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SCHULMAN INV. CO. v. OLIN CORP.

May 21, 1981

SCHULMAN INVESTMENT COMPANY, Plaintiff,
v.
OLIN CORPORATION, Defendant and Third Party Plaintiff, HABER & HENRY, INC., Tremco, Inc., Brisk Waterproofing Company, Inc., Thomas J. Mannino and Fraioli, Blum & Yesselman, Third Party Defendants; HABER & HENRY, INC., Fourth Party Plaintiff, v. SUPERINTENDENT OF INSURANCE OF the STATE OF NEW YORK as Rehabilitator of Empire Mutual Insurance Company and United States Fire Insurance Company, Fourth Party Defendant



The opinion of the court was delivered by: TENNEY

This case arises from the construction of two office buildings in Harrison, New York. In 1978 the buildings' owner, Schulman Investment Company ("Schulman"), brought suit against Olin Corporation ("Olin"), which had constructed the exterior curtain wall. Olin impleaded, among others, Haber & Henry, Inc. ("Haber"), a glazing subcontractor. Under the able guidance of Magistrate Nina Gershon, most of the claims in this complicated litigation have been settled. Schulman received $ 175,000, of which Olin paid $ 125,000, while Haber shared the remaining $ 50,000 liability with its supplier Tremco, Inc., which granted Haber a $ 20,000 merchandise credit.

When Haber was sued, it impleaded its two insurance companies, Empire Mutual Insurance Company ("Empire") and United States Fire Insurance Company ("USFIC"). With Empire, Haber had insurance for contractual liability and for comprehensive general liability, up to a limit of $ 25,000 per occurrence and $ 50,000 in the aggregate. With USFIC, Haber had comprehensive catastrophe liability insurance for claims above and beyond those covered by Empire's policy. Haber sought indemnification, legal fees, and punitive damages from its insurers because of their failure to defend Haber against Olin's third-party action. At this time, Haber has settled with Empire for $ 5,000, but its dispute with USFIC has proved irreconcilable. Haber now moves for summary judgment, which USFIC opposes because of unresolved factual issues about the two insurance contracts involved.

The insurance contract between USFIC and Haber provides as follows:

 
I COVERAGE
 
The Company agrees to indemnify the insured for ultimate net loss in excess of the retained limit hereinafter stated, which the insured may sustain by reason of the liability imposed upon the insured by law, or assumed by the insured under contract:
 
(b) Property Damage Liability. For damages because of injury to or destruction of tangible property including consequential loss resulting therefrom, caused by an occurrence(.)

 Affidavit of William Jarblum, sworn to February 17, 1981 ("Jarblum Aff."), Exh. 1-O. According to its terms, however,

 
(t)his policy shall not apply:
 
(b) under Coverage I (b), to injury to or destruction of (1) property owned by the insured or (2) any goods, products or containers thereof manufactured, sold, handled or distributed, or work completed by or for the insured, out of which the occurrence arises(.)
 
(g) under Coverage I (b), to claims made against the insured
 
1. for repairing or replacing any defective product or products manufactured, sold or supplied by the insured or any defective part or parts thereof nor for the cost of such repair or replacement;
 
2. for the loss of use of any such defective product or products or part or parts thereof;
 
3. for improper or inadequate performance, design or specification; but nothing herein contained shall be construed to exclude claims made against the insured for personal injuries or property damage (other than damage to a product of the insured) resulting from improper or inadequate performance, design or specification(.)

 In short, the USFIC policy covers damage to others and to others' property, but it does not cover repairs needed to bring Haber's products into conformity with the contracts under which they were sold. USFIC argues that it owed Haber no duty neither to indemnify nor to defend for a claim that Haber's curtain wall was defective. Answer of Fourth-Party Defendant USFIC PP 14-15. Haber claims, however, that the plaintiff Schulman "clearly alleges other damages than to reglaze the curtain wall," Jarblum Aff. P 23, thus bringing the suit within the USFIC policy. But USFIC parries that, even if Schulman ...


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