Union Insurance Soc. of Canton, Ltd. v. William Gluckin & Co.

• Decision Date: 20 December 1965
• Docket Number: No. 25,Docket 28367.,25
• Citation: 353 F.2d 946
• Parties: The UNION INSURANCE SOCIETY OF CANTON, LTD., Plaintiff-Appellee, v. WILLIAM GLUCKIN & CO., Inc., et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

353 F.2d 946 (1965)

The UNION INSURANCE SOCIETY OF CANTON, LTD., Plaintiff-Appellee, v. WILLIAM GLUCKIN & CO., Inc., et al., Defendants-Appellants.

No. 25, Docket 28367.

United States Court of Appeals Second Circuit.

Argued September 30, 1965.

Decided December 20, 1965.

COPYRIGHT MATERIAL OMITTED

John M. Speyer, Greenhill & Speyer, New York City, for plaintiff-appellee, The Union Insurance Society of Canton, Ltd.

Bert Cotton, Rein, Mound & Cotton, New York City, Ernest E. Rosenberg, Hortense F. Mound, New York City, of counsel, for defendant-appellant, The Schwab Rubber Co., Inc.

Henry J. Robinson, Kelly, Donovan, Robinson & Maloof, New York City, for defendants-appellants, Martin Schnur and Sidney Schnur, doing business as Rubber Fabrics Co.

Abbe L. Miller, New York City, for defendant-appellant National Backing Corp.

Before FRIENDLY and KAUFMAN, Circuit Judges, and HERLANDS, District Judge.^*

HERLANDS, District Judge.

Defendants-appellants National Backing Corporation, The Schwab Rubber Co., Inc., and Martin Schnur and Sidney Schnur, doing business as Rubber Fabrics Company hereinafter "National," "Schwab," and "Rubber Fabrics" respectively, appeal from an order entered on a cross-motion for summary judgment by the plaintiff-appellee, The Union Insurance Society of Canton, Ltd. hereinafter "Union".

The underlying suit is an action in the nature of interpleader brought by Union against all actual or possible claimants under a certain policy of fire insurance in the amount of $25,000 issued by Union to National.

In conducting its business of converting material, National performs certain processing operations on goods sent to it by its customers. For the purpose of storing such merchandise until it was processed at National's main plant, National utilized premises located at 9-11 40th Avenue, Long Island City, New York. National also stored certain of its own goods at these premises.

National carried insurance policies in an amount totaling $100,000 with the St. Paul Fire and Marine Insurance Company and the Home Insurance Company which protected it against liability to its customers in the event of loss by fire due to some fault on its part.

National also carried a standard form fire insurance policy in the sum of $15,000 with the Aetna Casualty and Surety Company hereinafter "the Aetna policy" for the purpose of insuring one of its customers — Vincent Horwitz Company, Inc. hereinafter "Horwitz" — to the exclusion of all its other customers. Both Horwitz and National were named insureds under the Aetna policy, but this policy provided that compensation for any loss would be payable first to Horwitz. National was entitled to receive only the balance of the policy's proceeds, if any, after Horwitz was indemnified. By its terms, the Aetna policy covered "contents contained in brick building situate 9-11 40th Avenue, L I C, Queens, New York."

The policy in suit is the $25,000 fire insurance policy which National procured from Union hereinafter "the Union policy".

A typewritten insertion in the Union policy provides — under the heading "DESCRIPTION AND LOCATION OF PROPERTY COVERED" — that the scope of its coverage extends to the

"CONTENTS, INCLUDING CUSTOMERS\' GOODS, BUT EXCLUDING CUSTOMERS\' GOODS SEPARATELY INSURED WHILE CONTAINED IN BRICK BUILDING SITUATE:

9-11 — 40TH AVENUE

LONG ISLAND CITY

NEW YORK" (Emphasis added).

There is also a provision in the Union policy to the effect that

"this Company * * * Union does insure the insured named above National and legal representatives, to the extent of the actual cash value of the property at the time of the loss, but not * * * in any event for more than the interest of the insured * * *." (Emphasis added.)

