The opinion of the court was delivered by: WEINER
MEMORANDUM OPINION AND ORDER
This action arises out of an accident which occurred on the Schuylkill Expressway in Philadelphia, Pennsylvania on May 18, 1980 involving a bus owned by defendant Garden of Prayer Church (Church) and insured by defendant Nationwide Mutual Insurance Co. (Nationwide) under a liability policy issued to the church. At the time of the accident, the bus, driven by Robert Stewart, was enroute from Philadelphia, Pennsylvania to Atlantic City, New Jersey and was being used by Overland Coach Lines Company (Overland), which was insured by plaintiff Transit Casualty Insurance Co. (Transit). At issue is the applicability of coverage under those policies.
Transit seeks a declaratory judgment that Nationwide's policy of insurance issued to the church is applicable and provides coverage for any and all claims arising out of the accident, and that Nationwide has a duty to defend against any and all such claims.
Nationwide denies the applicability of coverage under its policy for any of the claims generated by the bus accident, or that it owes a defense to the church. Further, it asserts that coverage for the bus at the time of the accident was provided by the Transit policy issued to Overland.
Jurisdiction is based upon diversity of citizenship and an amount in controversy in excess of $ 10,000.00, pursuant to 28 U.S.C. § 1332. Trial was held before this court, sitting without a jury. For the reasons to follow, we find that Nationwide owes no insurance policy coverage to the church, the driver, or Overland, and that Transit, under its policy, owes coverage to Overland and the driver, but not the church.
Following the accident, Nationwide informed the church by letter dated October 10, 1980, and by an accompanying proposed non-waiver agreement which the church was requested to execute, and pursuant to which Nationwide proposed to defend the church, that Nationwide was raising issues of coverage and entitlement to benefits under the policy. Nationwide stated in the proposed agreement that the reason the church might not be entitled to coverage or benefits was as follows:
The insured's application of insurance cites bus use for church/school purposes when in fact it may have been used for other purposes and hired out for monetary reimbursement and/or donations, for non-church functions. The Company, had it known this, may not have accepted the risk for coverage, or if it did, the premium charges would have been substantially greater since the actual risk is greater.
The church did not execute the proposed agreement, and by letter of November 20, 1980, was informed by Nationwide that coverage was therefore disclaimed and that Nationwide would "not handle any claims or defend any suits brought against the church or driver Robert Stewart as a result of this accident." The letter stated that "(t)he reason for disclaimer of coverage is that your application for insurance misrepresented the actual use of the vehicle as outlined in the non-waiver agreement sent to you on October 10, 1980."
Testimony offered at the trial bears directly upon the question of alleged misrepresentation on the part of the church in applying for and obtaining insurance from nationwide. Reverend Herman Thompson, a lay minister of the church, who secured the policy on its behalf from Leroy Funk, Nationwide's agent, testified that the bus was "99%" of the time used for church business. He recalled that on "two or three" occasions the bus was used for other than church business, and on "two or three" occasions it was used for other than church "civic" occasions. "Three or four" times Mr. Mitchell, the owner of Overland, had used the bus. Reverend Thompson further testified that he had "loaned" the bus to Mr. Mitchell and Overland, for the trip on which the accident occurred, but that he didn't know anything about a travel agent booking in connection with the trip and use of the bus. In addition, Reverend Thompson stated that in exchange for the use of the bus the church would receive a "donation" based on the trip. Finally, the Reverend testified that he could not remember anyone from Nationwide ever telling him the ramifications of use of the bus for non-church purposes.
Also testifying at trial was Leroy Funk, insurance agent for Nationwide. Mr. Funk stated that the application was filled in by him with information supplied by Reverend Thompson, who told him that no special trips or trips over fifty miles were planned. Mr. Funk testified as well that he told Reverend Thompson that Nationwide did not issue policies on buses for hire.
A copy of the "Commercial Vehicle Application" for insurance, prepared by Mr. Funk and signed by Reverend Thompson, has been supplied to and examined by the court. In the section at the beginning of the application used to indicate the type of vehicle to be insured, an "X" has been placed in the box next to the words "School Bus", but no mark appears in the box next to the words "School Bus Special Trip." Section 15 of the application is entitled "School Bus", and under subsection (B), "Use of Vehicle", an "X" has been placed in the box next to the word "Other-Describe Fully". On the space there provided the words "Church and Sunday School on Weekends" have been written. In Section 12, next to the words "Truck is operated regularly within a radius of," the box with 0 to 50 is circled, and 0 is written next to both "No. of trips per year beyond this radius" and "Est. mileage per year beyond this radius."
We have also examined the schedule of premiums issued by Nationwide for the policy providing coverage for the bus. This document advised that "(t)he estimated total premium for this policy is based on the exposures you told us you would have when the policy began."
The Nationwide insurance policy itself, No. 58BA-120-228-0001, under Part IV, "Liability Insurance", Section (D), "Who Is ...