Sturges Mfg. Co. v. Utica Mut. Ins. Co.
| Decision Date | 09 June 1975 |
| Parties | , 332 N.E.2d 319 STURGES MANUFACTURING COMPANY, Appellant, v. UTICA MUTUAL INSURANCE COMPANY, Respondent. |
| Court | New York Court of Appeals Court of Appeals |
James S. Carter and John T. Maloney, New York City, for appellant.
William E. Noonan, Martin, Noonan, Hislop, Troue & Shudt, Troy, for respondent.
Insured Sturges, plaintiff and appellan seeks judgment declaring defendant insurance company obligated under its general comprehensive liability policy to defend and, if necessary, indemnify Sturges in an action brought against Sturges by one of its customers, Americana. Sturges, a manufacturer of ski straps, has been sued by Americana for warranty breach and negligence in the sale of allegedly defective straps which Americana used in its production and distribution of ski bindings. Trial Term dismissed the complaint after trial, and a divided Appellate Division affirmed. 45 A.D.2d 52, 356 N.Y.S.2d 692.
The issue is whether in Americana's action against the manufacturer Sturges, Americana alleged that Americana's property had been harmed by Sturges' defective product. If so, there may be insurance coverage. If not, coverage was excluded under the policy issued by the insurer to Sturges. A related issue is whether under the pleadings in the Americana action any harm to Americana's property was alleged to have been due to defective design by Sturges in its manufacture of ski straps. If so, coverage was excluded by express provision in the policy.
The order of the Appellate Division should be reversed and declaratory judgment granted to the manufacturer, Sturges, to the extent of requiring the insurer to defend against Americana's action, at least until it is unequivocally established that the harm caused to Americana was not within the coverage of the policy. As Mr. Justice Kane properly noted in dissent below, Americana's complaint alleges that its bindings were damaged by the Sturges straps. It is possible, if not likely, that Americana will seek to establish that because of the defective components its bindings were diminished in value beyond the cost of the replacement straps, and also that it sustained harm in taking back and repairing the bindings. Such would constitute covered 'damage' to the bindings proper and not merely excluded harm to the insured's straps. The loss alleged may therefore be within the policy coverage, and the insurer is obliged to defend Sturges until it is shown otherwise.
In 1971 Sturges manufactured, on special order and specifications, runaway straps for the Americana Ski Company, which manufactured ski bindings. They were allegedly warranted to withstand a pull of at least 1,200 pounds. The straps, however, because of allegedly defective stitching, broke under stress. Numerous bindings were returned by ski retailers to Americana and orders for bindings were canceled. Americana sued Sturges for breach of express warranty and negligent manufacture, as well as harm to its firm name and good will.
Sturges, covered by a comprehensive general liability policy issued by the insurer Utica Mutual, asked the insurer to defend the action. The insurer declined, contending that there was no coverage, and therefore no duty to defend.
The insurance policy at issue covers, among other risks, liability for 'property damage' defined as 'injury to or destruction of tangible property.' The damage must result from an 'occurrence', equated with 'an accident'. The insurer asserts that there was no 'occurrence'. These terms are, however, obviously broad, and would encompass the unexpected breakage of the Sturges straps and other harm flowing from it.
The insurer argues that Americana's alleged loss falls under either of two policy exclusions.
Clause 'L' excludes 'property damage to the named insured's products arising out of such products or any part of such products'. Damage, therefore, to Americana's property, the bindings, on the other hand, presumably would not be excluded.
An insurer's obligation to defend is broader than its obligation to pay, and arises whenever the complaint 'alleges facts and circumstances, some of which would, if proved, fall within the risk covered by the policy' (Great Amer. Ins. Co. v. London Records, 35 A.D.2d 661, 662, 314 N.Y.S.2d 369, 370; see International Paper Co. v. Continental Cas. Co., 35 N.Y.2d 322, 326, 361 N.Y.S.2d 873, 875, 320 N.E.2d 619, 621; Prashker v. United States Guar. Co., 1 N.Y.2d 584, 591--592, 154 N.Y.S.2d 910, 915--916, 136 N.E.2d 871, 874--875; Goldberg v. Lumber Mut. Cas. Inc. Co., 297 N.Y. 148, 153--154, 77 N.E.2d 131, 132--134).
Americana's complaint against Sturges does state that its ski bindings were 'damaged' as a result of the defective runaway straps. Americana probably did not mean damage or harm in the course of active, sporting use. In those few instances, where the mesh straps actually snapped on the ski slopes, the...
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