Court Opinion

ID: 9520698
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:47:06.622148+00
Date Added: 2024-06-11T12:46:42.221612
License: Public Domain

R.S. Smith, J.
(dissenting). I agree that the “purpose of a vendor’s endorsement,” as it is described in Hartford Fire Ins. Co. v St. Paul Surplus Lines Ins. Co. (280 F3d 744, 746 [7th Cir 2002]) and elsewhere, would be served by reading the endorsement in this case the way the majority does. But I cannot reconcile that reading with the language of the endorsement, and I therefore dissent.
*166The endorsement protects vendors like Arbor against claims for “ ‘Bodily Injury’ or ‘Property Damage’ arising out of ‘Your [Raymond’s] Products’ . . . which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendors [sic] business.” The majority reads the words “arising out of ‘Your Products’ ” to mean “arising out of defects in ‘Your Products’ ” (majority op at 162). This reading of the phrase is not an impossible one, though it departs from our usual practice of resolving ambiguities in favor of the insured (United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986]); I might accept the majority’s reading if the rest of the vendor’s endorsement were consistent with it. When I read the exclusions from the vendor’s endorsement, however, I cannot believe that the author of the document intended only actions arising out of product defects to be within the endorsement’s coverage. If that was the author’s intention, the exclusions are largely unnecessary.
The vendor’s endorsement contains six exclusions, of which four are rendered pointless by the majority’s interpretation. Those four provide:
“The Coverage afforded the Vendor does not apply to:
“A. ‘Bodily Injury’ or ‘Property Damage’ for which the Insured is obligated to pay ‘damages’ by reason of the assumption of liability in a contract or agreement;
“This exclusion does not apply to liability for ‘damage’ that the ‘Insured’ would have in absence of the contract or agreement;
“B. Any Express Warranty unauthorized by ‘YOU’;
“D. Any failure to make such inspections, adjustments, tests or servicing as the Vendor has agreed to make or normally undertakes to make in the usual course of business, in connection with distribution or sale of the products;
“E. Demonstration, installation, servicing or repair operations except such operations performed by the Vendor . . . .”
If, as the majority says, the vendor’s endorsement applies only in cases arising out of product defects, why did the author *167bother to write exclusion A, for cases where the claim arises not out of a product defect, but solely out of a “contract or agreement”? Or exclusion B, for cases arising not out of product defects, but out of express warranties? Or exclusion D, for cases arising from certain failures by the vendor? Exclusion D is a very strange provision if all failures by the vendor are outside the endorsement’s coverage to begin with. Perhaps most compelling, exclusion E, which denies coverage for “ [demonstration, installation, servicing or repair operations except such operations performed by the Vendor,” necessarily implies that coverage does exist for demonstrations and the like that are performed by the vendor.
I find the majority’s attempts to give these exclusions some meaning that is consistent with its interpretation of the endorsement completely unpersuasive. It is far-fetched to think that exclusion A was intended to cover the very rare case where a manufacturer would not be liable for a product defect but for its assumption of liability in a contract; I am impressed that the majority can come up with a single example—an agreement to waive workers’ compensation protection (majority op at 163)— but I cannot believe that is what the author of the endorsement had in mind. The majority simply restates exclusion B, mentioning that express warranties might be contained “in a marketing or sales brochure,” but making no attempt to explain why claims based on such warranties would be excluded from an endorsement that did not cover them in the first place (id.). I think the majority is simply wrong in saying that exclusion D “makes sense because neglect to maintain a product properly may eventually cause it to become defective” (id. at 164); that is not what “product defect” means (see Black’s Law Dictionary 450 [8th ed 2004] [“An imperfection in a product that has a manufacturing defect or design defect, or is faulty because of inadequate instructions or warnings”]). The majority is no doubt right that a product defect caused by poor maintenance, or any other imaginable piece of illogie, “might be alleged in a product-defect lawsuit” (majority op at 164), but it is highly unlikely that exclusion D was written to provide against that possibility. The majority’s explanation of exclusion E is that it is designed to insure “that Raymond—rather than a nonvendor third party—created the allegedly injury-causing product defect” (id.). But defects are not product defects unless the manufacturer “created” them, and if the endorsement were limited to claims based on product defects, there would be no reason either to exclude *168any acts by vendors or to distinguish, as exclusion E does, between third-party vendors and Arbor.
Thus, I read the vendor’s endorsement here as applicable to a case, like this one, arising out of an injury caused by a Raymond product, whether the product was defective or not. Cases from other jurisdictions support this reading. Pep Boys v Cigna Indent. Ins. Co. of N. Am. (300 NJ Super 245, 692 A2d 546 [1997]) and Sportmart, Inc. v Daisy Mfg. Co. (268 111 App 3d 974, 645 NE2d 360 [1994]) are indistinguishable from this case. Both involved vendors that negligently sold products to minors; in neither case was there any claim that there was anything wrong with the products themselves. Both cases involved policy language that, to the extent it is quoted in the decisions, was word-for-word identical to the language at issue here. In both cases, the vendor was held to be covered by the policy.
The majority relies on Hartford but, while Judge Posner’s opinion contains general remarks about vendor’s endorsements that are consistent with the result thé majority reaches, Hartford was quite a different case. The vendor there had not only sold the product in question—a diet pill—but had “designed the contents of the label, including the warnings” (280 F3d at 746). The injured person claimed that the warnings were inadequate {id.). The vendor’s endorsement contained “an express exception for cases in which a claim of products liability is based on the labeling or relabeling of the product by the vendor” {id. at 747)—so that the result in Hartford seems to have been compelled by clear policy language. Nor do any of the cases cited by the Hartford court for what it called the “majority view” {id.) turn on an interpretation of language similar to that at issue here.
The majority also relies on Couch’s treatise, which says that coverage under vendor’s endorsements “is limited to injuries arising out of a defect in the manufacturer’s product” (9 Couch on Insurance 3d § 130:3 [1997], quoted at majority op at 164). But the treatise does not offer this comment as an interpretation of any particular policy language. The treatise, I believe, must be read as describing what vendor’s endorsements often say, or what its author believes they ought to say. This one does not say it.
I therefore conclude that the Appellate Division correctly held that the claim against Arbor was within the coverage provided by the vendor’s endorsement, and I would affirm the Appellate Division’s order.
*169Chief Judge Kaye and Judges G.B. Smith and Ciparick concur with Judge Read; Judge R.S. Smith dissents and votes to affirm in a separate opinion in which Judges Rosenblatt and Graffeo concur.
Order reversed, etc.