UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
April 27, 1977
TREASURE CRAFT JEWELERS, INC.
JEFFERSON INSURANCE COMPANY OF NEW YORK
The opinion of the court was delivered by: GORBEY
The $25,000 question in this case is: "Is the risk of loss from burglary of property from premises located and utilized by plaintiff as a jewelry store at the Southampton Shopping Center, Southampton, Pennsylvania, covered by a scheduled personal property floater policy, bearing no. SP429342, issued by the defendant?".
The Jewelers' Block Coverage Form NC-8A, attached to and forming a part of the policy provides, inter alia :
"This company does insure the aforementioned Insured, whose premises are located 7022 Bristol Pike, Levittown, Pennsylvania.
Limitations of Liability.
2. The maximum liability of the Company resulting from any one loss, disaster or casualty is limited to:
A. $100,000. in respect of property of the Insured's premises as described herein; . . .
E. $25,000.00 in respect of property elsewhere and not included in Clauses (A) . . . above or otherwise limited herein.
3. The property insured is as follows:
A. Pearls, precious and semi-precious stones, jewels, jewelry, watches and watch movements, gold, silver, platinum, other precious metals and alloys and other stock usual to the conduct of the Insured's business, owned by the Insured;
B. Property as above described, delivered or entrusted to the Insured by others who are not dealers in such property or otherwise engaged in the jewelry trade;
C. Property as above described, delivered or entrusted to the Insured by others who are dealers in such property or otherwise engaged in the jewelry trade, but only to the extent of the Insured's own actual interest therein because of money actually advanced thereon, or legal liability for loss of or damage thereto."
Among the five endorsements added to the policy is: " Property in Custody of Personnel Away From Premises Endorsement (Applicable When Policy Limit 2 (E) Exceeds $5,000) . . .". "It is understood and agreed that the liability of the Company for property in the custody of the Insured, any employee, member of the firm, or officer of the corporation or salesman outside the premises of the Insured (as referred to in this policy) is limited to $5,000 unless the name of such individual is listed hereunder. Edward McMenamen, Donald Bound, Paul Metzner, Dan Monteith." (Emphasis added)
Plaintiff has filed the affidavit of Donald J. Bound, apparently the same individual referred to above as Donald Bound. In this he deposes and says:
"1. At all relevant times and at present he was and is President and chief executive officer of the plaintiff, and of the other insureds named in the policy issued by defendant Jefferson Insurance Company of New York, being number SP 429342.
2. As said President and chief executive officer he at all relevant times had and has supervisory powers over the operation of the Southampton store of plaintiff.
3. Since Donald J. Bound had overall supervisory powers of the said Southampton store and in fact actively at all relevant times exercised supervisory powers over said store and in fact spent a substantial amount of time at said store, the contents of the said store were in his custody within the meaning of the policy endorsement relating thereto."
It is on the basis of this affidavit and 2. E. Limitations of Liability, as previously stated, that plaintiff is claiming the sum of $25,000.
Defendant denies all liability relying upon Clause 7 under Insuring Conditions which provides:
"Unless endorsed hereon, no assignment of or change of interest under this Policy shall bind the Company, nor shall coverage apply to additional locations of the Insured or to changes in or additions to the premises of the Insured specified in Section 1. . ." (Emphasis added)
Plaintiff points to "2. E. $25,000.00 in respect of property elsewhere . . ." and insists that plaintiff's property in the Southampton Shopping Center, Southampton, Pennsylvania, is indeed "property elsewhere" from 7022 Bristol Pike, Levittown, Pennsylvania.
As to the aforementioned Clause 7 relied upon by plaintiff, it urges that a reasonable construction of said paragraph "should be that the One Hundred Thousand ($100,000) Dollars Coverage of 2 A on the Levittown premises should not apply to additional locations or to a change of location unless by written endorsement to the policy. Reasonably construing Clause 7, it is nothing more than an attempt by the insurer to impose home office control upon attempts to insure the contents of additional locations for One Hundred Thousand ($100,000) Dollars without endorsement.".
Plaintiff also urges that "Clause 7 as applied to Clause E would create an ambiguity which must be resolved in favor of the insured." (Page 11, plaintiff's memorandum of law in opposition to motion for summary judgment).
Defendant, of course, denies that there is any ambiguity as respects this contract as it relates to the issue involved herein.
The principles of law which are urged by counsel are well settled.
Insurance contracts are regarded as contracts of adhesion, their multitudinous provisions being written by the insurer for an insured who has no bargaining power, and who must take it or leave it. Thus, there developed the rule that any ambiguities in the contract must be resolved strictly against the insurer. PATTON v. PATTON, 413 Pa. 566, 198 A.2d 578 (1964); HIONIS v. NORTHERN MUTUAL INSURANCE COMPANY, et al., 230 Pa. Super. 511, 327 A.2d 363 (1974). This principle has been applied to insurance contracts generally, including life insurance contracts. THOMAS v. METROPOLITAN LIFE INS. CO., 388 Pa. 499, 131 A.2d 600 (1957). Considering the reasons for the rule, it would appear that it would not apply to those aspects of an insurance policy such as specific property which is to be covered in the policy, and the amount of insurance to apply thereto. In most situations, those matters are determined by the insured or as a result of negotiation between the parties.
