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ABRAXAS GROUP v. GUARANTY NATL. INS. CO.

October 31, 1986

ABRAXAS GROUP, INC., Plaintiff,
v.
GUARANTY NATIONAL INSURANCE COMPANY, Defendant



The opinion of the court was delivered by: WEBER

 This is a diversity case alleging breach of an insurance contract. Relevant facts depict defendant, Guaranty National Insurance Company, as the insurer of plaintiff's facilities located at Blue Jay Village, Marionville, Pennsylvania for the period commencing April 1, 1984 and expiring April 1, 1985. Fires of unknown origin occurred totally destroying the building known as "Tiger Dorm" on January 16, 1985 and the building known as "Mohammad Dorm" on February 11, 1985. Plaintiff submitted timely claims of both fires totalling $237,345.36. Defendant paid $181,206, and denied any remaining amount was due. Plaintiff sued seeking the outstanding amount of $56,139.36.

 Following a period of discovery, defendant Guaranty National Insurance filed a motion for summary judgment. There is no dispute that defendant issued an insurance policy to plaintiff and that the policy covers the two buildings which were destroyed by fire in two separate incidents. Defendant urges the court to find that the policy is "scheduled" and that it specifically sets forth amounts of agreed values for each independently identified structure. Under this interpretation of the insurance contract, defendant would have paid all amounts due and owing under the contract and would be entitled to summary judgment as a matter of law.

 Plaintiff has filed its Reply and Cross Motion for Summary Judgment along with evidentiary material and brief, arguing that the policy in question is a "blanket" policy, providing a gross amount of insurance in the amount of $ 3,709,267. If plaintiff's interpretation of the contract is correct, then plaintiff is entitled to judgment as a matter of law for the outstanding amount of $56,139.36.

 Province of the Court

 Federal rather than state law must be applied in determining whether, in a contractual dispute, a given issue is to be decided by the trial judge as a matter of law, or, by the jury or judge as fact finder. Cooper Laboratories, Inc. v. International Surplus Lines, 802 F.2d 667 (3d Cir. 1986). The Third Circuit has recently emphasized the distinction between "construction" and "interpretation." Construction of a contract is within the province of the court. Construction is the process by which legal consequences are made to follow from the terms of the contract and its more or less immediate context, and from a legal policy or policies that are applicable to the situation. Ram Construction Co. Inc. v. American States Insurance Co., 749 F.2d 1049 (3d Cir. 1984). Interpretation of a contract is a factual matter requiring an inquiry into what the parties intended. Cooper Laboratories, slip op. at 7. When the agreement is in writing, ambiguous terms are interpreted by the jury, unambiguous ones by the court. Ram Construction Co., 749 F.2d at 1052. Both parties urge us to accept that the terms of the contract are unambiguous, and that their respective interpretation is the one the parties intended. Since we believe that the terms of the contract are unambiguous, we find the interpretation of this contract to be a matter that the court appropriately should decide. Erie County v. American States Ins. Co., 573 F. Supp. 479 (W.D. Pa. 1983).

 Applicable Standard

 In diversity cases, state substantive law controls the interpretation of the contract. Cooper Laboratories, slip op. at 8. It is the court's duty to ascertain the intent of the parties as manifested in the language of the agreement. Mohn v. American Casualty Co. of Reading, 458 Pa. 576, 326 A.2d 346 (1974). Moreover, under Pennsylvania law, a court should read policy provisions to avoid ambiguities if possible, Pennsylvania Manufacturers' Asso. Insurance Co. v. Aetna Casualty & Surety Insurance Company, 426 Pa. 453, 233 A.2d 548 (1967), according to the plain and ordinary meaning of the language used. St. Paul Fire and Marine Insurance Co. v. United States Fire Insurance Co., 655 F.2d 521 (3d Cir. 1981) (citing Pennsylvania law). In interpreting the various clauses of an insurance contract, the court must give effect to all of the various provisions reading the policy in its entirety. Monti v. Rockwood Ins. Co., 303 Pa. Super. 473, 450 A.2d 24 (Pa. Super. 1982).

 Nature of Policy

 Though the parties differ over whether the policy at issue is a "specific" or "blanket" policy, there is no dispute over the definitions of those terms.

 A blanket, compound or floater policy of insurance is written upon a risk as a whole, embracing whatever articles or items are included therein.

 
[Blanket insurance] is one that invariably covers and attaches to every item of property described therein. If the loss of one item exhausts the whole amount of the policy, the entire insurance must be paid, and there can be no apportionment. Another definition is that a compound, or blanket, policy is one which insures property collectively without providing in the event of a loss for a distribution of insurance to each item.

  Reliance Insurance Co. v. Orleans Parish School Bd., 322 F.2d 803, 806 (5th Cir. 1963) (citation omitted).

 A specific policy is one which allocates the amount of the risk in stated values upon the several items embraced in the coverage, or covers property at a designated location for a stated amount, or insures against a specific peril. 6 Appleman Ins. L. P. § 3912, page 481 and 482. A "scheduled" policy of insurance "separately schedules different items of property" . . . "each separately treated item of property is in effect covered by separate contracts of insurance and the amount recoverable with respect to a loss effecting such property is ...


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