Fidelity-Phenix Fire Ins. Co. v. Pilot Freight Carriers

• Decision Date: 07 January 1952
• Docket Number: No. 6338.,6338.
• Citation: 193 F.2d 812
• Parties: FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK v. PILOT FREIGHT CARRIERS, Inc.
• Court: U.S. Court of Appeals — Fourth Circuit

193 F.2d 812 (1952)

FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK v. PILOT FREIGHT CARRIERS, Inc.

No. 6338.

United States Court of Appeals Fourth Circuit.

Argued November 15, 1951.

Decided January 7, 1952.

C. R. Wharton and Richard L. Wharton, Greensboro, N. C. (Gregory S. Rivkins, New York City, Wharton, Poteat & Wharton, Greensboro, N. C., and Hill, Rivkins & Middleton, New York City, on the brief), for appellant.

B. S. Womble, Winston-Salem, N. C., and C. T. Boyd, Greensboro, N. C. (W. M. York, Greensboro, N. C., C. W. Womble, Winston-Salem, N. C., York & Boyd, Greensboro, N. C., and Womble, Carlyle, Martin & Sandridge, Winston-Salem, N. C., on the brief), for appellee.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

This appeal is taken from a judgment in the amount of $49,750 in favor of Pilot Freight Carriers, Inc., the Plaintiff in the District Court, in a suit against Fidelity-Phenix Fire Insurance Company of New York. The claim was based on damages caused by the theft of 630 cases of cigarettes belonging to R. J. Reynolds Tobacco Company and transmitted by the plaintiff, as a common carrier. The suit is on a cargo insurance policy which covered the legal liability of the assured carrier for the amount (not exceeding $49,750) that it should be forced to pay for loss on shipments of goods from certain perils, including theft. The carrier has paid the Reynolds loss.

The question presented is whether the loss is covered by the policy which, with respect to theft, contains the following provisions:

"1. In consideration of the rate at which this policy is written, it is a condition precedent to the liability of the Insurer hereunder and to the effectiveness of this policy as respects theft coverage for vehicles, that trucks and trailers owned, hired or used by the Assured will be equipped with a Senior Babaco Alarm including Parker when more than 50% of the load consists of manufactured tobacco products, textiles, alcoholic beverages or any or all combined; that such Babaco Alarm System and Parker will be maintained in working order at all times, inspected and approved once each month by the Babaco Alarm Systems, Inc. and proper inspection certificates issued.

"2. It is also a condition precedent to the liability of the insurer hereunder and to the effectiveness of this Policy as respects theft coverage for vehicles, that all the Babaco equipment protecting the cargo compartment of each vehicle equipped as aforesaid shall be in the `on' position while aforementioned merchandise is contained in said compartment, except with respect to any trailer which is actually being loaded, and/or unloaded and that while any trailer is being loaded and/or unloaded, at least one man shall be in actual attendance on the cargo compartment.

"3. It is further warranted by the Assured that the Babaco Alarm System on the cargo compartment of each and every truck or trailer transporting a load 50% or more of which consists of manufactured tobacco products, textiles, alcoholic beverages or any or all combined and covered hereunder shall be sealed by the Terminal Dispatcher or agents as designated below immediately after loading is completed and prior to the trailers leaving the loading terminal or shipping point, and unsealed by only the Terminal Dispatcher at Assured's regular terminals or by agents as designated below upon the arrival of said vehicles — the Babaco Alarm System to be sealed by means of the `Sealed Load' key provided by the Babaco Alarm Systems, Inc.

* * * * * *

"5. It is further warranted by the Assured that the Babaco Alarm System on the Cargo compartment of each trailer and the `Parker' device on each trailer will be in the `on' position when such vehicles are parked unattended, when loaded with commodities and in amounts stated above.

"6. The assured agrees, by acceptance of this policy, that the foregoing conditions precedent relate to matters material to the acceptance of the risk by the Insurer. Failure of the insured to comply with any of the foregoing conditions precedent in any instance shall render policy null and void as respects theft coverage for vehicles."

