The opinion of the court was delivered by: SWEET
SWEET, D.J.: Plaintiff Port Clyde Foods, Inc. ("Port Clyde") filed this action pursuant to the Interstate Commerce Act, 49 U.S.C. § 11707, against defendant Holiday Syrups, Inc. ("Holiday") seeking recovery for loss of property sustained when a Holiday truck was transporting Port Clyde's goods, a load of sardines, on January 25, 1980.
After Port Clyde filed a claim for its damages with Holiday, Holiday notified its insurance carrier, Lumbermens Mutual Insurance Co. ("Lumbermens") which issued a formal disclaimer of coverage. Subsequently, Holiday as a third party plaintiff, brought suit against Lumbermens and against its insurance broker, E.B. Cohen & Co. ("Cohen").
In this third party action tried to the court, Holiday sought a declaratory judgment pursuant to Rule 57 Fed.R.Civ.P. and 29 U.S.C. § 2201 that Lumbermens was liable for the loss pursuant to the contract of insurance or alternatively, that Cohen was liable for negligence in failing to procure the insurance. Cohen, by way of cross-claim, sought a declaration of its rights against Lumbermens with regard to indemnification or contribution on the basis of Lumbermens' negligence, constructive fraud, breach of contract or breach of warranty in the event of liability to Holiday.
The first issue in the third party action is whether the insurance policy in effect on the date of the accident provided for coverage when Holiday was transporting the goods of others as opposed to its own goods. The second issue is whether Lumbermens and/or Cohen is liable to Holiday for any failure to provide such coverage. On the basis of the following findings and conclusions, Holiday is entitled to recovery against Lumbermens and Cohen.
On September 30, 1977, Cohen on behalf of Holiday filed an application for motor truck cargo insurance with Lumbermens. Lumbermens issued a motor truck policy effective October 18, 1977. An employee of Cohen, Virginia Carroll ("Carroll") in November, 1977, compared the application with the policy and discovered that the policy failed to provide for legal liability as requested. Carroll notified Lumbermens of the omission and Lumbermens sent an application in order to rewrite the policy under a transportation form. Carroll submitted the application for a transportation floater which she clearly marked in large red print with the words "Policy to cover owner's goods on own trucks 95 percent, and goods by others, 5 percent." Thereafter, Lumbermens issued an Annual Transportation Floater as a rewrite of the motor truck policy. The period of the rewritten policy was from October 18, 1977 to October 18, 1978.
The Annual Transportation Floater policy was renewed for one year from October 18, 1978 to October 18, 1979. Before renewing the policy in October, 1979, Holiday advised Cohen that it no longer needed rail coverage, one item covered by the annual Transportation Floater policy. Cohen informed Lumbermens to "Renew as per expiring." However, after a telephone conversation between Lumbermens and Cohen, Lumbermens indicated orally and later in a letter to Cohen that it was affording Holiday the same coverage that it previously had, except for rail coverage. At no time did Lumbermens notify Cohen that any other coverage would be dropped. Nonetheless, Robert Kimball ("Kimball") an employee of Lumbermens purposefully issued a policy that did not include coverage of goods owned by others and Lumbermens issued such a motor truck cargo policy for the period October 18, 1978 to October 18, 1980.
The Motor Truck Cargo-Owners Form provided coverage for goods owned by the insured and transported in vehicles owned, leased or operated by the insured. The Motor Truck Cargo - Liability Form provided coverage for goods owned by others which is transported in the custody or control of the insured. The Annual Transportation Floater -- All Risk Form provided coverage for goods shipped by the insured at the insured's risk by rail, air, truck and boat and also provided coverage to an insured who does not require insurance for shipments by rail. Legal liability is another term which provided for coverage of goods owned by others when transported by the insured.
In October, 1977, 1978 and 1979, Holiday requested for Cohen and Cohen requested of Lumbermens coverage for goods transported by Holiday -- both their own and others. In 1977 and 1978, this request included coverage for goods shipped by rail. However, in October, 1979, the request for rail coverage was withdrawn.
In responding to these applications, Lumbermens mistakenly issued a policy in October, 1977 which did not provide coverage for goods owned by others. (Motor Truck Cargo-Owners Form). When Cohen discovered this error and notified Lumbermens, Lumbermens rewrote the October, 1977 policy to provide for coverage for goods owned by others and for rail shipment. (Annual Transportation Floater -- All Risk Form). Similarly in October, 1979, Lumbermens issued a policy when did not meet the requests of Holiday and Cohen and did not provide coverage for goods owned by others (Motor Truck Cargo-Owners Form).This time, however, unlike 1977, Cohen did not discover the error until after the date of the accident, January 25, 1980. Subsequently, on April 11, 1980, Lumbermens issued a Motor Truck Cargo-All Risks Form, which provides coverage for goods owned by others and which excludes rail coverage. Lumbermens refused to make this change retroactive as requested by Cohen.
The motor truck cargo policy, number 9AT 518025, was in effect on January 25, 1980, the date of the truck accident which gives rise to this litigation. This policy did not provide coverage for goods transported by Holiday which were owned by others.
1. Reformation of the Policy
Holiday and Cohen urge this court to reform the insurance contract to avoid a mutual mistake and to express the intent of the parties. See Smith v. Mutual Trust Life Ins. Co., 19 Misc. 2d 820, 189 N.Y.S.2d 393, 396 (Sup.Ct. 1959), aff'd, 10 A.D.2d 736, 201 N.Y.S.2d 488 (2d Dep't 1960). However, in Smith, the intent of the parties was expressed in an insurance policy.
In the instant case, Lumbermens denies that it intended to provide coverage for the goods owned by others.
The testimony of Kimball establishes that, in October, 1979, Lumbermens did not intend to provide this coverage and in fact issued a policy which did not provide coverage for the goods of others. Consequently, despite the intention of Holiday and Cohen to procure the coverage, Lumbermens' intention not to provide it defeats the assertion of a ...