Atlas Lubricant Corp. v. Federal Ins. Co. of New Jersey

• Decision Date: 27 March 1974
• Docket Number: No. 5675,5675
• Citation: 293 So.2d 550
• Parties: ATLAS LUBRICANT CORPORATION v. FEDERAL INSURANCE CO. OF NEW JERSEY et al.
• Court: Court of Appeal of Louisiana — District of US

Page 550

293 So.2d 550

ATLAS LUBRICANT CORPORATION v. FEDERAL INSURANCE CO. OF NEW JERSEY et al.

No. 5675.

Court of Appeal of Louisiana, Fourth Circuit.

March 27, 1974.

Rehearing Denied May 10, 1974.

William D. Treeby, of Stone, Pigman, Walther, Wittimann & Hutchinson, New Orleans, La., for Atlas Lubricant Corp., plaintiff-appellant.

P. A. Bienvenu, Ernest L. O'Bannon of Bienvenu & Culver, New Orleans, La., for Federal Ins. Co. of New Jersey, Aetna Casualty & Surety Co. of Connecticut, Lafayette Ins. Co. of Louisiana, and Great American Ins. Co. of New York, defendant-appellees.

Before STOULIG, MARINO and MALIK, JJ., Pro Tem.

THOMAS J. MALIK, Judge Pro Tem.

This is an action brought by the Atlas Lubricant Corporation against the Federal Insurance Company of New Jersey, Aetna Casualty & Surety Company of Connecticut, Lafayette, Insurance Company of Louisiana, and Great American Insurance Company of New York on fire insurance policies. Atlas, Lubricant Corporation suffered a large fire on April 23, 1970 that destroyed plaintiff's oil blending, packaging and distributing plant at 200 First Street, Jefferson Parish, Louisiana. Numerous tanks used for oil storage at the facility are the subject of this litigation which were largely unaffected by the fire.

The plant property was insured by the defendant insurance companies with a total coverage of $210,000.00 in fire and extended coverage. The insurance was placed through George D. Tessier, Inc., agents for the insurance companies, which agent company acted through Mr. George D. Tessier, Sr. Mr. Rivet, president of Atlas Corporation, procured these insurance policies on behalf of the plaintiff from Mr. George D. Tessier, Sr., who prepared the property coverage description of the policies. All of the policies included provisions of co-insurance providing that Atlas was required to insure its property up to 90% Of value. Under this provision should Atlas fail to meet this requirement, Atlas would become an insurer to the extent of the deficit and in that event would bear its proportionate loss.

After the fire in question Atlas notified the insurers of the claim and subsequently submitted a detailed Proof-Of-Loss on April 22, 1971. This Proof-Of-Loss did not include certain designated 'outside storage tanks' which plaintiff claims were not covered by the policies. The defendant insurers on the other hand claim that the 'outside tanks' should have been covered by the various contracts of insurance. As a result they engaged Mr. Paul Merritt, an appraiser to value the tanks. The defendant then calculated the loss, based upon the value of all the property losses, $214,562.50, plus the value of the outside tanks as appraised by Mr. Merritt, $118,834.81 the total value of reinsured property, therefore, was determined by the defendants to be $333,397.31 ($214,562.50 plus $118,834.81). Since plaintiff had only $210,000.00 of insurance in force, the coinsurance would apply under defendants calculations and policy interpretation.

The trial court ruled in favor of the defendants and plaintiff, Atlas Lubricant Company, hereinafter referred to as Atlas has appealed.

The very basic issue to be decided is whether or not these 'outside' storage tanks are covered by the policies or not. If they are not covered the coinsurance clause would not apply and the defendant insurers would owe Atlas for the full amount of the loss. The trial judge in the lower court found that the policies were clear and unambiguious and the tanks in question were insured thereunder.

The several questions posed to this court by the appeal are: (1). Whether these outside storage tanks are covered by the policy and (2). If they are, what their value is. Resolutions of the first issue in favor of the plaintiff precludes the necessity of going into the second issue. We think the lower court erred in holding that the tanks in question were included in the policy. A contract for insurance clearly expressed between the parties, is required under the law, and a strained construction on interpretation should not be used to effect coverage where the policy itself clearly evidences a contrary intent (Graham v. Maryland Co., 230 So.2d 264, La.App.1st Cir. 1969). Further, contracts of insurance, like other contracts are to be construed according to the sense and meaning of the terms which the parties have used, and if they are clear, then these terms are to be taken and understood in their plain and ordinary sense, (Ranch v. American National Ins. Co., Orleans No. 8881 (La.App.1923). Courts cannot, under the guise of interpretation, make a new contract for the parties as in Montelene v. American Employers Insurance Company, 239 La. 733, 120 So.2d 70 (1960); Hemel v. State Farm Mutual Automobile Ins. Co., 211 La. 95, 29 So.2d 483 (1947); Edwards v. Life Casualty Ins. Company of Tennessee, 210 La. 1024, 29 So.2d 50 (1946).

