Masterson, District Judge.
MASTERSON, District Judge:
This is an action for contractual damages brought by Pittsburgh Bridge & Iron Works (hereinafter referred to as "PBI") against Liberty Mutual Insurance Company (hereinafter referred to as "Liberty Mutual") for Liberty Mutual's failure to defend a property damage claim made against PBI.
In 1963, Colorado Fuel & Iron Corporation (hereinafter referred to as "Colorado") entered into a contract with Ft. Brannaum, Inc. (hereinafter referred to as "Brannaum"), whereby Colorado agreed to erect a tramway system from materials furnished by Colorado. Brannaum agreed to pour the concrete and anchor the steel for the foundation. Colorado subcontracted the erection of the tramway system to PBI under a purchase order dated February 28, 1963. Colorado further subcontracted the fabrication of the towers and the saddles*fn1 for the tramway system to PBI on April 10, 1963. PBI proceeded to erect the tramway and installed in the tramway a saddle incorrectly fabricated from the plans and specifications submitted to PBI by Colorado. The tramway operated from 1963 to 1965 at which time it was discovered that two of the outer strands of the main cable supporting the tramway car had broken due to the defective fabrication of the saddle. The cable had been manufactured and supplied by Colorado.
At all times relevant to this cause of action, PBI was an insured of Liberty Mutual under a comprehensive general liability policy in which the insurer promised:
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.
The policy further provided that the insured would:
Defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent . . .
The insurance policy included "products hazard" insurance, being partially defined in the policy as follows:
The term "product hazard" means operations, if the accident occurs after such operations have been completed or abandoned and occurs away from the premises owned, rented or controlled by the named insured; provided, operations shall not be deemed incomplete because improperly or defectively performed or because further operations may be required pursuant to an agreement.
In the exclusion section of the policy under exclusion (h)(4), it was recited that the policy does not apply:
To injury to or destruction of . . . any goods, products or containers thereof manufactured, sold, handled or distributed or premises alienated by the named insured, or work completed by or for the named insured, out of which the accident arises.
PBI notified Liberty Mutual of Brannaum's claim and Liberty caused an investigation to be made. As the result of the investigation, Liberty Mutual was notified by letter from Frederick L. Walker, an engineer, that the broken strands were caused by the defective saddle. Although PBI requested Liberty Mutual to assume defense of the claim, Liberty Mutual denied coverage of the claim under the policy.
On June 10, 1966, Brannaum filed a complaint in the United States District Court for the Eastern District of Kentucky against Colorado alleging damages resulting inter alia from the inoperation of the tramway and on June 15, 1966, Colorado filed a third party complaint against PBI. Plaintiff secured the representation of the law firm of Meyer, Unkovic & Scott in Pittsburgh, Pennsylvania and the law firm of Harbison, ...