July 20, 1936
STANDARD ACC. INS. CO.
COLLINGDALE STATE BANK
Appeal from the District Court of the United States for the Eastern District of Pennsylvania; William H. Kirkpatrick, Judge.
Before DAVIS and THOMPSON, Circuit Judges, and FAKE, District Judge.
THOMPSON, Circuit Judge.
This is an appeal from a judgment of the District Court for the Eastern District of Pennsylvania. The appellee brought suit in assumpsit against the appellant on a fidelity schedule bond. The appellant's bond purported to protect the appellee against the dishonesty and misappropriation of its employees, among whom was the appellee's cashier, John S. Ward. Ward misappropriated a sum in excess of $9,500 during the period beginning December 3, 1929, and expiring August 28, 1930, and further misappropriated funds in excess of $9,500 during the period beginning August 28, 1930, and ending August 28, 1931. The appellant alleged that by the terms of the bond the coverage was noncumulative, and that therefore its liability was restricted to a total of $9,500. The appellee maintained that the appellant had undertaken to insure the fidelity of Ward for two separate terms, that the contracts were separate and distinct, and that the liability was cumulative. A jury trial was waived by written stipulation filed of record. The District Court entered judgment for the appellee, assessing $9,500 as insurance for the first period, $9,500, for the second period, and interest on both amounts.
The question presented is whether the parties provided for a single liability or for successive (cumulative) liabilities. The answer to this question must be sought in the bond and schedules which comprise the contract between the parties, for in the bond and schedules can be found the intention of the parties. The bond and pertinent schedules are set out in the margin.*fn* We note that the bond is dated August 28, 1929, and that no expiration date is given. The grounds upon which the insurance may be terminated are set out in clause 5 of the bond. The schedules, however, contain a definite termination date. The first schedule which purports to insure the fidelity of the defaulting employee is dated December 3, 1929, and by its terms expires August 28, 1930. The subsequent schedule which carries Ward's name is dated August 28, 1930, and by its terms expires August 28, 1931. Neither the bond nor the schedules contain any statement that the liability was to be noncumulative. From these facts we conclude that the parties meant the fidelity of Ward to be insured from December 3, 1929, to August 28, 1930, and then again from August 28, 1930, to August 28, 1931. We are the more persuaded to this view by the improbability that a practical business concern, such as the appellee herein, would pay one company two premiums for a single right of recovery if it could by payment of the same sum to two separate insurance carriers procure recoverable insurance for two periods.
The numerous cases cited by the appellant to sustain its contention that the bond in suit is a noncumulatve undertaking may be distinguished. In Brulatour v. AEtna Casualty & Surety Co. (C.C.A.) 80 F.2d 834, the Second Circuit construed the fidelity bond and its successive schedules as a contract which did not permit cumulative liability. It based this conclusion upon a number of factors, mainly: There was nothing to indicate that the original contract set up by the bond ever ended; the yearly schedules all expressly stated that the coverage was under the original bond; the revised schedules contained the provision that the liability was noncumulative; the assured did not object to the noncumulative provision. The court differentiated Maryland Casualty Co. v. First Nat. Bank, 246 F. 892 (C.C.A. 5), and Florida Cent. & P. R. Co. v. American Surety Co., 99 F. 674 (C.C.A. 2), on the ground that the bond and schedules in those cases showed yearly expiration dates.
In Leonard v. AEtna Casualty & Surety Co. (C.C.A.) 80 F.2d 205, the Fourth Circuit in a well-considered opinion affirmed a decision of the District Court for the Western District of South Carolina which held that the bond in suit provided for noncumulative liability. The Circuit Court pointed out that the instrument to be construed did not specify a definitely limited period terminating on a certain date and that the schedules did not contain a provision that the fidelity of the employee was insured for a period ending on a definite date. The other cited cases may be distinguished on similar grounds. Our conclusion is that in the instant case the parties intended that a separate and distinct liability should arise for each period and that the sum total of the liabilities should be cumulative.
The question as to whether the appellee breached the condition of the bond by failure to give notice "as soon as possible after becoming aware of any act committed by any Employee which may be made the basis of claim hereunder" must necessarily be decided against the appellant's contention in view of the fact findings of the judge to whom the cause had been tried without a jury.