Atlantic Mutual Insurance Company v. Cooney

• Decision Date: 15 May 1962
• Docket Number: No. 16842.,16842.
• Citation: 303 F.2d 253
• Parties: ATLANTIC MUTUAL INSURANCE COMPANY, a corporation, Appellant, v. Robert J. COONEY, doing business under the firm name and style of Allied Enterprises, and National Union Fire Insurance Company of Pittsburgh, Pa., a corporation, Appellees. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., a corporation, Appellant, v. Robert J. COONEY, doing business under the firm name and style of Allied Enterprises, Appellee. Robert J. COONEY, doing business under the firm name and style of Allied Enterprises, Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

303 F.2d 253 (1962)

ATLANTIC MUTUAL INSURANCE COMPANY, a corporation, Appellant, v. Robert J. COONEY, doing business under the firm name and style of Allied Enterprises, and National Union Fire Insurance Company of Pittsburgh, Pa., a corporation, Appellees.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., a corporation, Appellant, v. Robert J. COONEY, doing business under the firm name and style of Allied Enterprises, Appellee.

Robert J. COONEY, doing business under the firm name and style of Allied Enterprises, Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., a corporation, Appellee.

No. 16842.

United States Court of Appeals Ninth Circuit.

February 26, 1962.

Rehearing Denied May 15, 1962.

COPYRIGHT MATERIAL OMITTED

George H. Hauerken, Cyril Viadro, Hauerken, St. Clair, Zappettini & Hines, San Francisco, Cal., for appellant Atlantic Mut. Ins. Co.

Bert W. Levit, John B. Hook, Long & Levit, San Francisco, Cal., for appellant, National Union Fire Ins. Co. of Pittsburgh, Pa.

Before POPE and HAMLEY, Circuit Judges, and JAMESON, District Judge.

JAMESON, District Judge.

This action was instituted against Robert J. Cooney, a citizen of California, doing business as Allied Enterprises, by Atlantic Mutual Insurance Company, a New York corporation, as assignee and subrogee of Army and Air Force Exchange Service, a government instrumentality. National Union Fire Insurance Company, a Pennsylvania corporation, intervened pursuant to leave of court.

Cooney is an export packer, who packages goods for export. Exchange was one of his customers. On August 15, 1952, Cooney and Exchange entered into an export packing agreement whereby Cooney agreed, "pursuant to purchase orders to be issued" by Exchange, "to receive merchandise from delivering carriers or vendors and to pack and perform all other necessary work * * *". Purchase orders were thereafter issued by Exchange to Cooney, and Cooney began doing a substantial amount of export packing for Exchange.

The contract of August 15, 1952, provided in paragraph 7:

"7. Export Packer (Cooney) agrees to accept full liability as an insurer of the property of Exchange Service and the property of others for which Exchange Service may be liable while said property of Exchange Service and property of others is in the care, custody, or control of said Export Packer; and Export Packer further agrees to reimburse the Exchange Service in full for any physical loss or damage to the aforementioned property, arising from any cause whatsoever occurring while such property is in the care, custody, or control of Export Packer."

On October 16, 1953, a fire (which started on adjoining premises and did not involve any negligence on his part) occurred at Cooney's warehouse and destroyed over $350,000 worth of Exchange merchandise, which Cooney had in his possession for packing.

On October 1, 1950, Atlantic had issued an open policy of insurance to Exchange which covered all of the Exchange's export shipments against loss by fire, and liability for loss at the Cooney warehouse being limited to $100,000.¹ This policy contained the following provisions:

"25. Warranted that this insurance shall not inure, directly or indirectly, to the benefit of any carrier or bailee.

"30. (C) Warranted by the Assured free from liability for loss or damage to goods in the possession of any carrier or other bailee who may be liable therefor. However, this Company agrees to pay to the Assured the difference between the amount which would be a claim under this policy if it did not contain this warranty and the amount recoverable by the Assured from such carrier or bailee, plus the costs and expenses of prosecuting the claim against such carrier or bailee. Pending collection from such carrier or bailee this Company agrees to advance as a loan such amount which would be a claim under this policy if it did not contain this warranty, repayable only to the extent of any net recovery from such carrier or bailee."

The rates of premium were based on the value of export shipments and were affected by Exchange's loss experience, as well as by recoveries which Exchange might make from others, such as carriers or bailees.

On October 30, 1953, Cooney signed another agreement with Exchange, acknowledging full liability as an insurer for the loss resulting from the fire to the property of Exchange, and agreeing to make payment on the loss.

