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Keystone Fabric Laminates Inc. v. Federal Insurance Co.

filed: March 13, 1969.

KEYSTONE FABRIC LAMINATES, INC.
v.
FEDERAL INSURANCE CO., ET AL.



Seitz, Aldisert and Stahl, Circuit Judges.

Author: Seitz

SEITZ, Circuit Judge:

This is an appeal pursuant to 28 U.S.C. ยง 1292(b) from an interlocutory order granting partial summary judgment for plaintiff on the issue of priority on its claim in a diversity action. The issue of damages was reserved for trial.

Plaintiff, Keystone Fabric Laminates, Inc. (Keystone), brought this action in the district court against defendant, Federal Insurance Company, to collect for a claim which it made under a policy issued to it as bailee by the insurance company. The insurance company paid the sum due under the policy into the registry of the court and interpleaded the bailors, who sought the proceeds of the policy to the exclusion of the bailee.

Keystone was in the business of laminating fabrics furnished by its customers to a backing furnished by Keystone. In the course of its business Keystone had in its possession fabrics owned by its customers upon some of which fabrics it had performed services and had added material. In 1964 it took out an insurance policy with defendant, and attached thereto was the insuring agreement in question here, entitled, "Bailee Customers Floater."*fn1 It provided coverage up to $300,000 as follows:

"1. On all kinds of goods and/or articles accepted by the Assured for lamination and other similar processes; the property of customers while contained in the following premises * * *.

"2. This policy covers direct physical loss or damage to the insured property from:

"(a) Fire arising from any cause whatsoever * * *."

The dispute centers around the following sections of the floater: Paragraphs A and B of the "Conditions", which provide:

"A. Loss, if any, at the option of this Company to be adjusted with and paid to the Insured for account of whom it may concern, or adjusted with and paid direct to the Insured's customers.

"B. The measure of loss shall include the Insured's charges that have been earned on property on which a loss is paid hereunder, excluding such charges that were uncollectible before the property loss."

and Endorsement Number One, which reads:

"It is agreed that the named assured shall obtain from customers or fix a specific valuation on the insured property, and this Company shall not be liable for more than the respective valuation declared by customers or fixed by the named assured, nor in any event beyond the actual cash value (meaning the cost to repair or replace the property with material of like kind and quality) of the insured property at the time any loss or damage occurs, and the loss or damages shall be ascertained or estimated according to such actual cash value with proper deduction for depreciation however caused."

In 1965, a fire occurred at one of the premises covered by the policy and destroyed all of the goods of Keystone's customers. Plaintiff filed a claim with defendant for priority in payment under the policy for its earned charges for processing done on some of the destroyed goods ($43,077.40). The customers of Keystone also claimed the proceeds of the policy ($300,000) in order to cover at least partially the value of their goods lost, plus the earned charges on them, a total of $716,111.80. After the insurance company denied its claim, plaintiff ...


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