Stephenson v. Duriron Company

Decision Date04 June 1970
Docket NumberNo. 19580.,19580.
Citation428 F.2d 387
PartiesCharles William STEPHENSON, Charles William Stephenson, as father and next friend of Kathy Stephenson, a/k/a Donna C. Stephenson, Charles William Stephenson and Nancy Stephenson, Norman Bakke and Leota Bakke, Plaintiffs-Appellees, v. DURIRON COMPANY, Inc., Defendant Third-Party Plaintiff-Appellee. AETNA INSURANCE COMPANY, Third-Party Plaintiff-Appellee, v. KUHNS BROTHERS COMPANY and Hartford Accident and Indemnity Company, Third-Party Defendants-Appellants.
CourtU.S. Court of Appeals — Sixth Circuit

William H. Selva, Dayton, Ohio, for third party defendants-appellants; Curtner, Selva, Parkin & Seller, Dayton Ohio, on the brief.

P. Eugene Smith, of Marshall, Smith & Green, Dayton, Ohio, on brief for appellees Duriron Co., Inc., and Aetna Insurance Co.

James C. Baggott, Dayton, Ohio, for plaintiffs-appellees Stephenson, and others; John M. Savage, Anchorage, Alaska, on the brief.

Before McCREE and COMBS, Circuit Judges, and McALLISTER, Senior Circuit Judge.

McALLISTER, Senior Circuit Judge.

On March 16, 1962, there occurred a disastrous explosion of natural gas in Anchorage, Alaska, resulting in injuries to plaintiffs and damages to their property. The gas had seeped through the earth and entered plaintiffs' residence because of a fracture in a valve installed in a gas distributing system. The valve was defective. It should have been made of certain ductile iron, according to required specifications; it was made, instead, of cast iron.

The owner of the gas distributing system was the Anchorage Natural Gas Corporation, which had purchased the valve in question from the Duriron Company, a New York corporation, with its principal place of business at Dayton, Ohio. The Duriron Company had purchased the valve from Kuhns Brothers Company, a Dayton, Ohio, corporation, which was guilty of negligence in making and pouring the valve body casting, and in its testing procedures which failed to discover the departure from the required specifications for the ductile iron.

Although the Duriron Company was not negligent, the negligence of its vendor, Kuhns Brothers, was attributable to Duriron under Alaska law. The Aetna Insurance Company was Duriron's insurer, insuring Duriron against such risks as damages resulting from its sale of the valve to the distributing gas company.

Plaintiffs, and others similarly injured as a result of the explosion, commenced suits in the Superior Court for the State of Alaska against Duriron. They also commenced similar suits in the United States Court for the Western District of Washington at Alaska against Duriron, as well as in the United States District Court in Dayton, Ohio.

The gas distributing company commenced actions against Duriron in the United States District Court at Seattle; and also filed a cross-claim in the Alaska Superior Court cases, seeking a judgment against Duriron in order that it be saved harmless and indemnified against loss resulting from the claims of persons injured in the explosion, and from the expense incurred in litigation commenced as a result of Duriron's failure to deliver a valve meeting the specifications which Duriron had agreed to furnish.

Kuhns Brothers Company was insured by Hartford Accident and Indemnity Company, which had issued a policy to Kuhns covering liability for Kuhns' furnishing the defective valve. When the actions were commenced by plaintiffs against the Duriron Company, both Duriron and its insurer, Aetna, requested Kuhns and Hartford to provide a defense, and to save Duriron and Aetna harmless from expense incurred and judgments, if any, that might be rendered in the action. As soon as plaintiffs' actions were commenced, Duriron and Aetna accompanied their requests to Kuhns and Hartford to defend, with copies of the complaints filed by plaintiffs.

The complaints and cross-claims of the gas distributing company, in the State of Alaska case, specifically asserted that Duriron's liability was based on a breach of warranty with respect to the specifications of the metal of which the valve was composed. Kuhns actually knew, and Hartford was charged with Kuhns' knowledge, that it alone controlled the means to make, or failure to make, the valve of ductile iron which conformed to ASTM specifications of A 395-56T, which were the specifications represented by Kuhns to have been those to which the valve conformed, and which was relied upon by Duriron and the gas distributing company — and intermediate vendors of the valve — and which because of the non-conformity of this valve to these specifications, caused it to break, resulting in the leakage of the gas, and causing the injury to plaintiffs. It is agreed that the valve was to be manufactured out of an alloy made by a secret process of the International Nickel Company, known as "ductile iron," and which met ASTM specifications A395-56T, which secret process was known to Kuhns, as a licensee of International Nickel Company.

Duriron, as mentioned above, was not negligent in its sale of the valve. It was powerless to discover that Kuhns failed to use ductile iron, meeting ASTM specifications A395-56T, in casting the valve. The evidence discloses that Kuhns' chief metallurgist sent a three-page written warranty, with a letter to Duriron, stating the valves which Kuhns proposed to make and sell to Duriron for resale would be composed of ductile iron conforming to the aforementioned specifications. Duriron's only warranty to the purchaser was in the same language as Kuhns' warranty to Duriron, and Duriron furnished the gas distributing company with a copy of Kuhns' three-page warranty.

Hartford's policy of insurance issued to Kuhns contained a vendor's endorsement, which provided that such insurance as was offered by the policy regarding "Products Hazard," applied also to any person or organization with respect to the distribution or sale, in the course of business of such person or organization, of goods or products manufactured, sold, handled, or distributed by Kuhns, subject to the provisions (a) that the insurance did not apply to liability arising from the negligence of such person or organization, and (b) that the insurance did not apply to any express warranty unauthorized by Kuhns.

In response to the request of March 20, 1964, made by Duriron and Aetna to Kuhns and Hartford to defend the suit commenced by plaintiffs, Kuhns and Hartford refused to assume the defense.

On May 24, 1965, after Duriron had challenged the venue and jurisdiction of the Alaska Superior Court, that court dismissed Duriron from the Alaska cases, but upon plaintiffs' appeal in that action, the Alaska Supreme Court reversed the Alaska Superior Court and held that that court had in personam jurisdiction over Duriron. Duriron then filed a petition for a writ of certiorari with the United States Supreme Court, seeking reversal of the decision of the Alaska Supreme Court. The United States Supreme Court, however, denied the petition for the writ of certiorari.

When such challenge to the jurisdiction had been rejected, Duriron and Aetna again called upon Kuhns and Hartford to defend, and Kuhns and Hartford refused, as they did on six separate occasions when Duriron and Aetna had informed them of the basis of plaintiffs'...

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