Wednesday's Weird But True Legal Cases - Vol XI

Tonight's weird but true case involves the creative efforts of an insurance carrier to avoid covering a loss contemplated by the policy. In Walton Hauling & Warehouse Corp. v. Aetna Cas. & Sur. Co, 69 Misc.2d 295, 329 N.Y.S.2d 972 (Civ. Ct. NY Cty 1972), the court examined a matter in which a freight carrier accidentally lost a package and made a claim against its policy which presumably was taken out to cover such a scenario. However, as anyone who has ever dealt with an insurance carrier knows, nothing is ever truly as it seems.

In this matter, Walton had been retained by David Merrick Productions to transport a box that was 4 x 4 x4 on one of its trucks, to be delivered to a studio where a play was being rehearsed. But a funny thing happened on the way to the studio, as the box fell off the truck. Although a passerby saw the box and called Merrick which in turn notified Walton, when Walton found the box it was open and missing a great deal of merchandise.

As Walton had insurance, it put in a claim with its insurer so that Merrick could be compensated for its loss. The policy obtained by Walton indicated that it covered:

the assured's liability as a carrier, bailee or warehouseman for loss or damage directly caused by perils hereinafter specified to shipments of lawful goods consisting principally of theatrical and television equipment while such goods are in due course of transit in or on vehicles owned, hired, leased, operated or used by the Assured within the 48 contiguous states of the United States, the District of Columbia and Canada.'

Well, the language of the policy would seem to cover a package that was lost by the shipper. This did not prevent the insurance carrier from disclaiming liability "on the ground that there was no theft or pilferage of the goods while such goods were ‘in or on the plaintiff's vehicle.'"

In assessing the policy taken out by Walton, the court noted that:

A reading of the policy discloses that it was the intent of the parties to provide the assured with unusual and broad coverage for all losses to customers' merchandise and equipment being shipped, carried, or stored by it. It included, in addition to the usual losses resulting from fire, theft, burglary, pilferage, hold-up, and accidental collision, losses resulting from acts of God (lightning, cyclone, tornado, windstorm, and floods), losses from perils of the seas or navigable waters, losses due to strikes, civil commotion, riots, vandalism, and malicious mischief.

Excluded from coverage were items such as money, securities, or jewelry and losses due to theft or pilferage by persons in the assured's employ, losses due to hostile or warlike action, nuclear explosion, and radioactive contamination, except that indirect loss by fire resulting from nuclear reaction was insured against.

Despite the plain language of the policy that would seemingly cover this type of loss, the court noted that the insurance carrier sought to avoid payment because the loss did not occur precisely within the strict and literal meaning of the policy. The court then characterized the insurer's position, explaining that the carrier was:

Admitting as it must that the loss occurred while the merchandise was ‘in transit’ and admitting, albeit reluctantly, that there was an inference that the loss resulted from theft or pilferage, the defendant insists that the loss did not occur while the merchandise was ‘in due course of transit in or on vehicles' owned by the assured.

The court did not accept the insurance company's attempt to avoid paying the claim, stating that:

True, having fallen off the truck at the moment the theft or pilferage took place, the goods when stolen were not in or on the assured's truck. However, it is this Court's opinion that the allowance of this specious disclaimer would be contrary to the spirit and intent of the contract entered into between the parties.

An interesting postscript is that the insurer took the case up on appeal to the Appellate Term. Walton Hauling & Warehouse Corp. v. Aetna Cas. & Sur. Co., 73 Misc.2d 959, 343 N.Y.S.2d 423 (App Term 1st Dept. 1973). Although the Appellate Term affirmed, one judge was swayed by the carrier's argument and dissented based on the fact that the loss did not occur while the box was on Walton's vehicle.

If you have seen this post being carried on another site such as JBlog, please feel free to click here to find other articles on the kosherbeers blogsite. Hey its free and you can push my counter numbers up!