Another principle of law, sometimes overlooked, is a principle that the aforementioned rule of strict construction against the insurance company has no application where the language is clear and unambiguous. SIDEBOTHOM v. METROPOLITAN LIFE INS. CO., 339 Pa. 124, 14 A.2d 131 (1940). Or, stated differently, a doubt cannot be created for the purpose of resolving it in favor of the insured. McCOWLEY v. NORTH AMERICAN ACCIDENT INS. CO., 150 Pa. Super. 540, 29 A.2d 215 (1943); WEINER v. METROPOLITAN LIFE INS. CO., 416 F. Supp. 551 (E.D. Pa. 1976); PENNSYLVANIA MFRS.' ASS'N. INS. CO. v. AETNA C. & S. INS. CO., 426 Pa. 453, 233 A.2d 548 (1967); HOLLIDAY v. ST. PAUL MERCURY INDEMNITY COMPANY, 153 Pa. Super. 59, 33 A.2d 449 (1943); QUIGLEY v. WESTERN & SOUTHERN LIFE INS. CO., 136 Pa. Super. 27, 7 A.2d 70 (1939).
The significant words of Mr. Justice Simpson writing for the court in 1933 are worthy of repetition.
"Many, if not most of the discrepant decisions arose by giving too great weight to the conclusion reached in other cases which are relied on, without noting the difference in the language of the policies. Others arose by giving undue weight to the rule, to which we adhere, that 'If doubt exists as to the meaning [of the language used in an insurance policy] it should be resolved in favor of the insured rather than in the interest of the insurer:' Levinton v. Ohio Farmers Ins. Co., 267 Pa. 448, 110 A. 295-296. In a number of the cases elsewhere, the court created the 'doubt' by a species of argument which would not be tolerated in any other kind of contract, and then, having thus found the 'doubt,' resolved it 'in favor of the insured.' So far as we are concerned, a little further reading of our opinion last referred to, will disclose a rule which is paramount to the clause above quoted: Where 'language is clear and unambiguous [it] cannot be construed to mean otherwise than what it says:' Ibid. 452. We have often said this ( Bole v. New Hampshire Fire Ins. Co., 159 Pa. 53, 28 A. 205; Hesse v. Traveler's Ins. Co., 299 Pa. 125, 149 A. 96; Foundation and Construction Co. v. Franklin Trust Co., 307 Pa. 10, 160 A. 711), and trust we shall continue to adhere to it, so long as our judicial system provides for an interpretation of contracts made by the litigants, and not to the making of contracts for them."
Urian v. Scranton Life Ins. Co., Appellant, 310 Pa. 144, 150-151, 165 A. 21.
It is likewise established that the policy must be read in its entirety; it should be construed according to the plain meaning of the words used, so as to avoid ambiguity while at the same time giving effect to all of its provisions. MASTERS v. CELINA MUTUAL INSURANCE COMPANY, 209 Pa. Super. 111, 224 A.2d 774 (1966).
"The language in an insurance contract is construed by its usual and ordinary meaning so that a person of ordinary intelligence can understand what is being insured and for how long . . ." (Emphasis added)
Hannon Motor Lines, Inc. v. Liberty Mutual Insurance Co., 214 F. Supp. 250 (W.D. Pa. 1963).
"A court may not rewrite policies of insurance . . ." Globe Indemnity Co. v. Liberty Ins. Co., 138 F.2d 180-184 (3d Cir. 1943);
nor can the insurer's obligation be enlarged or varied by judicial construction. IN RE PODOLSKY, 115 F.2d 965 (3d Cir. 1940).
"The parties had the right to make their own contract, and it is not the function of this Court to rewrite it, or to give it a construction in conflict with that which accords with the accepted and plain meaning of the language used." Topkis v. Rosenzweig, 333 Pa. 529, 5 A.2d 100, 101 (1939).
The court has "no right to add anything to the insurance contract or to give it a construction that renders any part of it useless and unnecessary, if it can be reasonably construed just as written and without any change, addition or elimination." QUIGLEY v. WESTERN & SOUTHERN LIFE INS. CO., supra.
Just as it is not permissible to lift one sentence from the policy and to try to attach a different meaning to that sentence standing alone, KEHOE et al. v. AUTOMOBILIE UNDERWRITERS, INC., 12 F. Supp. 14 (M.D. Pa. 1935), it would not be permissible to lift one clause out of the insurance contract in this case and to attach a different meaning to that paragraph considered in isolation from the rest.
