surety Co., 140 Conn. 304, 310, 99 A.2d 141. Under such circumstances, the terms must be accorded their natural and ordinary meaning. Raffel v. Travelers Indemnity Co., 141 Conn. 389, 392, 106 A.2d 716. But if the terms are ambiguous and susceptible to more than one interpretation, that which is more favorable to the insured should be adopted. Scranton v. Hartford Fire Ins. Co., 141 Conn. 313, 315, 105 A.2d 780. And this rule of construction favorable to the insured extends to exclusion clauses. Muller v. Sun Indemnity Co., 276 App.Div. 1028, 1029, 96 N.Y.S.2d 140, affirmed 302 N.Y. 634, 97 N.E.2d 760.

It is obvious that, because of the indorsement attached to it, the policy affords no coverage in the event the insured is sued for injuries to property occasioned by a 'products hazard.' That much is perfectly apparent. Whatever ambiguity exists comes not from the indorsement but from the printed definition of a 'products hazard' found in the body of the policy. The term 'products hazard' is there defined, so far as is here pertinent, as '(1) the handling * * * of goods or products manufactured, sold, handled, or distributed by the named insured, * * * if the accident occurs after the insured has relinquished possession thereof to others and away from premises owned, rented or controlled by the insured * * *; (2) operations, if the accident occurs after such operations have been completed or abandoned at the place of occurrence thereof and away from premises owned, rented or controlled by the insured, except (a) pick-up and delivery, (b) the existence of tools, uninstalled equipment and abandoned or unused materials and (c) operations for which the classification stated in the Declarations or in the company's manual specifically includes completed operations.' Because of the ambiguity which is evidence upon reading the definition, we must construe the language in conformity with the legal principles to which we have referred above.

The first paragraph of the definition does not have the meaning attributed to it by the defendant. The 'goods or products' which are involved in an accident, if the exclusion of coverage is to obtain, must be those 'manufactured, sold, handled or distributed' by the insured. In the case at bar, the twenty-five bags placed by Smedley on its shipping platform for the independent trucker to pick up represented 'goods or products' which, concededly, Smedley did not manufacture, sell or distribute. But, says the defendant, the 'goods or products' may also be those that are 'handled.' It is true that the verb 'handle' means to 'touch; to feel with the hand; to hold, take up, move, or otherwise affect, with the hand.' Webster's New International Dictionary (2d Ed.). Words, however, do not always have the same import, and frequently nuances of meaning are sharply revealed by their association with other words, for, under the maxim 'noscitur a sociis,' they are known by the company they keep. Josefowicz v. Porter, 32 N.J.S.uper. 585, 591, 108 A.2d 865; Evans v. City of Jackson, 202 Miss. 9, 15, 30 So.2d 315; 3 Corbin, Contracts...

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