International Products Company v. Erie Railroad Company

New York Court of Appeals · 1927 · Torts

244 N.Y. 331 (1927)

Updated July 23, 2026

TortsNegligent misrepresentationNegligenceBailmentsliability for negligent languageduty to speak with carerelianceproximate loss

Facts

The plaintiff arranged with the defendant railroad that goods arriving in Brooklyn would be taken to the railroad's docks and stored, with a bill of lading to be executed later in the ordinary course. Knowing the plaintiff needed the warehouse location to obtain insurance after the goods' existing coverage ended, the defendant told the plaintiff on August 17 that the goods were docked at dock F, Weekawken, though in fact the defendant had not yet received them and later stored part of them on dock D. The plaintiff relied on the statement to procure insurance describing dock F. In November dock D burned, and the plaintiff could not recover insurance because the policy misdescribed the storage location.

Issue

May a plaintiff recover in negligence for loss caused by a defendant's false statement about the location of goods when the statement was made carelessly, the defendant knew it was sought for insurance purposes, and the plaintiff relied on it, even though the defendant did not yet possess the goods when it made the statement?

Rule

Words negligently spoken may justify recovery of proximate damages caused by reliance on their accuracy when there is a duty, if one speaks at all, to give correct information. That duty arises where the speaker knows or has the equivalent of knowledge that the information is desired for a serious purpose, that the recipient intends to rely and act on it, that false information will likely cause injury to person or property, and the relationship of the parties, arising out of contract or otherwise, is such that the recipient has the right to rely on the speaker and the speaker owes a duty to give the information with care.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Marin Imports arranged with Harbor Belt Freight, a fictional rail carrier in Jersey City, to receive a shipment arriving in Newark and store it temporarily at the carrier’s yard until Marin gave shipping instructions. Before the goods were actually transferred, Marin told Harbor Belt it needed the exact storage shed to obtain insurance, and Harbor Belt carelessly responded that the goods were in Shed 4. Marin bought insurance naming Shed 4, but the goods were later placed in Shed 7, which burned, and the policy did not cover the loss because of the wrong location.

If Marin sues Harbor Belt in negligence for the loss of insurance proceeds, which is the best answer?

Explanation. The majority recognized liability for negligent language when there is a duty to speak with care. That duty arises when the speaker knows the information is sought for a serious purpose, knows the recipient intends to rely and act, knows falsity will likely cause injury, and the relationship of the parties makes reliance morally and legally justified. The court specifically held that liability was possible even though the speaker had not yet obtained possession, because the parties had already arranged for receipt and storage and the answer was given for insurance purposes.