Court Opinion

ID: 9476373
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:54:22.686467+00
Date Added: 2024-06-11T17:45:16.677733
License: Public Domain

OAKES, Circuit Judge
(dissenting):
The majority holds that IFF failed to give timely notice to Commercial Union of a relevant occurrence and thus Commercial Union had no duty to defend or indemnify IFF. Because I believe IFF satisfactorily complied with its obligation under the contract to notify Commercial Union of the suit brought by Plough, I respectfully dissent.
Under Paragraph 4 of the Commercial Union policies, IFF had duties as follows:
(a) In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.
(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.
(c) The insured shall cooperate with the company and, upon the company’s request, assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the insured because of injury or damage with respect to which insurance is afforded under this policy; and the insured shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of accident.
There is no doubt that IFF complied with subparagraph 4(b) relative to notification of the suit brought by Plough, and “Occurrence” is defined in the Commercial Union policies as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”
In a malpractice insurance case, Giles v. St. Paul Fire & Marine Insurance Co., 62 A.D.2d 1138, 404 N.Y.S.2d 190 (1978), the court described as “vague and ambiguous” language defining “occurrence” that was precisely the same as the language in this case. The court held that no notice was required by the insured until suit was brought, arguing that if the insurer “intended to require notice at the time the plaintiff insureds became aware of an act *276or omission which might reasonably be expected to be the basis of a ... suit, it should have done so in clear and unambiguous language.” Id. at 1139, 404 N.Y.S.2d at 192. That case was followed in Romano v. St. Paul Fire & Marine Insurance Co., 65 A.D.2d 941, 410 N.Y.S.2d 942 (1978) (mem.); but see id. at 943, 410 N.Y.S.2d at 944 (Cardamone, J., dissenting). As I see it, products liability is analogous to malpractice liability in that, to use the language of Giles, “[t]he potential for error in a [products liability] context is pervasive.” 62 A.D.2d at 1139, 404 N.Y.S.2d at 192. Because an ambiguous policy must be construed against the insurer, see, e.g., Niagara County v. Utica Mut. Ins. Co., 80 A.D.2d 415, 420, 439 N.Y.S.2d 538, 541 (1981), and because this is a case where, quoting Judge Pollack in setting aside the first verdict, “a cause is unknown, disputed, investigated by scientists, only discovered by new methodology and unanticipated until long after the occurrences,” 633 F.Supp. at 653, I believe that IFF had no duty to notify the insurer until Plough threatened suit. Plough did not threaten suit, however, it brought suit. Therefore there was no violation of the policy conditions.
To be sure, there is broad language in Security Mutual Insurance Co. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440-41, 293 N.E.2d 76, 78, 340 N.Y.S.2d 902, 905-06 (1972), to the effect that the insured “must exercise reasonable care and diligence to keep himself informed of accidents out of which claims for damages may arise” and that an “insurer need not show prejudice before it can assert the defense of noncompliance” with a condition requiring notice of an occurrence. But that case involved insureds who knew that two firemen had been injured in a major fire at a building they owned and operated. Indeed, the insureds had read a newspaper article reporting that the firemen had filed suit against the city and specifically referring to the possible liability of the insureds.
Here I suggest that the ingredient 6-MC had been used for decades as a fragrance and flavoring agent without incident or complaint. Both as a discrete ingredient and as part of Plough’s suncare products, it had been thoroughly tested and found to be without harmful propensity. Existing testing methodologies were not able to predict or demonstrate its photoallergenicity and the scientific community as a whole believed it harmless, as the scientific literature likewise indicated. Moreover, IFF had been requested by Plough to duplicate a fragrance provided by Plough which itself contained 6-MC, and Plough itself did not consider the alleged reactions to its products serious enough even to call for a warning to consumers, much less a recall of such products, until the FDA request in September 1978, a request which Plough resisted. I note that Plough had kept strictly confidential its meetings and correspondence in 1977 and 1978 with the FDA over a possible recall of Plough’s products, and had urged the FDA to do likewise, on the ground that the problem was not serious enough to warrant publicity, let alone recall. It is interesting that after 6-MC had been identified as a photoallergen and replaced in IFF’s fragrance, Plough continued to purchase the reformulated fragrance and other fragrances from IFF, without making any claim against IFF. And, Plough never made any claim against IFF or even indicated that it intended to do so until it brought suit in March 1979, three months after the FDA action. Finally, IFF in my opinion could reasonably have thought the manufacturer of the end product, that is, Plough, was responsible for the safety of that product, as the ultimate use of the fragrance was wholly within its control. Mr. Grisanti of IFF, who had twenty-five years’ experience in the fragrance industry, testified that nobody in that industry had ever been sued as a result of an allergic reaction to a fragrance supplied to a cosmetics manufacturer.
Given these points, many of them stipulated to by CU, I do not think IFF violated the notice provision of the policy by failing to notify CU until Plough actually brought suit. Indeed, as early as December 8, 1978, IFF notified its insurance broker who in turn notified CU of the FDA’s finding that 6-MC could cause allergic reactions in con*277sumers using products in which it was incorporated. That letter goes on to report that no claims or demands had been made against IFF as a result of its use of 6-MC.
Accordingly, I dissent.