American Mfrs. Mut. Ins. Co. v. Wilson-Keith & Co.

• Citation: 247 F.2d 249
• Decision Date: 14 August 1957
• Docket Number: 15649.,No. 15648,15648
• Parties: AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, a Corporation, and Central Mutual Insurance Company, a Corporation, Appellants, v. WILSON-KEITH & COMPANY, a Corporation, and Dumas-Wilson & Company, a Corporation, Appellees. WILSON-KEITH & COMPANY, a Corporation, and Dumas-Wilson & Company, a Corporation, Appellants. v. AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, a Corporation, and Central Mutual Insurance Company, a Corporation, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

247 F.2d 249 (1957)

AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, a Corporation, and Central Mutual Insurance Company, a Corporation, Appellants, v. WILSON-KEITH & COMPANY, a Corporation, and Dumas-Wilson & Company, a Corporation, Appellees.

WILSON-KEITH & COMPANY, a Corporation, and Dumas-Wilson & Company, a Corporation, Appellants. v. AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, a Corporation, and Central Mutual Insurance Company, a Corporation, Appellees.

Nos. 15648, 15649.

United States Court of Appeals Eighth Circuit.

August 14, 1957.

COPYRIGHT MATERIAL OMITTED

Donald N. Clausen, Chicago, Ill. (Clausen, Hirsh & Miller, Chicago, Ill., Karl P. Spencer and Spencer & Duncan, St. Louis, Mo., were on the brief), for American Manufacturers Mut. Ins. Co. and Central Mut. Ins. Co.

Adolph K. Schwartz, St. Louis, Mo. (Flynn & Parker, St. Louis, Mo., on the brief), for Wilson-Keith & Company and Dumas-Wilson & Company.

Before SANBORN, WOODROUGH and JOHNSEN, Circuit Judges.

WOODROUGH, Circuit Judge.

Federal jurisdiction existed in this case by reason of diversity of citizenship. It was commenced as an action for declaratory judgment to obtain adjudication that the two insurance companies, plaintiffs, were not liable under certain policies of fire and explosion insurance issued respectively by each of them to Wilson-Keith and Company (covering also the interest of its mortgagee, Dumas-Wilson and Company) and insuring the contents of its manufacturing plant at 4140 Chippewa Street, St. Louis, Missouri, in the aggregate amount of $60,000. Explosion and fire had occurred there on June 10, 1954, during the life of the policies, causing loss of the insured property in an amount exceeding the insurance, but plaintiffs denied liability under the standard increase of hazard clause in the policies which reads:

"* * * this company shall not be liable for loss occurring (a) while the hazard is increased by any means within the control or knowledge of the insured: * * *."

Plaintiffs alleged that the insured permitted highly explosive and inflammable chemicals to be brought upon, stored and processed on its premises and so increased the hazard of fire and explosion; that said chemicals exploded, the loss in question resulted, the insurance was suspended by the terms of the policies, and the insurers were not liable.

The insured pleaded that the hazard it was insured against in the policies issued by plaintiffs had not been increased by any means within the control or knowledge of the insured. It also alleged that the increase of hazard clause in the policies, set forth above, relied on for defense by the insurers was superseded to the extent of the other clause of the policies called the "Work and Materials" clause. By the terms of that clause as it appears in the policies the insurers granted permission to the insured to make "such use of the premises as is usual and incidental to the occupancy as described therein" and by amendment to the answer and counterclaim made by leave of court, the insureds alleged that the additional terms of the work and materials clause not written in the policies became a part of the insurance contracts in consequence of the policy of the insurance companies to extend additional benefits to their insureds without actually adding the clauses conferring them to their insurance policies as endorsements, where there was no additional premium charge, and where the clauses had been adopted and used in the country by the plaintiffs in policies similar to and like those issued to Wilson-Keith and Company. The amendment to the answer and counterclaim was as follows:

"* * * that on or before June 10, 1954, there was on file in the Department of Insurance at Jefferson City, Missouri, on behalf of each of the plaintiffs, the following policy provisions:

"`Work and Materials: Permission granted for such use of the premises as is usual and incidental in the business as conducted therein, and to keep and use all articles and materials usual and incidental to said business, in such quantities as the exigencies of the business require.\'

"`Liberalization Clause: If during the period that insurance is in force under this policy, there be adopted in this state by the fire insurance rating organization on behalf of this company, any forms, endorsements or rules by which this insurance could be extended or broadened, without additional premium charge, by endorsement, then such extended or broadened insurance shall inure to the benefit of the insured hereunder as though such endorsement or substitution of form had been made,\'

that these paragraphs were on file, as aforesaid, pursuant to the laws of the State of Missouri and are a part of the policies of insurance issued by the plaintiffs herein; and by reason of the aforesaid policy provisions, the increase of hazard defense asserted by plaintiffs specifying paragraphs of pleadings do not apply."