The insured carrier is a North Carolina corporation with its principal office at Winston-Salem. The vehicle used by it in transporting the stolen freight was an enclosed trailer, approximately 30 to 32 feet in length, drawn by a separate motor tractor. Freight was loaded into the trailer through rear doors which could be closed and sealed. The trailer was equipped with the theft protection device, described in the policy and known as the Senior Babaco Alarm, consisting of two parts, the "Sealed Load" alarm and the "Parker" alarm. Both parts were controlled by a steel alarm box, 30 inches long, 10 inches wide and 12 inches deep, mounted beneath the body of the trailer on the right side, about midway between the front and the rear end. The box contained batteries and a loud siren alarm, and was operated by means of two keyhole switches, each having an "on" and an "off" position, one controlling the "Sealed Load" alarm, and the other the "Parker" alarm.

Ordinarily in such a device the "Sealed Load" is applied immediately after a cargo is loaded on the trailer and the trailer doors sealed. The "Sealed Load" alarm is then placed in the "on" position, and it becomes impossible to open the rear doors without sounding the siren alarm. Keys to the "Sealed Load" alarm are kept only at the motor carrier's terminal points and were not furnished to drivers en route. Hence the "Sealed Load" alarm ordinarily remains "on" from the point of shipment to the point of destination.

The other half of the Babaco device, the "Parker" alarm is designed to prevent the unauthorized movement of the trailer. When the "Parker" switch is "on", it is impossible to move the vehicle without sounding the siren alarm. Since the insurance policy required that the "Parker" alarm be kept in the "on" position whenever an insured vehicle was left parked unattended, the drivers should have been supplied with a key; but, for some unexplained reason, the carrier did not furnish keys to its drivers.

On the morning of March 3, 1949, carrier's trailer No. 81 was inspected at its Winston-Salem terminal and the Babaco "Sealed Load" device was found to be defective. It was taken to the Babaco service agency in town where it was discovered that the wires had been cut. They were replaced and the system was tested and found to be operating properly. The trailer was then taken to the R. J. Reynolds Tobacco factory, loaded with 630 cases of Camel Cigarettes, the doors were closed and sealed, and the "Sealed Load" alarm switch was turned to the "on" position. A two-man crew drove the trailer and tractor from Winston-Salem to the carrier's terminal in Hoboken, New Jersey, arriving at about seven o'clock the following morning. Neither member of the crew had a key for the "Parker" device, and the testimony indicates that the carrier had "somehow or other along the line * * * dropped off the `Parker' key business." The members of the truck crew testified, however, that the tractor-trailer unit was never parked unattended from North Carolina to Hoboken, New Jersey. The only stops were made at the carrier's checking stations where an employee would watch the unit while the drivers ate.

The drivers turned the tractor-trailer and the bills of lading over to the watchman at the Hoboken terminal, where, about an hour later, a local driver, Salvatore Sinno, was assigned to drive the vehicle to the Lakawanna Warehouse of the R. J. Reynolds Company in Jersey City, about a mile and a half away. Sinno drove the vehicle to a point 150 yards from the Lakawanna Warehouse and parked it on the right side of the street. He then crossed the street to a cafe, had a cup of coffee and some cake, then walked to the warehouse, got a lot number, and returned to the tractor-trailer. Since he was not supplied with a key, the "Parker" device remained in the "off" position during his 15 minute absence. Upon his return he opened the left door of the tractor and started to climb in when he saw a man with a pistol in the cab on the right hand side of the seat. The man ordered Sinno to get in and "keep his mouth shut." Another man jumped on the left side of the running board and Sinno was directed to drive the vehicle around the corner, approximately two and a half blocks, where he was ordered to stop. He was forced to get out of the cab and to get into the rear of a waiting automobile on his hands and knees. Several hours later he was released about 14 miles north of the Hoboken terminal and reported the robbery by telephone to the terminal. The vehicle was found empty that evening in New York City. The "Sealed Load" switch was then in the "off" position.

There was some conflict in the evidence as to whether the "Sealed Load" alarm to the cargo compartment was in the "on" position at the time of the theft; but the jury having resolved this conflict in the plaintiff's favor, we are not concerned with it on this appeal. It is conceded, however, that the "Parker" device was not in the "on" position when Sinno parked the vehicle and left it unattended on the street, and the question therefore arises as to whether, under the circumstances related, this failure on the part of the insured to comply with the warranty contained in the fifth paragraph of the Babaco warranty bars recovery for the loss. The District Judge had no doubt that failure on the part of the insured to comply with this provision would avoid the policy; but he was of the opinion that although the device was not "on", there was substantial evidence that the vehicle was not unattended, when the loss occurred, and hence the jury's finding on the second issue required a judgment for the insured. 98 F.Supp. 329.

We think that the conclusion on the first point was correct, but that the conclusion on the second point...