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GILBERT v. SAFEGUARD MUT. INS. CO.

July 26, 1972

Harry GILBERT and Irene W. Gilbert
v.
SAFEGUARD MUTUAL INSURANCE COMPANY


Luongo, District Judge.


The opinion of the court was delivered by: LUONGO

Plaintiffs, Harry and Irene W. Gilbert, citizens of New York, were holders of bonds of William Penn Finance Company and Associated Acceptance Corporation in the total face amount of $17,000. The bonds were insured against loss in the event of the insolvency of either corporation by Empire Mutual Insurance Company. On September 1, 1960, William Penn and Associated Acceptance merged with Commonwealth Financial Corporation. Several years later Safeguard Mutual Insurance Company, a Pennsylvania corporation, replaced Empire as insurer of the obligations which Commonwealth had assumed by reason of the merger.

 The Gilberts received two documents entitled "Safeguard Mutual Insurance Company Certificates of Insurance" (hereinafter Certificates of Insurance) from Commonwealth Financial sometime in 1965. The Certificates of Insurance bore the signature "Sydney O. Snitzer" and provided as follows:

 
"It is hereby certified by Safeguard Mutual Insurance Company, a Pennsylvania insurance corporation, that the debenture holder named below is fully insured for the amount specified in this Certificate for the period specified pursuant to a Master Policy dated January 15, 1965, in which the debentures described below of Commonwealth Financial Corporation, a Pennsylvania corporation, are insured as to principal and interest for a period of five years as provided therein.
 
"This Certificate issued to: (The debenture holders) Harry G. Gilbert or Irene W. Gilbert
 
Address: 2900 Ocean Avenue, Brooklyn, N.Y. 11235
 
Amount: $
 
IN WITNESS WHEREOF the Safeguard Mutual Insurance Company has had this Certificate inscribed by its agent duly authorized thereto as of this day of , 1965.
 
Safeguard Mutual
 
Insurance Company
 
By: s/Sydney O. Snitzer "

 One Certificate [Exhibit P-2] dated March 1, 1965, was for $4,900, representing the face amount of the bonds originally issued by Associated Acceptance, and the other [Exhibit P-3] dated August 1, 1965, was for $12,100, representing the face amount of the bonds originally issued by William Penn.

 Commonwealth Financial defaulted in interest payments in 1967 and the Gilberts made claim to Safeguard for payment. Thereafter, in December 1967, Commonwealth Financial became insolvent and went into bankruptcy. Despite repeated demands, the Gilberts' claim was not paid by Safeguard and the Gilberts brought suit in this court (on diversity grounds) to recover the amount of the principal of the bonds, plus accumulated interest, less the amount which had been received by the Gilberts as a liquidation dividend from the Bankruptcy court.

 The case came to trial on February 18, 1972, but a mistrial was declared upon defendant's motion. Upon retrial in early March, 1972, the jury returned a verdict in favor of the Gilberts for $17,193, the stipulated amount of damages, which stipulated amount included principal and interest.

 Before the court are Safeguard's motions for judgment notwithstanding the verdict and, in the alternative, for a new trial.

 The grounds asserted for the motions are:

 1. the court erred in permitting the jury to determine what the contract was between the parties;

 2. the court erred in its interpretation of a written instrument issued by Safeguard;

 4. the court erred in allowing plaintiffs to reopen their case at the aborted first trial.

 The motions will be denied.

 1. The Court erred in permitting the jury to determine what the contract was between the parties.

 At trial, plaintiffs introduced into evidence a copy of a Safeguard Mutual Insurance Company insurance policy issued to Commonwealth Financial Corporation and dated March 10, 1965. The document was Exhibit P-28 and defendant maintains that it was the Master Policy referred to in the Certificates of Insurance. It is defendant's contention that since plaintiffs introduced that agreement, they were bound by its terms and by the testimony of Leopold Weiner, Corporate Secretary of Safeguard, that that document was the only written contract of insurance between Safeguard and Commonwealth Financial. Defendant argues, therefore, that the court erred when it permitted the jury to determine whether that document [Exhibit P-28] was the master policy referred to in the Certificates of Insurance, or whether there was another master policy which had not been produced, or whether no such master policy existed, in which case the jury might find that the Certificates of Insurance constituted the entire insuring agreement between plaintiffs and Safeguard.

 The evidence in the case amply justified submission of the issue to the jury. Where there is a dispute as to which set of several circumstances, some expressed in writing and some oral, constitute the agreement between the parties it is the jury's function and not the court's to determine which set of circumstances constitutes the true agreement. See Philadelphia v. Stewart, 201 Pa. 526, 51 A. 348 (1902); Jessop v. Ivory, 172 Pa. 44, 33 A. 352 (1895); and see McCormack v. Jermyn, 351 Pa. 161, 40 A. 2d 477 (1965).

 In the instant case, the discrepancies between P-28 and the Certificates of Insurance were such as to create serious doubt that P-28 was the master policy referred to in the Certificates of Insurance issued to the Gilberts. For example, the Certificates of Insurance indicated that the bondholders were protected by a master policy which insured bonds against loss as to both principal and interest, yet the alleged master policy, P-28, insured against loss of principal only. Further, the Certificates of Insurance referred to a master policy dated January 15, 1965. There was testimony that P-28 did not physically come into existence until March 10, 1965, yet one of the Certificates was issued on March 1, 1965. Another point of discrepancy was that the Certificates of Insurance provided for a five year term of coverage as set forth in the master policy, whereas P-28 made no mention of a specific period of coverage.

 Beyond the discrepancies between the Certificates of Insurance and P-28, the following testimony, elicited on cross-examination of defendant's Secretary, Mr. Weiner, indicates that there had been an oral agreement existing between Commonwealth and Safeguard for several months prior to March 10, 1965, the date P-28 came into existence:

 
"MR. BAYER:
 
Q. now let me ask you again: On March 9 was there a policy in existence or any coverage in existence? I show you P-28. Now, on March 9, the day before the day of ...

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