Thomas J. Lipton, Inc. v. Liberty Mut. Ins. Co.
| Decision Date | 13 June 1974 |
| Citation | 357 N.Y.S.2d 705,34 N.Y.2d 356 |
| Parties | , 314 N.E.2d 37 THOMAS J. LIPTON, INC., Respondent-Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Appellant-Respondent, and Alfonso Gioia & Sons, Inc., Respondent-Appellant. |
| Court | New York Court of Appeals Court of Appeals |
Stephen V. Lines and William T. Lehman, Rochester, for appellant-respondent.
Michael T. Tomaino, Rochester, for Thomas J. Lipton, Inc., respondent-appellant.
Robert Oppenheimer, Rochester, for Alfonso Gioia & Sons, Inc., respondent-appellant.
This appeal calls for an interpretation of exclusionary clauses in products liability insurance policies.
Gioia sold enriched macaroni and egg noodles, manufactured by it, to Lipton for inclusion by Lipton in its soups which in turn are sold in a Nation-wide market. When it was discovered that some of the macaroni and noodles were contaminated Lipton took immediate steps to withdraw its six affected soups from the market for destruction and to recall all its stocks of macaroni and noodles. It followed the standard practices of food manufacturers and pharmaceutical houses when a product is discovered to have a potential danger to ultimate consumers. In so doing it incurred substantial expense.
Lipton then brought an action against Gioia to recover damages in six categories: property damage to certain Lipton soup products in which Gioia's macaroni products had been used; property damage to Gioia's macaroni products not yet incorporated in any of Lipton's soup mixes; the value of employees' and agents' time in withdrawal, recall and destruction of contaminated products; costs incurred in notification of the trade and general public; loss of good will; and loss of profits. Gioia called on Liberty Mutual, its insurer, to undertake the defense of Lipton's action. Liberty Mutual then disclaimed all responsibility to defend or to indemnify, based on exclusions in its insurance policies.
During the pendency of the action for damages, Lipton instituted the present action against Gioia and Liberty Mutual for a declaratory judgment construing the insurance policies.
Two policies are involved, both written by Liberty Mutual--a so-called special multi-peril policy and an umbrella excess liability policy. The critical exclusion in the multi-peril policy is worded as follows: 'This insurance does not apply * * * to damages claimed for the withdrawal, inspection, repair, replacement, or loss of use of the named insured's products or work completed by or for the named insured or of any property of which such products or work forms a part if such products, work or property are withdrawn from the market or from use because of any known or suspected defect or deficiency therein'. The corresponding exclusion in the umbrella policy is worded differently: 'This policy does not apply * * * with respect to * * * work performed by or on behalf of the named insured or the Insured's Products * * * (or) to that portion of any damages for which claim is made or suit is brought and which represents the cost (including loss of use) of inspecting, repairing, replacing, modifying or withdrawing any property from the market or use in the interest of preventing accidents which may result from any known or suspected defect therein or in the interest of improving its quality or performance'. Although there are slight verbal distinctions between the two clauses, we find no significant difference and Liberty Mutual makes no contention to the contrary.
The issue contested is whether these clauses relate to withdrawal and recall of defective products by the named insured only (here Gioia) or whether they extend as well to withdrawal and recall by the claimant (here Lipton). Lipton and Gioia contend that the policies must be construed to exclude coverage only as to claims made against the named insured for damages incident to withdrawal and recall of the contaminated product by the named insured, i.e., by Gioia. No claim, of course, if made here by Lipton for any such damage. Liberty Mutual, on the other hand, contends that the policies must be interpreted more broadly, to exclude coverage as to claims made against the named insured for damages incident to withdrawal and recall By the claimant of the defective product (or any property of which the defective product forms a part), i.e., here withdrawal and recall By Lipton of Lipton products...
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