International Products Co. v. Erie R.R. – 244 N.Y. 331, 155 N.E. 662 (1927)
Facts
The plaintiff imported goods and sold them to the customers. It was expecting some upcoming shipment, and contracted with the defendant to store the goods at the defendant’s warehouse dock upon arrival. When the plaintiff asked whether the shipment had arrived, the defendant negligently said it did, and told the wrong duck number to the plaintiff. The plaintiff purchased insurance according to the defendant’s description of the dock. Later, the actual dock where the shipment was stored was on fire, destroying the products. The plaintiff was not covered by the insurance due to the wrong description of the defendant. The plaintiff instituted the suit against the defendant.
Issue
Is the defendant liable for its negligent statement when the plaintiff was unable to recover damages from the insurance due to the reliance upon comment negligently made by the defendant?
Rules
Jaillet v. Cashman
Liability arises only where there is a duty to give the correct information. ... There must be knowledge or its equivalent that the information is desired for a serious purpose; that he to whom it is given intends to rely and act upon it; that if false or erroneous he will because of it be injured in person or property. Finally the relationship of the parties must be such that in morals and good conscience the one has the right to rely upon the other for information, and the other giving the information owes a duty to give it with care.
Application
The plaintiff argued that the defendant should be held liable for the damages because due to their negligent statement, the products were unprotected by the insurance. The defendant disagreed with the argument, rejoining that they do not owe any liability either under tort or contract. The court followed the rule portrayed in Jaillet v. Cashman. Liability is established due to the negligent statement when the defendant knew the plaintiff desired information for serious purpose, he relies upon the defendant, false statement would injure the person or property and the relationship of the parties is based on good conscience. Here, as a bailee and bailor, the parties established a good conscience relationship. The defendant solely had the opinion of which dock that the shipment will be stored. The plaintiff has no other choice but to rely on the defendant's information. The purpose of the acquiring information was to obtain insurance was known and false information would render the insurance worthless is easily presumable. Because the facts in the case sufficiently establish liability under negligently spoken words, the defendant should be held liable for damages caused by its words.
Holding
Yes, the defendant is liable for its negligent statement.
Conclusion
Affirmed.
Feedback and notes
If there was a provision in the contract between the insurance company and the plaintiff based on fire destruction, the case would have been resolved quickly. But since there was no such, the court focuses on the relationship between the parties to see whether the defendant is liable for the plaintiff’s loss. There was also no contract regarding fire destruction between the parties. But the court held that the duty of care can exist without contractual privity- so the defendant breached its duty of care when it told the wrong dock number to the plaintiff.