Composite Technology, Inc. v. Underwriters at Lloyd's, London, 1
| Decision Date | 21 May 1985 |
| Docket Number | No. 84-1589,No. 1,No. 2,1,2,84-1589 |
| Citation | 762 F.2d 708 |
| Parties | COMPOSITE TECHNOLOGY, INC. and E. Keith Harvey, Appellees, v. UNDERWRITERS AT LLOYD'S, LONDON, Guardian Royal Exchange Assurance, LTD., La Concorde Compagnie D'Assurances S.A. (account), La Concorde Compagnie D'Assurances S.A. (account), Norwich "Trust" Account, Minster Insurance Company, LTD., Sphere Insurance Company, LTD. ( account), Drake Insurance Company, LTD. (account), Compagnie D'Assurances, Maritimes, Aeriennes and Terestres, S.A., Assurances Generales De France, Gan Incendie Accidents Compagnie Francaise D'Assurances et de Reassurances, Scottish Land Insurance LTD., Andrew Weir Insurance Company, LTD., British Reserve Insurance Company, LTD., British Law Insurance Company, LTD. (account), Lombard Insurance Company (U.K.) LTD. (account) Road Transport and General Insurance Company, LTD. ("G" account), Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Thomas C. Walsh, St. Louis, Mo., for appellants.
Larry O'Neal, Kansas City, Mo., for appellees.
Before ARNOLD, Circuit Judge, HENLEY, Senior Circuit Judge, and BOWMAN, Circuit Judge.
The issue in this case is whether the word "sales" in the liability insurance policy here involved is sufficiently precise and unambiguous to allow for summary judgment based strictly on the language of the policy, without consideration of any extrinsic evidence. The District Court ruled that it was, and granted summary judgment in favor of the insured. We reverse and remand.
A military helicopter crashed near Passaic, Missouri on June 11, 1982. Six members of the United States Air Force were killed. The accident involved a helicopter rotor blade that allegedly had been repaired by Composite Technology, Inc. (CTI). Following the crash, several lawsuits were filed naming CTI, among others, as a defendant and claiming that CTI had negligently performed repairs to the rotor blade of the doomed helicopter.
CTI gave its liability insurance carriers (the Underwriters) timely notice of the crash, and requested that they assume CTI's defense of the lawsuits arising therefrom and that they provide coverage for any damages awarded. Relying on an exclusion in the policy for "sales to military organizations," the Underwriters denied any obligation to defend or to provide coverage.
CTI and its president and principal stockholder E. Keith Harvey 1 then filed the present action against the Underwriters to obtain a declaratory judgment of coverage and duty to defend. 2 The Underwriters subsequently agreed to assume the defense of the underlying lawsuits subject to a reservation of rights.
Less than a month after the Underwriters filed their answer to the complaint, CTI moved for summary judgment, arguing that the insurance policy issued to it by the Underwriters unambiguously provides for coverage of any improper repairs by CTI to military helicopters. At the time CTI filed its motion, there had been no discovery.
Denying that the policy affords coverage for liability arising out of repairs performed by CTI for the military, the Underwriters sought to engage in discovery for the purpose of gathering evidence that would shed light upon the language of the policy. They also submitted the insurance application and several affidavits for the same purpose. The District Court, however, concluded that the issues raised by the motion for summary judgment could be resolved within the four corners of the policy. Having thus foreclosed consideration of any extrinsic evidence, the District Court took into account only the language of the policy, and found that "[a] reasonable reading of the pertinent portions of the policy leads to the conclusion that coverage is afforded for liabilities arising out of repairs performed by CTI for military organizations." Composite Technology, Inc. v. Underwriters at Lloyd's, London, No. 83-0671, mem. op. at 4 (W.D.Mo. April 2, 1984). Noting that the lawsuits against CTI arising out of the crash of the Air Force helicopter are based on the theory that CTI negligently performed repairs, the District Court granted CTI's motion for summary judgment. This appeal has followed. 3
The Underwriters contend that the District Court erred in granting summary judgment in favor of CTI on the basis of the policy language alone, without consideration of the evidence proffered by the Underwriters to show the scope of the policy's coverage. Where a written contract is ambiguous, resort to parol evidence--evidence extrinsic to the four corners of the instrument--is proper to resolve the ambiguity. See J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo.1973). "The meaning of an ambiguous contract is determined in light of the extrinsic circumstances." Penney v. White, 594 S.W.2d 632, 638 (Mo.App.1980). The question, then, is whether the policy is free from ambiguity. We believe it is not.
The key provision here at issue is paragraph 3 of the schedule attached to the policy:
THE NATURE OF THE ASSURED'S BUSINESS OR OPERATION IN RESPECT OF WHICH THE POLICY IS EFFECTED IS:--
Rotor Blade Repairers operating at Stockton, California and Dallas, Texas in respect of Civil Operations only excluding any liabilities in respect of sales to military organisations, if any[.]
Appendix at 406. This language, hand-tailored for the CTI policy and typewritten on what appears to be a pre-printed form, immediately tells us that the policy covers CTI's business as "Rotor Blade Repairers," and that coverage is afforded "in respect of Civil Operations only." The latter phrase would appear to rule out any coverage whatsoever for military operations, as distinguished from repair services rendered in the civilian sector. Doubt creeps in, however, because of the phrase "excluding any liabilities in respect of sales to military organisations, if any[.]" What is meant by the word "sales"? Was it intended simply to confirm, somewhat redundantly, the apparent total exclusion with respect to military operations, or was it intended to narrow the scope of that exclusion? CTI argues, and the District Court agreed, that "sales" as here used should be read narrowly as meaning only "sales of goods," resulting in the conclusion that the policy excludes from coverage only sales of goods by CTI to military organizations. The Underwriters argue that "sales" was intended to encompass all transactions with the military, i.e., sales of repair services as well as sales of goods. The word "sales" is quite capable of bearing either meaning 4 and the question is which of the ascribed meanings is in accord with the intention of the parties as of the time they entered the contract. The ambiguity is facially apparent, and is not cured by resort to other provisions of the policy, which provisions, unlike the clause under discussion, consist mostly of boilerplate language. We therefore hold that the District Court erred in determining that the word "sales" was free from ambiguity and therefore also erred in limiting its inquiry to the four corners of the contract. It follows that the order of the District Court granting summary judgment in favor of CTI must be vacated.
Having examined the insurance policy with some care, we wish to emphasize our belief that the boilerplate or...
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