Sucrest Corp. v. Fisher Governor Co., Inc.
| Decision Date | 06 June 1975 |
| Parties | SUCREST CORPORATION, Plaintiff, v. FISHER GOVERNOR CO., INC., et al., Defendants. CONSERVATIVE GAS CO., INC., Third-party Plaintiff, v. CYLINDERS INCORPORATED, Third-part Defendant. FISHER GOVERNOR CO., INC., Third-party Plaintiff, v. SCOVILL MANUFACTURING CO., Third-party Defendant. FISHER GOVERNOR CO., INC., Fourth-party Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Fourth-party Defendant. |
| Court | New York Supreme Court |
Bigham Englar Jones & Houston, New York City, for plaintiff.
Christensen & Caliendo, New York City, for defendant and 3rd and 4th party plaintiff (Fisher Governor).
George J. Conway, Manhasset, for defendant (Conservative).
George S. Pickwick, New York City, for defendant (Ohiolene).
Edward L. Milde, New York City, for defendant (Ehrbar).
Harold M. Foster, New York City, for defendant (Cylinders Inc.).
Mellen, Donnelly & Fogarty, New York City, for 3rd party defendant (Scovill Mfg. Co.).
D'Amato, Costello & Shea, New York City, for defendant (Bastian).
Mellen, Donnelly & Fogarty, by Walter A. Donnelly, New York City, for 4th party defendant (Liberty Mut. Ins. Co.).
This is a motion for summary judgment by the fourth-party plaintiff, Fisher Governor Co., Inc. (Fisher), and a cross-motion for summary judgment by the fourth party defendant Liberty Mutual Insurance Company (Liberty) in an action for a declaratory judgment declaring that the comprehensive general liability policy issued by Liberty to Scovill Manufacturing Co. (Scovill) afforded coverage to Fisher under the vendor's or products liability endorsement to the policy. Fisher contends it was an additional insured under the vendor's endorsement and that Liberty owed it a duty to defend the main action instituted against Fisher, which was settled during trial before this court on September 11, 1974.
For breach of the duty to defend, Fisher seeks a judgment declaring that Liberty is obligated to reimburse Fisher for (1) the amount of Fisher's contribution toward the settlement of the main action ($265,000); (2) expenses and reasonable attorneys fees and disbursements incurred by Fisher in the main action; (3) reasonable attorneys fees and disbursements incurred by Fisher in prosecuting this declaratory judgment action; and (4) reasonable attorneys fees and disbursements incurred by Fisher in an action brought by Sucrest Corporation (Sucrest) against Fisher in the U.S. District Court for the Eastern District of Pennsylvania.
In the main action, arising out of a fire which occurred at Sucrest's refinery on July 12, 1966, Sucrest sued Fisher and others to recover $3,615,514.58 property damage, alleging liability on the part of Fisher for negligence and breach of warranty in connection with Fisher's manufacture, sale and distribution of a Fisher Type C--152 service line shut-off valve with excess flowcheck. The supplemental complaint (par. 'Eleventh') charged Fisher with negligence, carelessness and recklessness:
'* * * in the designing, planning, testing, inspecting, assembling, packing, shipping, fabricating, manufacturing, supplying and selling of its aforesaid valve in that said valve and its component parts were improperly constructed, machined, fitted and forged * * *'
Other allegations of that complaint alleging breach of warranty, express and implied, made reference to the valve and its component parts (par. 'Fifteenth' and 'Nineteenth').
On February 16, 1971, after discovery proceedings had been initiated in the main action, Fisher commenced a third party action against Scovill, the manufacturer of the forging in which the shut-off valve with excess flow-check was placed by Fisher. The third-party complaint alleged: (1) prior to the date of the fire Scovill supplied and sold to Fisher the machined forging used on the Type C--152 valve (Par. 8); (2) Scovill knew Fisher purchased the machined forging for use on the Fisher Type C--152 valves for re-supply and/or resale to members of the general public (Par. 9); (3) Fisher was not primarily negligent in any manner with regard to the allegedly defective shut-off valve (Par. 11); (4) Fisher was unaware of any defect, if any, that existed in the machined forging at the time the valve was sold and/or supplied to plaintiff (Par. 10); and (5) any damages which resulted from the accident were caused by the negligence of Scovill in the 'design, manufacture, control, supply and sale of the aforesaid machined forging in an improper and thoroughly unworkmanlike manner' (Pars. 12 & 13). Fisher also impleaded Scovill in an action which had been initiated in July of 1969 by Sucrest against Fisher in the U. S. District Court for the Eastern District of Pennsylvania.
