Cumis Ins. Soc., Inc. v. Republic Nat. Bank of Dallas
| Decision Date | 04 May 1972 |
| Docket Number | No. 17824,17824 |
| Parties | CUMIS INSURANCE SOCIETY, INC., Appellant, v. REPUBLIC NATIONAL BANK OF DALLAS, Appellee. |
| Court | Texas Court of Appeals |
J. Dan Bohannan, Burford, Ryburn & Ford, Dallas, for appellant.
Gordon H. Rowe, Jr., Gardere, Porter & DeHay, Dallas, for appellee .
Republic National Bank of Dallas has sued Cumis Insurance Society, Inc., on two contracts styled 'Credit Union Discovery Bonds' issued by the society, one to Grand Rapids Teachers Credit Union of Grand Rapids, Michigan, and the other to Merced School Employees Federal Credit Union of Merced, California. The bank alleges that it delivered to the credit unions certain blank traveler's checks, which were stolen while being held by the credit unions for safekeeping and sale, and that some of the stolen checks were completed by persons unknown and were negotiated so that the bank was required to pay out $2,180 for checks stolen in Grand Rapids and $6,310 for checks stolen in Merced, and that these losses were covered by the contracts in question. Both parties moved for summary judgment. The facts alleged in the petition were established without dispute. The record shows that the checks were taken in burglaries of the offices of the credit unions and that the total amount paid out by the bank on the stolen checks was $8,170. The trial court denied the society's motion and granted the bank's motion for summary judgment and the society appeals.
The question is whether the bank has the right to recover for this loss as third-party beneficiary. This question depends on two subsidiary questions: (1) Does a contract to indemnify an insured bailee for loss of property within its premises 'held by the Insured in any capacity, and whether or not the Insured is liable therefor' insure the full value of the property or only the bailee's interest? (2) If the contract insures the full value of the property, does the owner have the right to enforce it as a third-party beneficiary? We hold that the full value is covered and that the owner may enforce the contract.
The first question, concerning the property insured, is a matter of determining the intent of the parties from the language of the contract. Since the two contracts here are identical, we shall discuss them as if only one were involved. In the opening paragraph the society 'agrees to indemnify' the insured credit union 'from and against any losses sustained by the Insured as a result of any of the occurrences or events stipulated in this Bond.' Among the 'occurrences or events stipulated' are the following:
'For direct loss of any property, as defined herein, through burglary, robbery, larceny (whether common-law or statutory), theft, holdup, misplacement, mysterious unexplainable disappearance, damage or destruction, including damage or destruction by fire of property as defined herein, while such property is within the premises as defined herein.'
'Property' is defined as 'Money, securities, bullion, * * * jewelry * * * in which the Insured has a pecuniary interest or which are held by the Insured in any capacity, and whether or not the Insured is liable therefor.' 'Securities' is defined to include 'checks.'
Under the contractual definition these checks were 'property.' They were covered by the contract in the same manner as money, bullion or jewelry. Although they may have been of little inherent value, they were potentially worth the face amounts if sold or negotiated. Consequently, we must consider that a loss occurred at the time of the burglary, like the loss of any other property taken from the credit unions' custody, rather than at the time the bank was required to pay them. 1
Moreover, the checks were 'property' in the sense that they were the subject of a contract of bailment between the credit union and the bank. 2 Hence, we have stated the first question above to be whether the society has agreed to insure only the bailee's interest, or whether it agreed to insure the full value of the property.
We interpret the contract as insuring the full value of the property because we find that intent in the insuring clause when taken in connection with the definition of 'property.' The insuring clause covers 'loss of any property' through burglary, fire and other occurrences specified while 'within the premises' of the insured. The definition of 'property' is broad enough to cover property held by the insured as bailee, since it is not limited to property 'in which the Insured has a pecuniary interest,' but extends to property 'held by the Insured in any capacity.' Since property held by the insured as bailee (or in any other capacity) is covered 'whether or not the Insured is liable therefor,' the insured's legal liability for the loss need not be established.
The society contends that the phrase 'whether or not the Insured is liable therefor' means only that the society could not avoid liability to the insured for any amount the insured has actually paid out on the ground that the insured has paid something it was not legally liable for. 3 In this connection the society concedes that the credit union could recover from the society if it had first paid the bank for this loss. We do not think the contract can reasonably be construed as making coverage depend on the voluntary act of the insured after the loss. We construe it as providing indemnity to the insured for loss of any property on its premises by burglary, fire, or any of the other occurrences, specified, to the extent of the credit union's insurable interest as owner, bailee, or otherwise, Consequently, we hold that the insured credit union had the right to recover from the society the full value of the property as indemnity for such loss and hold the proceeds in lieu of the property for the benefit of the owner.
This interpretation of the contract is amply support by judicial precedents. If the language of the contract limits the insurance to the interest of the bailee in property within his custody, or his liability for loss of such property, the courts hold that the insurer is liable only to the extent of the bailee's interest or of the amount of the bailee's liability legally established. 4 On the other hand, a bailee has an insurable interest in the property, which authorizes him to insure it for its full value, and courts have construed contracts containing language similar to that now before us as providing this broader coverage. 5
The society contends that its liability is limited to loss of the credit union's interest and the funds the credit union has actually paid because the society agreed only to 'indemnify the Insured * * * against losses sustained by the Insured.' The society argues that this language provides personal indemnity insurance rather than insurance on property. 6 We cannot agree. Insurance on property, as well as other insurance, is by definition indemnity against loss. 7 Otherwise it would be against public policy. 8 Insurance on property is not an incident of the thing insured, but a personal contract of indemnity to the person insured for his loss. 9
The distinction between property insurance and personal insurance must rest on contractual language other than the verbs 'indemnify' or 'insure,' which in this context are synonymous. 10 A contract provides property insurance if it binds the insurer to indemnify the insured for loss of identifiable property described either specifically or by general language, such as property in a certain place or within the possession of the insured. If the contract describes property in a certain place and some of the property in that place is not owned by the insured, but is in the custody of the insured as bailee, the question arises as to whether the insurer has agreed to indemnify the insured only for loss of property in which he has a pecuniary interest or extends to loss of property in which he has an insurable interest because of his duty as bailee to account to the owner. This question must be determined by looking to the contractual language defining the property covered. Here the contract covers loss of property 'within the premises' of the insured, and 'property' is defined to include not only property in which the insured has a pecuniary interest, but also property 'held by the Insured in any capacity whether or not the Insured is liable therefor.' This language cannot reasonably be construed as limiting the property covered to the insured's pecuniary interest or to money paid out by the insured as a result of the loss.
This construction is in accordance with Hudiburg Chevrolet, Inc. v . Globe Indem. Co., 394 S.W.2d 792 (Tex.Sup.1965), which involved a suit by an insured automobile dealer for the value of a truck stored with it and stolen from its premises. The original policy was in the usual language of liability insurance binding the insurer to pay all sums which the insured should be legally obligated to pay because of injury to or destruction of property. An endorsement provided, 'this policy is extended to cover for direct loss of or damage * * * by theft * * * to automobiles which are the property of others and in the custody of the insured for storage, repair or safekeeping, * * * regardless of the legal liability of the insured.' The Supreme Court held that the insured bailee was entitled to recover the market value of the truck but that recovery would be limited to the amount the bailee had paid out to a mortgagee because that was all it had prayed for. The court based this holding on the general rule that contract provisions covering property contained in specified places and for which the insured is liable are held to insure against loss of the property and not to indemnify the insured against his legal responsibility in tort or by contract to the owner of the property, and the court observed that this rule permits the insured...
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