Brand Distributors, Inc. v. Insurance Co. of No. Am.

Decision Date02 October 1974
Docket NumberCiv. A. No. 74-28-N.
PartiesBRAND DISTRIBUTORS, INC., Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant.
CourtU.S. District Court — Eastern District of Virginia

COPYRIGHT MATERIAL OMITTED

James M. Gallagher, Hofheimer, Nusbaum & McPhaul, Norfolk, Va., for plaintiff.

Edward A. Marks, Jr., Archibald Wallace, III, Sands, Anderson, Marks & Clarke, Richmond, Va., for defendant.

MEMORANDUM OPINION

KELLAM, Chief Judge.

Brand Distributors, Inc. operated a jewelry store on Poplar Hall Drive, Norfolk, Virginia. Insurance Company of North America, through its agent in Norfolk issued a Jeweler's Block Policy No. JB 29381 to cover said premises against loss by theft. On July 23, 1973 two unidentified persons entered said premises and removed, at gunpoint, diamond merchandise.

I

After commencement of the trial of this case with a jury, and after plaintiff had presented some evidence, the parties agreed that the loss which occurred on July 23, 1973, was covered by the policy; that proper notice of the loss had been given; that the amount which plaintiff was entitled to recover under the policy for diamond watches was $4,864.85, for gold bracelets, $598.76, and customers' property, $933.15. As to the amount of recovery for other items, it was agreed the only issue was an interpretation of the terms of the insurance policy which was for the Court, taking into consideration the evidence presented.

It was stipulated that the acquisition cost of the diamonds in issue was $61,465.06, and that if the plaintiff's interpretation of the policy is correct, it should recover $78,521.84. Further, it was stipulated that interest ran on the liquidated obligation from October 20, 1973.

Each party agrees plaintiff is entitled to recover a total of $6,396.76 for loss of diamond watches, gold bracelets and customers' property. Plaintiff says it is also entitled to recover $78,521.84 for loss of diamonds, or a total of $84,918.60. Defendant says the amount of recovery for loss of diamonds is $61,465.06, for a total of $67,861.82.

The difference in dispute arises over an interpretation of the language or terms of the policy. Plaintiff asserts its right of recovery is the actual cash value of the lost property at the time of the loss, not to exceed the cost of replacement, which may be determined by presentation of oral evidence. It says that any wholesaler of diamonds can take the list of items lost and determine the fair market value of such diamonds at the time of the loss. Defendant says that the policy limits the recovery to the lowest figure put upon the stolen items in plaintiff's inventory records.

To prove the market value or replacement cost of the some 300 diamond items lost plaintiff offered the testimony of two salesmen or dealers in diamonds. While they had not attempted to inspect the report of the items stolen, they were of the opinion that the prices of the diamonds have increased 40 to 50 per cent between the time of the purchase of said items and the date of the loss.

Plaintiff maintained unit control cards on all diamonds, "which said unit control cards constitute a perpetual inventory of such merchandise and which said unit control cards constitute full compliance with paragraph 8(A) of the aforesaid policy" of insurance.1 The card contains a diamond control number, recitation of the retail value, an alphabetical code reflecting acquisition cost, the name of the supplier, a cross-reference to the supplier's invoice, the date stocked, and a description or sketch of the item. These cards were prepared for each diamond when it was brought upon the premises. The card remained in the card file until the item was sold or taken from the premises. The only change made to the information on the card was to increase the selling price of an item.

The applicable provisions of the policy are those contained in paragraphs numbered 8(A) and 9(A). They are: —

8. RECORDS It is a condition of this insurance that:
(A) The assured will maintain a detailed and itemized inventory of his or their property and separate listing of all travelers stocks in such manner that the exact amount of loss can be accurately determined therefrom by the Company.
9. VALUATION
(A) The company shall not be liable beyond the actual cash value of the property at the time of any loss or damage and the loss or damage shall be ascertained or estimated according to such actual cash value with proper deduction for depreciation, however caused, and shall in no event exceed the lowest figure put upon such property in the Assured's inventories, stock books, stock papers or lists existing at the time the loss occurred, nor the cost to repair or replace the same with material of like kind and quality. Any antiquarian or historical value attaching to the said property shall be excluded from the estimate of loss or damage.
II

Jurisdiction is alleged by reason of diversity, defendant asserting it is a foreign corporation. In diversity cases, the Court is bound by and must follow the law of the State. C.I.R. v. Stern, 357 U.S. 39, 78 S.Ct. 1047, 2 L. Ed.2d 1126 (1958); Woods v. Interstate Realty Co., 337 U.S. 535, 69 S.Ct. 1235, 93 L.Ed. 1524 (1949); Angel v. Bullington, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed. 832 (1947); St. Paul Fire and Marine Ins. Co. v. Lack, 476 F.2d 583 (4th Cir. 1973); Sides v. Richard Machine Works, Inc., 406 F.2d 445 (4th Cir. 1969). In diversity of citizenship cases, the federal courts, when deciding questions of conflict of laws, must follow the rules prevailing in the states in which they sit. Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Griffin v. McCoach, 313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481 (1941); Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 208, 58 S.Ct. 860, 82 L.Ed. 1290 (1938); New York Life Ins. Co. v. Jackson, 304 U.S. 261, 58 S.Ct. 871, 82 L.Ed. 1329 (1938); Rosenthal v. New York Life Ins. Co., 304 U.S. 263, 58 S.Ct. 874, 82 L.Ed. 1330 (1938); Erie Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Hence the law of the Commonwealth of Virginia on Conflict of Laws is to be applied.

