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Customized Distribution Services v. Zurich Ins. Co.

Superior Court of New Jersey, Appellate Division

October 19, 2004, Argued ; December 16, 2004, Decided

DOCKET NO. A-1586-03T1


 [**561]  [*483]   The opinion of the court was delivered by


In June 2000, Campbell Soup Company (Campbell) filed a complaint against Customized Distribution Services, Inc. (CDS) which operated a warehouse in Wharton, New Jersey. The claim arose from the warehousing of a Campbell beverage product named "Splash." According to Campbell, CDS failed to rotate and ship the Splash in a timely manner and was liable for Campbell's resultant damages, including those flowing from Campbell having to dispose of the product at reduced prices.

CDS sought insurance coverage for the claim from its insurer, defendant Zurich Insurance Company (Zurich). Zurich's denial [**562]  of coverage to CDS triggered the declaratory judgment action now before us, and the focus of this appeal is on whether CDS is entitled to coverage under the policy for Campbell's damages. The trial court granted summary judgment in favor of Zurich. The action by Campbell has been settled.

The underlying facts are straightforward. On January 29, 1999, Campbell notified CDS that "Splash products [that had been stored at CDS] were shipped out of turn with expiration dates exceeding a twenty day window." Campbell informed CDS that this misrotation would result in it "be[ing] forced to sell [the affected product] to secondary markets as lower grade product and at less than 50 percent of Bulletin Price." In an apparent effort to mitigate damages, Campbell sold the misrotated product in secondary markets and donated the remaining portion to charity. Campbell claimed that because it was unable to ship the  [*484]  misrotated product in its usual retail supply chain, it sustained a loss of $ 1,384,727.00.

In February 1999, CDS notified Zurich of the potential claim based on the alleged misrotation of the Campbell Splash products. CDS had obtained insurance from Zurich that included a Comprehensive General Liability ("CGL") policy, and a Commercial Inland Marine policy containing a Warehouseman's Liability ("WL") form. The WL form provided liability coverage to the CDS warehouse located in Wharton, New Jersey where the Splash product was kept prior to shipment. On February 18, 1999, Zurich acknowledged receipt of CDS' claim, noting that it would begin its investigation and review of the claim immediately.

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373 N.J. Super. 480 *; 862 A.2d 560 **; 2004 N.J. Super. LEXIS 442 ***


Subsequent History: Approved for Publication December 16, 2004.

Certification denied by Customized Distrib. Servs. v. Zurich Ins. Co., 183 N.J. 214, 871 A.2d 91, 2005 N.J. LEXIS 358 (N.J., Mar. 8, 2005)

Prior History: On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-1747-01.


coverage, misrotation, insured, loss of use, physical loss, damages, loss of market, warehouse, ambiguity, collapse, trial court, composition, alteration, expiration, provisions, consequential loss, cause of loss, triggered, illusory, risks

Insurance Law, Policy Interpretation, Reasonable Expectations, General Overview, Civil Procedure, Appeals, Standards of Review, Questions of Fact & Law, Claim, Contract & Practice Issues, Ordinary & Usual Meanings, Plain Language, Question of Law, Ambiguous Terms, Business & Corporate Compliance, Contracts Law, Standards of Performance, Illusory Promises, Contracts Law, Contract Interpretation