Cass Bank & Trust Co. v. National Indemnity Co.

• Decision Date: 14 January 1964
• Docket Number: 17280.,No. 17279,17279
• Citation: 326 F.2d 308
• Parties: CASS BANK & TRUST COMPANY, a Corporation, and David Coonce, d/b/a Refrigerated Truck Leasing, Appellants, v. NATIONAL INDEMNITY COMPANY, a Corporation, Appellee. John E. MONGE, Appellant, v. NATIONAL INDEMNITY COMPANY, a Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

326 F.2d 308 (1964)

CASS BANK & TRUST COMPANY, a Corporation, and David Coonce, d/b/a Refrigerated Truck Leasing, Appellants, v. NATIONAL INDEMNITY COMPANY, a Corporation, Appellee.

John E. MONGE, Appellant, v. NATIONAL INDEMNITY COMPANY, a Corporation, Appellee.

Nos. 17279, 17280.

United States Court of Appeals Eighth Circuit.

January 14, 1964.

John S. Marsalek, of Moser, Marsalek, Carpenter, Cleary & Jaeckel, St. Louis, Mo., Eugene W. Wines, St. Louis, Mo., on the brief, for appellants.

James W. Jeans, St. Louis, Mo., Gray & Jeans, St. Louis, Mo., for appellee.

Before VAN OOSTERHOUT and BLACKMUN, Circuit Judges, and HANSON, District Judge.

VAN OOSTERHOUT, Circuit Judge.

This is a timely appeal by plaintiff Coonce and intervenors Cass Bank & Trust Company and John E. Monge from final judgment dismissing their complaint and claims. This case was tried to Judge Meredith without a jury. A memorandum opinion setting out the facts and the basis of the trial court's decision is reported at 213 F.Supp. 483. Jurisdiction, based upon diversity of citizenship, is established.

The cause of action is based upon a policy of insurance issued by the defendant National Indemnity Company providing collision coverage with respect to a tractor-trailer owned by Coonce. Plaintiff's claim is for $12,000 collision damage to his tractor-trailer. Intervenor Cass Bank & Trust Company had a valid mortgage upon the tractor-trailer and intervenor John E. Monge claims a lien upon Coonce's claim against defendant by virtue of a judgment he holds against Coonce upon which an execution has been issued against any sums due Coonce from the defendant. The rights of the intervenors are dependent upon Coonce's policy rights against the defendant. For convenience, we shall in this opinion treat plaintiff as the sole claimant. The rights of the intervenors arise only in the event Coonce has insurance coverage under the policy in suit.

It is undisputed that the defendant issued the policy sued upon; that plaintiff paid the premium due; that such policy provides collision coverage for the unit damaged; and that the collision occurred within the policy period specified in the policy.

Defendant asserted two defenses to the policy. The first defense, based upon false and fraudulent answers in the application for insurance, was rejected by the trial court upon the ground that the evidence was insufficient to sustain such defense and the issue presented by such defense is not before us on this appeal.

The other defense asserted was that the policy was conditional upon the truth of the declarations contained therein; and that declaration 7(c), reading, "Unless otherwise stated herein: * * * (c) During the past three years no insurer has canceled insurance, issued to the named insured, similar to that afforded hereunder:" was false in that similar insurance had in fact been canceled within the three-year period and hence the policy was void ab initio. Such defense was sustained by the trial court. The law applicable to such defense is thus stated by the trial court:

"When the policy of insurance is conditioned on the truth of declarations contained therein which are material, then the false representation will avoid the policy though innocently made. Dixon v. Business Men\'s Assurance Co. of America, supra 365 Mo. 580, 285 S.W.2d 619; Ettman v. Federal Life Ins. Co., supra 8 Cir., 137 F.2d 121; Grand Lodge, U. B. of F., etc. v. Massachusetts B. & Ins. Co., supra 324 Mo. 938, 25 S.W.2d 783." 213 F.Supp. 483, 486.

Such statement of the law is not challenged by the plaintiff and is a correct statement of Missouri law. This appeal is based upon the points hereinafter set out and discussed.

I.

Plaintiff urges that the trial court misapplied and mis-interpreted Missouri law in construing the words of declaration 7(c) reading: "no insurer has canceled insurance * * * similar to that afforded hereunder." Plaintiff contends that the words "similar insurance" are ambiguous and that he is entitled to have the policy construed strictly against the insurer and favorably to the insured so as to afford the widest possible scope of protection and that such policy of liberal construction applies particularly to forfeiture provisions.

It is quite true that Missouri, like most other states, holds that where insurance policies are ambiguous and are reasonably susceptible of two constructions, one of which favors the insured, the construction favoring the insured will be adopted. Freese v. St. Paul Mercury Indem. Co., Mo.App., 252 S.W.2d 653; State ex rel. Mills Lumber Co. v. Trimble, 327 Mo. 899, 39 S.W.2d 355.