On November 3, 1959, a fire occurred at 9-11 40th Avenue, Long Island City, causing substantial damage. National, claiming damages of $13,990.59 to its own merchandise, sought to recover under both the Aetna policy and the Union policy. Aetna and Union were represented by the same claims adjuster, one Harold S. Daynard, who apportioned National's loss by attributing $6,959.05 to Aetna, which it paid, and $7,031.54 to Union, which has not yet been paid. Most of National's customers carried sufficient insurance to cover their losses. However, certain of National's customers either carried no insurance of their own or suffered losses greater than the amount of their own insurance coverage. Schwab claimed a loss of $44,782.77. The limit of its own policy with Fireman's Mutual Insurance Company was $25,000. Hence, it suffered a claimed loss of $19,782.77 which its own policy did not cover. Other National customers suffering losses in the fire who had no insurance or insurance inadequate to cover their losses included: Splendor Form Brassiere Co., Inc. ($1,523.81); Blossom Footwear, Inc. ($353.67); and Infant Socks, Inc. ($1,067.80).

By its terms, the Union policy provided that

"No suit * * * on this policy * * * shall be sustainable in any court * * * unless commenced within twelve months next after inception of the loss."

On November 3, 1960, twelve months after inception of the loss, only three suits had been commenced against Union. They were instituted by National, Schwab, and Rubber Fabrics. By an opinion of District Judge Richard H. Levet dated February 19, 1962 and an order dated March 14, 1962, Union obtained judgments against Splendor Form Brassiere Co., Inc.; Blossom Footwear, Inc.; Infant Socks, Inc., and all the insurance companies named in this interpleader action, cutting off any rights they may have had in the Union policy, on the ground that they had failed to commence their own action within the one year period.

National and Schwab both contended below that the Union policy applies to the uninsured ($19,782.77) portion of Schwab's loss. Schwab contended that to this extent its goods were not "separately insured." In substance, the Schwab claim was based upon the theory that its goods on National's premises were not "separately insured" because Schwab's own insurance policy did not provide adequate coverage for its loss. On the other hand, both Schwab and National seemed to agree that Rubber Fabrics was "separately insured" because it had sufficient insurance to cover its loss. The bases of this contention by Schwab appear to have been in part as follows: (a) National intended the Union policy to be available to customers to the extent that they were not otherwise protected by their own coverage; and (b) Union's policy is "specific insurance" (here insuring goods at one designated location), while Schwab's Firemans Mutual policy is a "floater policy" and should not be applied until Union's policy is exhausted.

Rubber Fabrics claimed to have suffered losses of $11,499.58. Unlike Schwab, it was fully insured, by policies with the Hanover Fire Insurance Company and the Aetna Insurance Company of Hartford, Connecticut, and has been paid by them. The insurers assert in its name that these losses were covered by the Union policy and that Rubber Fabrics' claim should have been satisfied from it before resort to them.

Three motions for summary judgment were before the District Court: (1) by Union, seeking judgment against Schwab and Rubber Fabrics; (2) by Schwab, seeking judgment against Union; and (3) by National, seeking judgment against Union in Schwab's favor as well as in National's favor, in both a personal and a representative capacity. The District Court granted the first motion; denied the second motion; and granted the third motion only to the extent of entering a judgment in favor of National against Union in the amount of $7,031.54 — the amount of National's own loss which Daynard, the claims adjuster, had attributed to Union.

The District Court held that, if any of National's customers having goods stored on National's premises had procured insurance of its own, regardless of amount, that customer's goods were "separately insured" and, therefore, excluded from coverage under the Union policy. According to this reasoning, a customer such as Schwab (who claimed a loss of over $44,000 and whose own policy's limits were $25,000) was not covered by the Union policy for the uninsured portion of its loss.

The District Court also held that National was not entitled to recover under the Union policy for the benefit of its three customers; namely, Splendor Form Brassiere Co., Inc., Blossom Footwear, Inc., and Infant Socks, Inc., the losses sustained by them. The District Court recognized that National's action for the full limits of the Union policy was commenced within one year of the date of the loss. However, the District Court reasoned that National's claim, to the extent that it was for the benefit of its three customers, was barred by the March 14, 1962 judgment rendered against the said three customers.

National and Schwab urge this court to find that Union is liable under its policy for losses to National's customers who had no insurance of their own or whose insurance did not fully cover their losses. Rubber Fabrics, construing the policy as covering all customers save those for whose benefit National had procured separate insurance, contends that the District Court erred in granting summary judgment and that it should have permitted the case to proceed to trial so that a determination could have been made as to the proper apportionment of the proceeds of the Union policy.

I.

Fed.R.Civ.P. 56(c) provides that judgment "shall be rendered forthwith if the pleadings * * * together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The District Court expressly found that the scope of the term "separately insured," as it appears in the Union policy, encompassed not only the Aetna policy carried by National, explicitly covering the goods of its customer Horwitz, but also other insurance separately carried by...