Plaintiff has insisted that even if there is no ambiguity the burden is on the insurer to prove that the insured was aware of the exclusion of limitations and that the effect thereof was explained to the insured, citing as authority HIONIS v. NORTHERN MUTUAL INSURANCE COMPANY, et al., supra. It therefore concludes that an issue of fact must be determined, and this would preclude summary judgment. The language from that case, extracted by the plaintiff at page 12 of his memorandum, must be interpreted in the light of the facts of the particular case. When so considered, it has no application to the facts of the case sub judice, for in that case the litigation arose because the agent failed to provide, without explanation, coverage which had been requested by the insured. No such problem is presented here.
With respect to a defense based on an exception or exclusion with the burden of proof on the insurer, WEISSMAN v. PRASHKER, 405 Pa. 226, 233, 175 A.2d 63 (1961), it must be noted that there is a sharp distinction between a defense based upon an exception or exclusion on the one hand, and a risk not included on the other, a distinction emphasized particularly in life insurance contract cases involving an incontestability clause. METROPOLITAN LIFE INS. CO. v. CONWAY, 252 N.Y. 449, 169 N.E. 642 (1930). The defense here is not based upon an exception or an exclusion; it is based upon the simple contention that the language of the policy clearly and unambiguously shows that the risk of burglary at the Southampton jewelry store was not covered by the contract.
We may say here, as did the court in BLOCKER v. AETNA CASUALTY AND SURETY COMPANY, 232 Pa. Super. 111, 332 A.2d 476, 477-478 (1975):
"The single issue for our determination will of course be resolved by our analysis of the terms and conditions of the insurance policy issued by the appellant [defendant]. This analysis of an insurance policy, like the interpretation of any other written contract is a question of law for the court. Bole v. New Hampshire Fire Insurance Company, 159 Pa. 53, 28 A. 205 (1895)."
The first clause of Jewelers' Block Coverage Form NC-8A, in Clause 1, states:
". . . THIS COMPANY DOES INSURE the aforementioned Insured, whose premises are located at 7022 Bristol Pike, Levittown, Pennsylvania."
It is a sound and well established rule that the location at which the subject matter of an insurance policy is exposed to the peril insured against, is necessary for the writing of a policy covering burglary losses just as it is for the writing of a fire insurance policy. The insurance company must have knowledge of this, as well as other material facts, in order that it as a prudent insurer, may make an intelligent decision as to whether to accept the risk or not, and if it decides to assume the risk, the amount of the premium which should be charged.
It has been held "that the specified location of the insured property is so important and so essential to the risk assumed, that coverage does not exist to casualty occurring at a different place or location." MORGAN SMITH AUTOMOTIVE PRODUCTS, INC. v. CONTINENTAL INSURANCE CO., 418 Pa. 190, 210 A.2d 273, 275 (1965). See also Volume IV, Appleman Insurance Law and Practice, § 2350, p. 361.
Turning to the policy we find that immediately under the location of the premises appears:
"2. The maximum liability of the Company resulting from any one loss, disaster or casualty is limited to:
A. $100,000 in respect of property at the Insured's premises as described herein."
Since the only premises described "herein" is 7022 Bristol Pike, Levittown, Pennsylvania, the risk of loss of property elsewhere at another location of the plaintiff, is a risk not assumed by the contract.
It is instructive to look at the Proposal for Jewelers' Block Policy, a part of the contract attached to plaintiff's complaint. This is the part where the insurer has asked questions the answers to which are to enable it to appraise intelligently the risk before determining whether to accept it or not, and if so, what premium should be charged. In Clause 1 c, we find: "Our premises are located at 1st Floor & Basement 7022 Bristol Pike, Levittown, Bucks County, Pa.".
Turning now to Clause 2, we read:
"The maximum liability of the Company resulting from any one loss, disaster or casualty is limited to: E. $25,000.00 in respect of property elsewhere and not included in Clauses (A) . . . or otherwise limited herein."
It is true, as plaintiff argues, that property of the plaintiff in Southampton Shopping Center, Southampton, Pennsylvania, is obviously property "elsewhere" than Levittown. However, the meaning of "property elsewhere" must be related to a policy which covered the premises of the insured at the location given by the insured.
Since this is a Jewelers' Block Policy, it could be anticipated, as indeed it was, that some jewelry which would normally be kept at the described premises, would for quite legitimate business reasons, be removed from the store by an officer, employee, or salesman, therefore subject to risks entirely different from the risk at the described premises in Levittown. That this was anticipated is clearly shown by the aforementioned 2 E of the Limitations of Liability which limited liability to $25,000.00.
When we examine the second page of the Proposal, we read:
"11. Property outside our Premises as set forth in Question 1 c during the last 12 months:
a. In the custody or control of the Proposer, Employees, Members of the Firm or Officers of the Corporation or Salesmen:
1. In cities or towns in which the Proposer's premises are situated.
NAME NUMBER OF AVERAGE MAXIMUM
DAYS AMOUNT AMOUNT
Edward McMenamen 156 days 3 per wk. $5,000 $25,000
Paul Metzner 60 days 5 per month $5,000 $25,000
Dan Monteith 104 days 2 per wk. $10,000 $25,000
Donald Bound 60 days 5 per month $5,000 $25,000
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