Scovill, third-party defendant, was insured by Liberty under a comprehensive general liability policy. That policy contained a vendor's or products liability endorsement; (1) providing insurance with respect to 'the possession, consumption, handli or use of or the existence of any condition in any merchandise or product manufactured, sold, handled or distributed by the named insured', and (2) extending coverage 'to any person or organization with respect to the distribution or sale in the course of business of any merchandise or product manufactured, sold, handled or distributed by the named insured.'
In September of 1972, Scovill's motion for summary judgment and dismissal of the third-party complaint, was denied on the ground there were issues of fact as to '* * * whether there was negligence in the construction, fitting, forging, etc. of the valves involved and its component parts, one of which was manufactured by Scovill.' (Riccobono, J., N.Y.L.J., 11/21/72, p. 18, col. 2).
On March 16, 1973, some two years after commencement of the third-party action and more than four years after suit was instituted by Sucrest, Fisher made what appears to be its first inquiry as to the extent of the insurance coverage contained in the policy which had been issued by Liberty to Scovill. On that date, interrogatories were served by counsel for Fisher in the Federal action inquiring whether Scovill's policy with Liberty included a vendor's endorsement. Allegedly acting in reliance on representations by counsel for Scovill in the Federal action that, according to Liberty, the policy had no such endorsement, Fisher entered into a stipulation withdrawing its jurisdictional defenses in the New York action in return for a discontinuance of the Federal action.
On September 4, 1973, Fisher wrote Liberty inquiring again whether the Scovill policy was endorsed to furnish coverage for Fisher. By letter dated September 24, 1973, Liberty responded that the policy did contain a vendor's endorsement 'which may or may not apply to Fisher'. By letters dated September 26 and October 1, 1973, counsel for Fisher called upon Liberty to take over the defense of Fisher in the main action. Fisher asserted it was an additional assured under the Scovill policy by reason of the vendor's endorsement. On October 3, 1973, Liberty responded that it would not, under the vendor's endorsement, assume the defense of and/or indemnify Fisher.
Immediately thereafter, on October 15, 1973, Fisher commenced this fourth-party action against Liberty for a judgment declaring that Liberty was obligated to defend Fisher under the policy which had been issued to Scovill, and that by reason of Liberty's breach of its obligation to defend, Liberty was further obligated to reimburse Fisher for expenses and reasonable counsel fees expended in defense of the main action and to pay any judgment that might be rendered against Fisher. At a conference held on October 19, 1973, counsel for Fisher again called upon Liberty to assume the defense of the action and Liberty again formally declined.
Trial of the actions commenced on September 3, 1974 and continued until September 11, when the main action was settled for the sum of $535,000.00, $265,000.00 of which was contributed by Fisher. The third-party action against Scovill was discontinued with prejudice, and this fourth-party action was severed.
The issue is whether Liberty was under a duty to defend Fisher in the main action brought by Sucrest, and if so, when the obligation arose. Fisher contends that Liberty's responsibility to afford Fisher a defense became ripe in February 1971, at the time of the service of Fisher's third-party complaint against Scovill. Liberty, in opposition, asserts that since the Sucrest supplemental complaint in the main action contains no allegation of negligent design or manufacture of the forging by Scovill, coverage within the terms of the policy issued by Liberty never arose.
The policy requires that the insurer defend any suit against the insured within the coverage of the policy, 'even if such suit is groundless, false or fraudulent'. Under such a provision, the insurer is obligated to handle the defense where there is alleged a state of facts covered by the policy 'regardless of whether such allegations squared with objective truth or were utterly false and groundless' (Goldberg v. Lumber Mut. Cas. Inc. Co.,297 N.Y. 148, 153, 77 N.E.2d 131, 133).
In determining whether there is a duty to defend, the point of departure is the allegations of the complaint in the action brought against the insured. If the allegations in the negligence action are, on their face, within the compass of the risk covered by the insurance, the insurer is obliged to assume defense of the action (Goldberg v. Lumber Mut. Cas. Inc. Co., supra; International Paper Co. v. Continental Cas. Co., 35 N.Y.2d 322, 361 N.Y.S.2d 873, 320 N.E.2d 619). Although where the alleged facts clearly do not appear to bring the case within the coverage of the policy, the insurer is free of such obligation (Freedman, Inc. v. Glens Falls Ins. Co., 27 N.Y.2d 364, 318 N.Y.S.2d 303, 267 N.E.2d...
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