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filed: December 23, 1982.


No. 894 April Term, 1979, Appeal from the judgment of the Court of of Common Pleas, Allegheny County, Civil Division, at No. GD 77-07343.


James A. Mollica, Jr., Pittsburgh, for appellants.

Charles Gibbons, Pittsburgh, for appellee.

Price, Brosky and Montgomery, JJ. Brosky, J., files a concurring opinion.

Author: Price

[ 308 Pa. Super. Page 571]

This appeal is from a judgment granted upon the whole record in favor of Motor Coils Manufacturing Company ("Motor Coils"), which brought an action in assumpsit to recover the proceeds of a liability insurance policy from appellants Fireman's Fund American Insurance Company and the American Insurance Company ("Fireman's Fund").

Motor Coils is a Pennsylvania corporation in the business of repairing diesel electric locomotive equipment. The business requires the shipping of such equipment between various railroad companies around the nation and Motor Coils' repair shop in Braddock, Pennsylvania. On or about January 10, 1974, Motor Coils purchased a three year term Comprehensive Liability Policy from Fireman's Fund.

Included in the policy issued was an optional coverage entitled "Bailee's Customers Property Floater", ("Floater"), selected by Motor Coils' president on the recommendation of Fireman's Fund agent James Smith because of the nature of Motor Coils' operation. (R. 163). The Floater provided insurance against damage to Motor Coils' customers' property while such property was on Motor Coils' premises, and "while in transit on vehicles owned or operated by" Motor Coils. (R. 2a).

At the time the policy was issued, Motor Coils transported train parts to and from customers' places of business on trucks leased from National Car Rental System and driven by employees of Motor Coils. In March of 1974, Motor Coils terminated its lease agreement with National Car Rental System, and entered into an oral agreement to lease four trucks from Clauzell Trucking Company ("Clauzell") on an exclusive basis. Clauzell, rather than Motor Coils, supplied drivers for the trucks, and each shipment was confirmed with a "Proof of Lease Agreement" in the possession of the Clauzell driver. Also under the new arrangement, Motor Coils: paid for any necessary state permits; advanced money to Clauzell to pay the drivers (without deducting social security or withholding taxes); instructed the drivers as to when and where equipment was to be

[ 308 Pa. Super. Page 572]

    collected and delivered, but not as to specific routes or the manner of driving the truck. Motor Coils' name appeared on the doors of the truck cabs.

On July 25, 1976 a truck owned by Clauzell and carrying property of a Motor Coils customer under the above lease arrangement*fn1 was en route from a Motor Coils' Shop to Atlanta, Georgia. The truck was involved in an accident on the Pennsylvania Turnpike which resulted in extensive damage to the property of a Motor Coils customer. Motor Coils submitted a claim to Fireman's Fund under the Bailee's Customers Property Floater section covering damage to customers' property "while in transit on vehicles owned or operated by the insured." The claim was denied for the stated reason that the truck used to transport the property was not "owned or operated by" Motor Coils, but was owned (not in dispute) and operated by Clauzell Trucking Co., so that Motor Coils' policy did not cover the damage resulting from the accident.

Motor Coils filed a complaint in assumpsit, and after Fireman's Fund's demurrer to the complaint was overruled, damages were stipulated by the parties at $49,000.*fn2 At the close of Motor Coils' case, Fireman's Fund's motion for a compulsory non-suit was denied; at the close of Fireman's Fund's case, Motor Coils' motion for a directed verdict was also denied. Both parties then requested binding jury instructions which were refused by the court.

The court instructed the jury, first, that the contract term requiring that vehicles be "operated by" the insured is ambiguous as a matter of law "in that there is no definition of [the] key word within the agreement; and, therefore, the language of the contract must be interpreted in favor of the insured and a broad definition given to the undefined

[ 308 Pa. Super. Page 573]

    word." (R. 395-96). Second, the jury was charged to resolve the question of who operated "[i]n other words . . . maintained direction and control" of ...

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