APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE (D.C. Civil No. 76-0059)
Before Seitz, Chief Judge, Higginbotham, Circuit Judge and Meanor,*fn* District Judge.
On September 12, 1974, plaintiff's decedent, Brian O'Hanlon, was a passenger in an automobile being operated by a Michael Ryan. Ryan and the operator of a never identified vehicle engaged in a drag race. Ryan's car, without making contact with the unidentified vehicle, was forced off the road where it collided with apparently immovable objects. Brian O'Hanlon suffered devastating personal injuries from which his death ensued on the second anniversary of the accident. These events gave rise to an automobile liability insurance controversy of considerable magnitude and complexity, only part of which has survived for appellate review here.
Suit was brought against Hartford Accident and Indemnity Company, Insurance Company of North America (INA), the appellant here, and Nationwide Mutual Insurance Company. Nationwide insured the Ryan car. Hartford covered in one policy four vehicles owned by Patrick J. O'Hanlon, father of Brian. INA had provided to Patrick J. O'Hanlon an "umbrella policy"*fn1 which included automobile liability coverage and also a separate primary auto policy which covered a pick-up truck owned by O'Hanlon. In the latter policy, the named insured was designated as Coe Management Company, a trade name under which O'Hanlon conducted business.
Nationwide paid its liability limit, $25,000. Recovery was sought under the Uninsured Motorist (UM) coverage of the Nationwide policy. UM recovery was also sought on the Hartford policy, the INA policy issued with Coe Management as named insured and the INA umbrella policy. The Hartford policy had $100,000/$300,000 ($100/$300) liability limits and it was asserted that under Delaware law the insurer was required to offer UM coverage in this amount, but had failed in its legal duty to do so.*fn2 Reformation of the Hartford policy to increase UM coverage to $100/$300 was sought. As to the INA Coe Management policy, it was contended that although Delaware law required that UM coverage be offered, INA did not make such coverage available. Reformation of that policy was sought to include UM coverage therein. The INA Coe Management policy had liability limits of $100/$300 and further reformation of this policy was claimed so as to provide UM coverage in that amount.
The INA umbrella policy provided UM coverage. Plaintiff asserted that this policy likewise was required by Delaware law to provide UM coverage, and consequently sought its reformation to UM limits of $300,000. This policy, as written, provided UM coverage up to $35,000 after deduction of a "retained limit". INA contended that because of payments made by other insurers, it owed nothing. Plaintiff asserted, however, that in light of an ambiguity in the UM coverage provisions of this policy INA owed at least the full $35,000.*fn3
Proceedings in the district court produced two reported decisions. O'Hanlon v. Hartford Accident & Indem. Co., 439 F. Supp. 377 (D.Del.1977) (O'Hanlon I ); O'Hanlon v. Hartford Accident & Indem. Co., 457 F. Supp. 961 (D.Del.1978) (O'Hanlon II ). There was a clause in the Nationwide and Hartford policies attempting to restrict UM coverage where the identity of the owner or operator of the uninsured vehicle could not be ascertained, thereby making the accident one involving a "hit-and-run" vehicle, to instances where there was a physical contact with the "hit-and-run" vehicle. The same clause would have been in the INA Coe Management policy had UM coverage been provided therein, as INA conceded was required under Delaware law. The district court held this limitation of UM coverage invalid. O'Hanlon I, 439 F. Supp. at 381. Nationwide has not appealed this determination and has paid its UM coverage limit. The district court further held that the plaintiff was entitled to "stack" UM coverages and that Hartford, since its policy provided UM coverage on four separate vehicles for which four premiums were paid, was liable with respect to four separate UM coverages. Hartford paid these claims and settled by additional payment the claim that its policy should be reformed to provide UM coverage with limits of $100/$300. Hence, Hartford is not involved in this appeal.
With respect to the issues surrounding the INA policies that are brought here by appeal and cross-appeal, the district court first held that the INA Coe Management policy which, as written, did not provide UM coverage but which concededly should have so provided pursuant to Delaware law, was not a policy having UM coverage that inured to the benefit of Brian O'Hanlon. Following an evidentiary hearing, the district court also determined that the INA umbrella policy was not a policy required by 10 Del.Code tit. 18, § 3902 to provide UM coverage. This rendered moot plaintiff's claim that that policy should be reformed to provide UM coverage with $300,000 limits. Thereafter in an unreported opinion, the court held that because of an ambiguity in the UM coverage provisions contained in the INA umbrella policy, INA was required to pay its full limit of $35,000 pursuant to the UM coverage contained in that policy.*fn4
Thus, the remaining issues before us may be defined as follows:
1. Whether INA policy CAL 15 38 48, covering a 1973 GMC pick-up truck and designating Coe Management Company as named insured was a policy whose statutorily mandated UM coverage inures to the benefit of Brian O'Hanlon.
2. Whether INA policy XIM 30 82 80, i.e., the INA umbrella policy, which in fact provides UM coverage, is a policy required by 10 Del.Code tit. 18, § 3902 to contain UM coverage.*fn5
3. Whether the "retained limit" as defined in INA's umbrella policy should be deducted from INA's maximum exposure of $35,000, as INA contends, or should be deducted from "all sums which the insured or his legal representative shall be legally entitled to recover from the owner or operator of an uninsured automobile" as the plaintiff contends. Subsidiary to this issue is the question whether the umbrella policy coverage language is ambiguous, with the result that any ambiguity must be resolved in favor of the insured.
INA policy CAL 15 38 48 listed Coe Management Company as named insured and covered a 1973 GMC pick-up truck. INA concedes that it breached its statutory duty under 10 Del.Code tit. 18, § 3902 by not providing UM coverage in this policy and that the policy must be construed and enforced as though the mandated UM coverage had been contained in it. The endorsement that INA would have used to provide UM coverage within this policy is contained in the record, and there is no dispute that we are obligated to read this policy as though that endorsement had been present when the policy was issued.*fn6
Coe Management Company is a trade name under which Patrick J. O'Hanlon conducted business. The truck insured under INA policy CAL 15 38 48 was used by an employee of O'Hanlon who normally had the truck in his possession. He was under instructions to use the truck only in the course of his employment.
The Coe Management policy is a commercial automobile liability policy. It was written to cover a business vehicle as distinguished from a private passenger family automobile. It seems to have been designed to cover business entities rather than natural persons. For example, in defining "persons insured" the policy refers to the named insured and "any partner or executive officer thereof." The use of the pick-up truck described under the heading "owned automobiles" is listed as "business." These considerations led the district court to conclude that O'Hanlon never intended to protect his ...