Missouri courts have frequently stated that insurance contracts like other contracts are to be reasonably construed consonant with the apparent object and intent of the parties. Central Sur. & Ins. Corp. v. New Amsterdam Cas. Co., 359 Mo. 430, 222 S.W.2d 76; Packard Mfg. Co. v. Indiana Lumbermens Mut. Ins. Co., 356 Mo. 687, 203 S.W.2d 415; Wendorff v. Missouri State Life Ins. Co., 318 Mo. 363, 1 S.W.2d 99, 57 A.L.R. 615; Sulzbacher v. Travelers Ins. Co., 8 Cir., 137 F.2d 386.

The general principles applied by Missouri courts to the construction of insurance contracts are well summarized in McKinney v. Truck Ins. Exch., Mo.App., 324 S.W.2d 773, at 777, as follows:

"Insurance contracts should be construed by the same general rules applicable to other written contracts. * * * Where there is no ambiguity, there is no room for construction, and the unequivocal language of the contract must be given its plain meaning unless contrary to public policy or positive law. * * Of course, if the contract is reasonably open to different constructions, the one most favorable to the insured must be adopted; but that principle does not authorize a perversion of language or the exercise of inventive power to create an ambiguity where none exists. * * * And, as the lodestar of construction of other contracts is the intention of the parties * * *, so a court discharges its full duty with respect to construction of an insurance contract when it ascertains and gives effect to the intention of the parties thereto. * * *" (Citations omitted.)

To like effect, see Davis v. Liberty Mut. Ins. Co., 8 Cir., 308 F.2d 709, 711.

44 C.J.S. Insurance § 294, p. 1159, states:

"The words or terms should be taken and understood as an average or reasonable person, with usual and ordinary understanding, would construe them when used to express the purpose for which they are employed in the policy."

Such rule is followed in Missouri. See Taylor v. Aetna Life Ins. Co., 236 Mo. App. 435, 154 S.W.2d 421, 425; Robinson v. Commonwealth Cas. Co., 224 Mo. App. 969, 27 S.W.2d 49, 51.

In Sulzbacher v. Travelers Ins. Co., supra, a case involving Missouri law, this court states:

"The rule requiring the construction of an insurance policy favorable to the insured in cases of ambiguity does not justify a strained interpretation of the language of the contract in order to create an ambiguity where none exists. `The natural obvious meaning of the provisions of a contract should be preferred to any curious hidden sense which nothing but the exigencies of a hard case and the ingenuity of a trained and acute intellect would discover.\'" 137 F.2d 386, 391.

Judge Meredith based his conclusion that the policy admittedly canceled was similar to the insurance afforded by the present policy upon the following reasoning:

"According to Webster\'s, the word `similar\' means `Nearly corresponding, resembling in many respects; somewhat like; having a general likeness\'.

"The coverages of the policy in question were collision or upset, fire, lightning and transportation and combined additional coverage on plaintiff\'s tractor-trailer. The coverages of the canceled policy on plaintiff\'s automobile were collision, theft and liability. Collision is common to both policies. There can be no doubt that one of the insured events was identical, and such was the import of the declaration. But plaintiff contends that the statement permitted him to construe the language to apply only to the tractor-trailer to which the policy applied and since he had not previously had insurance on the tractor-trailer, the condition of the policy was met with regard to prior cancellation. We find such a strained construction unreasonable. Plaintiff cites Business Men\'s Assurance Co. v. Campbell (8 C.A., 1929), 32 F.2d 995, in support of its position that the language is ambiguous. As we understand that opinion, the Court held under that factual situation that the cancellation of a life policy was not material in fact or in law to the issuance of a health and accident policy. Under circumstances present here, prior cancellation of plaintiff\'s collision insurance was material in fact and in law. Bearden v. Countryside Casualty Company (Mo.App., 1961), 352 S.W.2d 701; Minich v. M. F. A. Mutual Insurance Co. (Mo.App., 1959), 325 S.W.2d 56; Teich v. Globe Indemnity Co. (Mo.App.1930), 25 S. W.2d 554.

"Plaintiff further argues that since the named insured on the policy in question was `David Coonce, dba Refrigerated Truck Leasing\' while the cancelled automobile policy was issued to `David Coonce\', the representation of no prior cancellations was not false. It was plaintiff\'s testimony that he had been doing business as Refrigerated Truck Leasing only days prior to the issuance of the policy. Can it honestly be asserted that plaintiff thought the declaration in the policy referred only to him in his recent capacity as a truck owner? The Court finds this is not a reasonable construction. The same individual was insured under both policies although he was described in the policy in question as doing business as Refrigerated Truck Leasing." 213 F.Supp. 483, 487.

Plaintiff's efforts on this appeal seem to be concentrated upon stressing ambiguity with respect to the word "similar". He points to no reasonable construction of the word "similar" as...