The opinion of the court was delivered by: DUMBAULD
There used to be people holding themselves out as transportation consultants who would solicit a large shipper for permission to audit his freight bills, and would then have him sue the carriers for overcharges under applicable tariffs, taking for their compensation a contingent percentage of the recovery.
The present litigation seems to owe its origin to a similar display of zeal and ingenuity on the part of an insurance brokerage firm (Johnson & Higgins), successfully "bucking" for plaintiff's account. The idea that the defendant insurance company might be liable under the policy issued to plaintiff apparently never occurred to plaintiff's former insurance adviser who lost the business to the more adventurous firm. The amount of money recoverable if successful would make it worth while to attempt collection, even if the law were less clearly in favor of defendant than it is. For that the magnitude of the financial interests at stake is potent to foment litigation has been aptly observed by Lord Coke and Justice Holmes. 10 Rep. pref.; Northern Securities Co. v. United States, 193 U.S. 197, 400-401, 24 S. Ct. 436, 48 L. Ed. 679 (1904); Sanitary Dist. of Chicago v. United States, 266 U.S. 405, 425, 45 S. Ct. 176, 69 L. Ed. 352 (1925). See Getty Oil Co. v. Mills, 204 F. Supp. 179, 180 (W.D.Pa.1962).
The case is before us on defendant's motion for summary judgment, raising questions of law as to the scope of coverage under the policy. From the affidavits, depositions, and other voluminous material developed during extensive discovery procedures, the following facts emerge.
Plaintiff, Bowman Steel Corporation, is the corporate successor by merger to a subsidiary manufacturing company which manufactured a product named "Steelbestos" which was sold by the parent sales company to numerous customers to be used as an exterior surface for buildings. The product, as the name indicates, was made of layers of steel and of asbestos, bonded together by a layer of adhesive material. In due course after the sales, complaints were received from many customers that the material was defective. Some complaints were of discoloration, most that the material was "delaminating" or peeling apart. Ultimately the product was determined to be so unsatisfactory that plaintiff ceased producing it.
Upon receipt of these complaints from customers, plaintiff undertook "on its own hook" to adjust the matter, installing new material to replace that which had proved defective. No demand on defendant was made, and defendant was given no opportunity to investigate or settle the claims of customers. Because of its extensive operations in the process of making replacements, the parent sales corporation negotiated with defendant's agent an adjustment of insurance rates, because it was now functioning as an operating company as an installer of material rather than simply as a sales company.
Plaintiff replaced defective material for 56 customers, on contracts approximating $1,094,010.00, incurring expenses of approximately $416,786.00.
If it were determined that defendant is liable on the policy, there would be enormous questions of fact regarding the extent and amount of damages arising out of these numerous product failures. There would also be questions of fact as to how much of the replacement work done by plaintiff was work for which plaintiff was responsible under the warranties imposed on it by law as a seller, and how much was volunteered by plaintiff as a matter of sales policy or promotion of good customer relations. There is substantial evidence that some of the replacement work fell in the latter category.
Defendant contends that it is not liable under the coverage of the policy. It further contends that plaintiff can not recover because of failure to comply with the terms of the policy by giving notice to defendant when claims arose.
The policy provides that the defendant agrees " Coverage D - Property Damage Liability - Except Automobile. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident."
Under exclusions, it is provided: "This policy does not apply: (a) to liability assumed by the insured under any contract or agreement except under coverages B and D, (1) a contract as defined herein or (2) as respects the insurance which is afforded for the Products Hazard as defined, a warranty of goods or products."
(j) under coverage D, to injury to or destruction of (1) property owned or occupied by * * * the insured, or * * * (4) any goods, products or containers thereof manufactured, sold, handled or distributed * * * by the named insured, or work completed ...