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LOWENSTEIN DYES & COSMETICS, INC. v. AETNA LIFE &

October 15, 1981

LOWENSTEIN DYES & COSMETICS, INC., Plaintiff,
v.
AETNA LIFE AND CASUALTY COMPANY and the Aetna Casualty and Surety Company, Defendants



The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

Plaintiff ("Lowenstein"), a New York citizen, commenced this declaratory judgment action against defendant insurers ("Aetna"), citizens of Connecticut, for a determination of the parties' rights and obligations under a policy of comprehensive general liability insurance. A manufacturer of hair dyes and other products, Lowenstein is defendant in an action commenced in the United States District Court for the Eastern District of Missouri by one of its customers, Hall Angel Co. In accordance with its interpretation of the policy, Lowenstein seeks a summary judgment declaring that Aetna is obligated to pay for its defense in the Missouri action. Aetna contends that the basis for Lowenstein's liability in the Missouri lawsuit is excluded from its contractual obligation to defend, and argues further that the claims in that action did not trigger its obligation to defend. For the reasons that follow, summary judgment is granted to plaintiff on its first cause of action declaring that Aetna is obligated to pay for Lowenstein's defense.

 The policy at issue provided in pertinent part that Aetna

 
"will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of
 
bodily injury or
 
property damage
 
to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent."

 In a section of "General Provisions" the policy defined "bodily injury" as "bodily injury, sickness, or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom." "Property damage" was defined as

 
"(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period."

 "Occurrence" was defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."

 Angel Hall commenced the Missouri action on May 7, 1980. In June 1980 Lowenstein sent notification and a copy of the complaint which Aetna received on June 25, 1980. By letter dated July 7, 1980, Aetna informed Lowenstein it was reserving the right to disclaim coverage on the ground that notice was not given as soon as practicable and would investigate the applicability of the following exclusion from the comprehensive general liability policy:

 
"This insurance does not apply:
 
"(k) to bodily injury or property damage resulting from the failure of the named insured's products ... to perform the function or serve the purpose intended by the named insured, if such failure is due to a mistake or deficiency in any design, formula, plan, specifications, advertising material or printed instructions prepared or developed by any insured; but this exclusion does not apply to bodily injury or property damage resulting from the active malfunctioning of such products ...." *fn1"

 Subsequently, on November 24, 1980, by a letter from its Liability Claim Department Superintendent, Aetna disclaimed coverage for the Missouri suit on the basis of exclusion (k). It adhered to this position after plaintiff forwarded ...


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