In Virginia, everything governing the making of a contract is governed by the place where the contract is made, Woodson v. Celina Mut. Ins. Co., 211 Va. 423, 177 S.E.2d 610 (1970); Arkla Lumber & Mfg. Co. v. West Virginia Timber Co., 146 Va. 641, 132 S.E. 840; Scudder v. Union Nat'l. Bank, 91 U.S. (I Otto) 406, 23 L.Ed. 245 (1875); Sterling v. Blackwelder, 302 F.Supp. 1125 (E.D. Va.1968), aff'd. 414 F.2d 1362 (4th Cir. 1969), Michie's Jur. Vol. 4, title Conflict of Laws § 24 page 56, and everything governing performance by the place where it is to be performed, Irving Trust Co. v. Day, 314 U.S. 556, 62 S.Ct. 398, 86 L.Ed. 452 (1942); Scudder v. Union Nat'l. Bank, supra; Arkla Lumber & Mfg. Co. v. West Virginia Timber Co., supra; Norman v. Baldwin, 152 Va. 800, 148 S.E. 831 (1929); Hogue-Kellogg Co., Inc. v. G. L. Webster Canning Co., Inc., 22 F.2d 384 (4th Cir.), cert. denied 277 U.S. 592, 48 S.Ct. 529, 72 L. Ed. 1004 (1927); Tow v. Miners Memorial Hospital Ass'n., 305 F.2d 73 (4th Cir. 1962); KECO Indus., Inc. v. ACF Indus., Inc., 316 F.2d 513 (4th Cir. 1963); Toyomenka, Inc. v. Mount Hope Finishing Co., 432 F.2d 722 (4th Cir. 1970); Heavner v. State Automobile Mut. Ins. Co., 350 F.Supp. 859 (W.D. Va.1972); Vol. 4 Michie's Jur., subject Conflict of Laws § 20 page 53; Vol. 16 Am.Jur.2d, subject Conflict of Laws § 48 page 46.

Virginia decisions are in accord with the general rule that the interpretation of the insurance contract depends upon the law of the place where the contract was delivered. Woodson v. Celina Mut. Ins. Co., 211 Va. 423, 177 S.E.2d 610 (1970); Lackey v. Virginia Surety Co., 209 Va. 713, 167 S.E.2d 131 (1969); Mutual Life Ins. Co. of New York v. Johnson, 293 U.S. 335, 55 S.Ct. 154, 79 L.Ed. 398 (1934); Northwestern Mutual Life Ins. Co. v. McCue, 223 U.S. 234, 32 S.Ct. 220, 56 L.Ed. 419 (1912); Hardware Mut. Casualty Co. v. Wendlinger, 146 F.2d 984, 989 (4th Cir. 1944), cert. denied 324 U.S. 882, 65 S.Ct. 1029, 89 L.Ed. 1432; Harrison v. Carroll, 139 F. 2d 427 (4th Cir. 1943); Farmer v. Fidelity & Casualty Co., 249 F.2d 185 (4th Cir. 1957); United Services Life Ins. Co. v. Moss, 303 F.Supp. 72 (W.D.Va. 1969).

Unless otherwise provided in the contract or by statute, a contract is made where the last act necessary to give the contract validity is performed. Equitable Life Assurance Society v. Clements, 140 U.S. 226, 11 S.Ct. 822, 35 L.Ed. 497 (1891); Toyomenka, Inc. v. Mount Hope Finishing Co., 432 F.2d 722 (4th Cir. 1970); KECO Indus., Inc. v. ACF Indus., Inc., 316 F.2d 513 (4th Cir. 1963); Tow v. Miners Memorial Hospital Ass'n., 305 F.2d 73 (4th Cir. 1962); Hogue-Kellogg Co., Inc. v. G. L. Webster Canning Co., Inc., 22 F.2d 384 (4th Cir.), cert. denied 277 U.S. 592, 48 S.Ct. 529, 72 L.Ed. 1004 (1927). 4 Michie's Jur. page 53, subject, Contracts, ¶ 22. Pursuant to the provisions of Virginia Code 38.1-282, the defendant insurance company was authorized to transact business in the State of Virginia only through a regularly constituted resident agent licensed in this State, and pursuant to Virginia Code 38.1-283, any policy issued to cover a subject of insurance located or to be performed in Virginia must be countersigned by a licensed resident agent of the Company.2

The last act necessary to give the contract validity was done in Virginia, the contract was delivered in Virginia, was to be performed in Virginia, was issued and countersigned by a resident agent of the Company in Virginia, and therefore is to be applied and construed according to the laws of Virginia.

The general rule, and the rule applicable in Virginia, governing the interpretation of insurance contracts is that the terms and conditions of an insurance contract are to be considered the same as in other contracts, subject only to the...

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