Court Opinion

ID: 9470476
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:07:18.638745+00
Date Added: 2024-06-11T17:41:55.485135
License: Public Domain

IRVING R. KAUFMAN, Circuit Judge
(concurring):
I concur in the result reached by the majority, but for slightly different reasons. The dispute in this case is not whether Aetna’s insurance policies extended coverage against consequential damages. Rather the question is whether General Time’s liability to Flair for the latter’s lost profits was the type of consequential damage against which General Time was protected pursuant to the terms of the contracts. Since both the insurance agreements and the law are unclear on this disputed issue, I would adhere to long-standing and widely accepted principles of contract interpretation, and construe the terms of the policies against the insurer.
The umbrella policy expressly covered consequential losses resulting from damage to the insured’s property. “ ‘[Pjroperty damage’ means injury to or destruction of tangible property ... and all direct and consequential loss resulting therefrom.”1 The disagreement between the parties focuses on whether those consequential damages which are covered by this clause include losses resulting from liability to a third party for lost profits. Unfortunately, the policy fails to shed any light on this question, and the intention of the parties at the time the agreement was entered into is also obscure.
In the absence of meaningful guidance from the policies, we look to state law to determine whether consequential damages clauses have been interpreted to encompass lost profits. Connecticut law, which, as the majority notes is controlling, has not resolved this issue. In my -view, the law of New York is also of little aid.
In Thomas J. Lipton, Inc. v. Liberty Mutual Ins. Co., 34 N.Y.2d 356, 357 N.Y.S.2d 705, 314 N.E.2d 37 (1974), the Court of Appeals affirmed a lower court judgment which awarded consequential damages, including lost profits, to the insured in an action against the insurer. Neither the Court of Appeals, nor the Supreme Court, however, focused on the issue whether lost profits could be treated as insured consequential damages. Indeed, the dispute in Lipton did not center on coverage of profits, but rather on whether all damages resulting from a recall of Lipton’s products were excluded pursuant to a policy provision which purported to limit the insurer’s liability in the event of a recall of defective goods. There is no indication in the courts’ opinions that they considered whether lost profits could be considered as an insured consequential damage.
*85Fairly read, Lipton does not support a claim that New York clearly allows for recovery of lost profits. Indeed, subsequent New York decisions have rejected attempts to recover lost profits in similar circumstances. For example, in Willets Point Contracting Corp. v. Hartford Ins. Group, 75 A.D.2d 254, 259, 429 N.Y.S.2d 230, 233 (2d Dept.1980), aff’d, 53 N.Y.2d 879, 440 N.Y.S.2d 619, 423 N.E.2d 42 (1981), the court concluded that lost profits were not covered by an insurance clause which protected against property damage, and accordingly, the insurer had no obligation to defend such a claim. See also County of Monroe v. Travelers Ins. Co., 100 Misc.2d 417, 422, 419 N.Y.S.2d 410, 413 (Monroe Cty.1979) (“Lost profits, delay and performance of extra work are not encompassed within the term property damage....”) In light of these inconsistent decisions, and absent clear guidance from the Court of Appeals, the issue of lost profits is unresolved under New York law.
Courts in other jurisdictions have also considered this question, but unfortunately, the case law indicates a marked lack of unanimity. Many courts which have confronted the issue have concluded lost profits are not an insured consequential loss from property damage. See Liberty Mutual Ins. Co. v. Consolidated Milk Producers’Association, 354 F.Supp. 879, 884 (D.N.H.1973); Hartford Accident & Indemnity Co. v. Case Foundation Co., 10 Ill.App.3d 115, 294 N.E.2d 7, 13-14 (Ill.App.1973); Geddes & Smith, Inc. v. Saint Paul-Mercury Indemnity Co., 51 Cal.2d 558, 334 P.2d 881, 885-86 (Cal.1959) (en banc); see also 11 Couch on Insurance 2d § 42:402 (1963). Other courts, however, have reached a contrary result. See, e.g, Central Armature Works v. American Motorists Ins. Co., 520 F.Supp. 283, 289 (D.D.C.1980); General Ins. Co. of America v. Gauger, 13 Wash.App. 928, 538 P.2d 563 (Wash. App.1980).
In the absence of further instruction from the New York courts on this question, we have little basis for concluding that New York law grants General Time the right to recover the amount of its liability to Flair for the latter’s lost profits. Since the case law does not clarify the meaning of the words “consequential damages,” we are left with nothing more than the ambiguous provisions of the insurance policies.
We, therefore, must turn to the principles dealing with the uncertainty of meaning of provisions in an insurance policy. The law is clear that ambiguities in insurance agreements are to be construed most favorably to the insured. Since the insurer is assumed to have control over drafting the contract provisions, it is fair to hold it responsible for ambiguous terms, and accord the insured the benefit of uncertainties which the insurer could have, but failed to clarify. Both Connecticut and New York have adopted this hornbook rule of contract interpretation. “If the terms of an insurance policy are of doubtful meaning, that permissible construction which is most favorable to the insured is to be adopted .... ” Weingarten v. Allstate Ins. Co., 169 Conn. 502, 509, 363 A.2d 1055, 1059 (1975) (quoting Porto v. Metropolitan Life Ins. Co., 120 Conn. 196, 200, 180 A. 289, 290 (1935)); see also Simses v. North American Company for Life & Health Ins., 175 Conn. 77, 394 A.2d 710 (1978); Palace Laundry Co. v. Hartford Accident & Indemnity Co., 27 Conn.Supp. 222, 234 A.2d 640 (Ct.Comm.Pleas 1967). “Well recognized is the general rule that ambiguities in an insurance policy are to be construed against the insurer, particularly when found in an exclusionary clause.” Breed v. Ins. Co. of North America, 46 N.Y.2d 351, 353, 413 N.Y.S.2d 352, 354, 385 N.E.2d 1280 (1978); see also Miller v. Continental Ins. Co., 40 N.Y.2d 675, 389 N.Y.S.2d 565, 358 N.E.2d 258 (1976); Thomas J. Lipton, Inc., supra, 34 N.Y.2d at 361, 357 N.Y.S.2d at 708, 314 N.E.2d at 40. Applying this well ensconsed principle of policy interpretation, I would hold Aetna responsible for the ambiguity in the insurance agreements relating to lost profits, and construe those provisions as affording General Time coverage for its losses resulting from liability for Flair’s lost profits.

. The primary policy contained a slightly different definition of property damage, but Judge Sand ruled that the policies were intended to have coextensive coverage, and the parties do not contest this conclusion.