The insureds counterclaimed under the policies for the amount of the loss to the limit of the policies with interest, costs, attorney's fees and ten per cent penalty.

On the first trial of the case the jury disagreed.

On the second trial the court instructed the jury on the applicable law, which was the law of Missouri, and the jury returned their verdict in the form of answers to four interrogatories propounded to them as follows:

Interrogatory No. 1.

Did the taking onto the premises of the defendant Wilson-Keith & Company by Universal Match Company, on the day preceding the fire, of the chemicals which were to be made into pellets, and the subsequent use of said chemicals in making the pellets described in evidence, increase the hazard of fire and explosion in said building?

YES (Answer "Yes" or "No")

If you answer to Interrogatory No. 1 is "Yes" answer the following three interrogatories:

Interrogatory No. 2.

Was the increase in hazard referred to in Interrogatory No. 1, by any means within the control of the defendant Wilson-Keith & Company?

NO (Answer "Yes" or "No")

Interrogatory No. 3.

Was the increase in hazard referred to in Interrogatory No. 1, by any means within the knowledge of the insured?

NO (Answer "Yes" or "No")

Interrogatory No. 4.

Was the bringing of chemicals to the plant of Wilson-Keith & Company by the Universal Match Company, and their use in the plant of the defendant Wilson-Keith & Company in the making of incendiary pellets for Universal Match Company, on the day of the explosion, such use of the premises as was usual and incidental in the business as conducted therein prior to the explosion, and was the keeping in the plant of Wilson-Keith & Company of the chemicals brought to the plant by Universal Match, and in the quantities kept, usual and incidental to the business of Wilson-Keith & Company and as the exigencies of the business of Wilson-Keith & Company required as operated prior to the day of the fire?

YES (Answer "Yes" or "No")

On the return of the foregoing verdict, the court entered judgment "as directed by the answers to these special interrogatories" and awarded recovery in favor of the insured against each of the insurance companies for the amount of the policy issued by it, aggregating $60,000, together with interest and costs.

The insurance companies filed motions to set aside the judgment and to enter judgments for them or in the alternative for a new trial and the court entered its order denying the motion to enter judgment for the companies but sustained their motion for new trial. The order for new trial was accompanied by the opinion of the court which gave as the sole reason for the ruling that:

"Plaintiffs asked for but did not get their charge to the jury that if defendants knew, or in the exercise of ordinary care should have known, of the increased hazard, then defendants were chargeable with knowledge of the increased hazard. Plaintiffs excepted to the court\'s failure to charge the jury in this respect. Under the Franciscus case such failure is error."¹

The insureds promptly filed appeal in this court from the order setting aside the verdict and judgment in their favor and awarding plaintiff a new trial of the case, but as the case had not then been disposed of by final judgment in the district court, this court held that appeal to be premature and dismissed it solely on that ground. Wilson-Keith & Co. v. American Mutual Insurance Co., 8 Cir., 225 F.2d 481.

Thereafter in April 1956, there was a third jury trial of the case and a final judgment disposing of the case was then rendered. That judgment was for the insureds and against the insureds and appeal has been taken from it, which is pending in this court as No. 15,648.

The insureds prosecute this appeal (No. 15,649) to review the interlocutory order which set aside the verdict and judgment entered in their favor on the second trial of the case and awarded a new trial to the insurance companies. They point out that it was duly adjudicated on that second trial by the court's instructions and the answers of the jury to the first and fourth interrogatories that the insurance companies had superseded the increase of hazard clause of their policies in this case by granting permission (as found by the jury) "for use of the premises of the insured as is usual and incidental in the business as conducted therein and to keep and use chemicals and materials usual and incidental to said business in such quantities as the exigencies of the business require," and as further found by the jury, that "the bringing of chemicals to the plant * * * and their use in the plant in the making of incendiary pellets * * * was such use of the premises as was usual and incidental to the business as conducted therein prior to the explosion * * *" as was also "the keeping in the plant * * * and in the quantities kept of said chemicals * * * usual and incidental to the business and as the exigencies of the business required, as operated prior to the day of the...