This court is fully aware that it cannot create ambiguity, where note exists in order to protect the interests of the insured. The problem thus is whether there is such ambiguity. If so, the insurance coverage descriptions must be interpreted to determine its effect on the rights of the parties, and parol evidence would be admissible to interpret the insurance coverage description if such ambiguity was indeed present. 3 Corbin 542, 542A, 543, 579; Schuman v. Gordon Inc. Corp., 247 Md. 265, 232 A.2d 256 (1967); Whitebird v. Eagle-Picher Co., 390 F.2d 831 (10th Cir. 1968). The ambiguity if any must be found in the property coverage description of the policies, which reads:

'On the one-story, frame, approved roof warehouses, 1, 3, 5 and 7 pump house paint house, lunch house, boiler house, tanks & structures, and oils and machinery equipment and including furniture, fixtures, and equipment located 200 First Street, Jefferson Parish, Louisiana. Fire District 1 (Ward 7), Jefferson Parish, Louisiana (395).

Defendants argues that the language of the policy is clear and that tanks means tanks. How else can one say it? It means, unless otherwise limited, anything which is encompassed within the usual meaning of the word. Atlas does not contend that the 66 objects valued by Mr. Merritt are not 'tanks'. Atlas seeks to limit the application of the word to a few of such objects which it says are 'inside' tanks as opposed to the larger and more valuable number of such objects which it chooses to call 'outside' tanks. But the policy is not limited to 'inside' tanks, or 'outside' tanks, or to 'tanks with coils', or to 'silver colored tanks,' or to any special kind of tanks. It covers them all, inside and out as shown by the policy.

Defendant is very clear in one point that is that there is no other way to say tanks other than 'tanks.' But in the argument defendant reveals two very basic facts relevant to the question of ambiguity. First of all defendant enables a distinction between the alleged two types of tanks by referring to the 'larger and more valuable number of such objects' which it chooses to call 'outside tanks.' So apparently there is a difference between the two types of tanks, if not only of location, but of value and size, which is recognized by the defendant, which brings us to the second relevant fact brought out in the argument. That is, that there is a clear way of designating the tanks and structures to be covered by a policy. Such tanks could easily be referred to as 'upright' tanks, or as 'welded' tanks, or as 'tanks with coils,' or as 'silvered colored tanks', or as 'inside or outside' tanks, however, no such description was made in the policy.

In dealing with the first fact it is perfectly clear that there are indeed two types of tanks. Mr. Rivet in his testimony clearly brings out this point:

'Q. Did you consider anything unusual about the words 'tanks and structures' at that time in the policy?

A. No, because we had inside storage tanks in warehouse number five and those are included in the property that was to be insured, and further,

Q. Did you inform Mr. Mauterer or the agents at that time of the existence of the inside storage tanks?

A. Yes, I did. I also explained that those tanks were referred to in the policies, the inside tanks. And that is why they had some words as 'tanks and structures'. I further explained that some of the inside tanks were built upon little platforms, and that was what was meant by the structures, the platforms which supported the inside tanks.'

Out of this evidence two things are clear, First that there are indeed two different types of tanks, those inside the building and those 'larger and more valuable' outside the building. Secondly that the tanks in the policy are described as 'tanks and structures' which Mr. Rivet stated referred to platforms which supported the inside tanks. Thus on the very face of the policy we find ambiguity. Truly tanks means tanks, but which tanks, the inside, the outside or all the tanks? Furthermore why did the descriptions refer to 'tanks and structures' rather than just 'tanks'?

In the instant matter we think that there is enough ambiguity in the contract to permit the introduction of parol evidence to explain the intent of the parties. When the terms of a written contract are susceptible of more than one interpretation, or when there is uncertainty or ambiguity as to be provisions of the contract, parol evidence is admissible to clarify the ambiguities and to show the intentions of the parties. LSA-C.C. Art. 2276; Capizzo v. Traders and General Insurance Company 191 So.2d 183 (La.App.3d Cir. 1966); Giamanco v. Fairbanks, 218 So.2d 346 (La.App.3d Cir. 1969). Snow-White Roofs, Inc. v. Boucher, 182 So.2d 846 (La.App.1966). Furthermore where the terms of a written contract are susceptible of more than one interpretation or where there is uncertainty or ambiguity as to the provisions of the contract, or where the intent of the parties cannot be ascertained from the language employed, parol evidence may be...