After the fire Atlantic did not rely on the $100,000 limitation, but paid Exchange the total loss, less some $25,000 which had been paid by Cooney. On Atlantic's first payment of $200,000, it took an assignment from Exchange, and on the second and third payments totaling approximately $126,000 (made after suit was started), Atlantic took subrogation receipts from Exchange. Atlantic also paid $28,142.07 on account of salvage and other expenses.

On February 1, 1953, National had issued to Cooney a $50,000 policy of insurance covering Cooney for his liability to customers for loss or damage to their property from specified perils, including fire. The amount of the policy was increased to $100,000 on May 1, 1953. On June 25, 1953, National issued two certificates of insurance to Cooney at his request, but Exchange did not receive any certificate until after the fire. The agent who wrote the National policy for Cooney had on August 15, 1952, as agent for another company, sent a certificate of insurance of that company to Exchange. Exchange had no knowledge until after the fire of the change in policies.

National received oral notice of the fire on October 16, 1953, and written notice on October 26, 1953. Cooney filed proof of loss, which was received by National on November 27, 1953, and supplemental proof of loss, received on April 7, 1954.

On February 18, 1954, Cooney was served with process in the action instituted by Atlantic and tendered the defense to National. Cooney refused to execute a non-waiver agreement, and National rejected the defense. Thereafter National was permitted to intervene to assert nonliability under its policy. In asserting nonliability, National relies primarily upon three provisions of its policy:

1. "* * * This Company is not liable for any loss or damage, which without its consent, has been settled or compromised by the Assured."

2. "This policy shall be void if the Assured has concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof * * * "

3. "Other Insurance. It is expressly agreed that this insurance shall not cover to the extent of any other insurance whether prior or subsequent hereto in date, and by whomsoever effected, directly or indirectly, covering the same property and this Company shall be liable for loss or damage only for the excess value beyond the amount of such other insurance."

The case was tried in two phases. Phase I was upon the issues raised by the intervention pleadings, to resolve the question of whether or not (assuming there was liability on the part of Cooney) National was liable to Cooney under its policy. Phase I was tried in June, 1956, before Judge Hamlin and resulted in judgment in favor of Cooney.

Phase II was tried before Judge Goodman in November, 1959, on the issues raised by the pleadings in Atlantic v. Cooney, to resolve the question of whether Cooney was liable to Atlantic as assignee and subrogee of Exchange. Judge Goodman found in favor of Cooney.

National has appealed from the judgment entered on phase I. Atlantic has appealed from the judgment entered on phase II. Cooney has adopted the briefs of Atlantic on the appeal of the first phase and the briefs of National on the second phase of the case.

It appears more logical in this opinion to consider first the primary question of whether Cooney is liable to Atlantic. While the question of whether National was liable to Cooney was tried first,² when this phase of the case was determined adversely to National, the principal action was then defended by National on behalf of both Cooney and National.

Atlantic contends that the trial court (on the second phase) erred: (1) in holding that Cooney would be liable only for loss or damage resulting from his own fault or negligence; (2) in finding that Exchange did not intend to assign its rights against Cooney to Atlantic and Atlantic did not intend to take an assignment of those rights, but that the intention of the parties was to preserve to Atlantic any rights it might have as subrogee; and (3) in holding that Atlantic is not entitled to recover from Cooney by way of subrogation. In addition to relying on the findings of the trial court on these issues, National contends that the agreement between Cooney and Exchange is invalid because (a) it is too uncertain to be enforceable and is without consideration, and (b) is lacking in mutuality of remedy.

Clause 7 of the Cooney-Exchange agreement, quoted supra, specifically provides that Cooney accepted "full liability as an insurer" of the Exchange property in his care, custody, or control and that he would reimburse Exchange in full for any physical loss or damage to that property "arising from any cause whatsoever occurring while such property" is in his care, custody, or control. In our opinion this provision is clear and unambiguous. No extrinsic evidence was needed for its construction. Under its provisions Cooney agreed to assume liability for loss or damage to the Exchange property in his possession irrespective of fault on his part.

In support of its contention that the agreement is not valid or enforceable, National argues first that there is no mutuality of obligation, in that the contract is too uncertain to be enforced and is without sufficient consideration. It is true, as National contends, that most of the contract provisions specify obligations on the part of Cooney. The only obligation assumed by Exchange was set forth in the first sentence of paragraph 4, which reads: "For...