Hamiltonian Federal Sav. and Loan Ass'n v. Reliance Ins. Co.

• Decision Date: 02 September 1975
• Docket Number: No. 36405,36405
• Citation: 527 S.W.2d 440
• Parties: HAMILTONIAN FEDERAL SAVINGS & LOAN ASSOCIATION, a corporation, Plaintiff-Appellant, v. RELIANCE INSURANCE COMPANY, Defendant-Respondent, Helen CAREY, Third-Party Defendant. . Louis District, Division One
• Court: Missouri Court of Appeals

Page 440

527 S.W.2d 440

HAMILTONIAN FEDERAL SAVINGS & LOAN ASSOCIATION, a corporation, Plaintiff-Appellant, v. RELIANCE INSURANCE COMPANY, Defendant-Respondent Helen CAREY, Third-Party Defendant.

No. 36405.

Missouri Court of Appeals, St. Louis District, Division One.

Sept. 2, 1975.

Gentry, Bryant & Hereford, Stephen M. Hereford, St. Louis, for plaintiff-appellant.

Joseph L. Leritz, St. Louis, Theodore S. Martin, Clayton, for defendants-respondent.

WEIER, Presiding Judge.

Plaintiff, Hamiltonian Federal Savings & Loan Association, brought suit against the defendant, Reliance Insurance Company. Plaintiff sought recovery under an indemnity bond issued by the defendant in the sum of $8,545.61, which the plaintiff had paid to the public administrator. Defendant filed a third party petition against a third party defendant, Helen Carey (formerly Helen Lowry), alleging that should defendant, Reliance Insurance Company, be held liable to plaintiff, the third party defendant would be liable for the claim against the defendant. Motions for summary judgment filed by both the plaintiff and defendant were overruled. The parties had waived a jury trial and submitted the action on stipulated facts. Under this stipulation it was agreed defendant issued its Savings and Loan Blanket Bond with an effective date of May 20, 1968 and a limit of $1,350,000.00, agreeing to indemnify the plaintiff within its terms. At all times pertinent to this action the bond was in effect. On April 17, 1974 the trial court entered its finding and judgment for the defendant. From this order, plaintiff appeals.

Third party defendant, Helen Carey (then Helen Lowry), was appointed guardian of the estate of her three minor children by the Probate Court of St. Louis County, and in that capacity opened an account with Hamiltonian in the amount of $7,780.55. On July 23, 1965 the Probate Court entered an order restricting the deposit by Helen Lowry by subjecting $7,144.17 to withdrawal only upon an order from the court. One of plaintiff's employees was instructed to prepare the account card and to indicate thereon the withdrawal restriction. Through negligence, however, the employee failed to note the restriction and therefore Because of Helen Lowry's failure to file an annual settlement, she was removed as guardian of her children's estate and replaced by the public administrator, Patrick M. Fiandaca III. On August 14, 1969 the public administrator demanded that plaintiff pay him, in his official capacity as guardian, all of the money paid to Helen Lowry without a court order plus interest. And thereupon $8,545.61, a sum equal to the original deposit plus all interest had there been no withdrawals, was paid by plaintiff to the public administrator. Plaintiff then demanded reimbursement from defendant, claiming the terms of its blanket bond policy covered the plaintiff's loss. Defendant refused to comply with plaintiff's demand. Thereafter, plaintiff filed the suit against defendant from which this appeal arises.

plaintiff's tellers did not receive notice of the court order. At various times in 1968 Helen Lowry withdrew $8,126.05. She did so without a court order and it was stipulated she did so without bad faith or fraudulent or dishonest intent. It was also stipulated the withdrawn funds were used solely for the benefit of her minor children.

The facts, having been stipulated, are not in dispute. So the resolution of this case must turn on the terms of the bond; the issue being whether or not plaintiff's claim was a recoverable loss within the meaning of the bond for which the parties contracted. Thus the language of the bond is crucial in determining whether plaintiff has actually suffered an indemnifiable loss. The plaintiff contends the 'On Premises' clause of paragraph B of the 'Insuring Agreements' section of the bond entitles them to be reimbursed for their payment to the public administrator. The bond, in part, provides:

'The Underwriter, in consideration of an agreed premium * * * agrees with the Insured, in accordance with the Insuring Agreements hereof * * * and with respect to loss sustained by the Insured at any time but discovered during the Bond Period, to indemnify and hold harmless the Insured for:

ON PREMISES

(B) Any loss of Property through robbery, burglary, common-law or statutory larceny, theft, hold-up, misplacement, mysterious unexplainable disappearance, damage or destruction, abstraction or removal from the possession, custody or control of the Insured (whether with or without negligence on the part of any Employee) * * *.' (Emphasis added.)

Plaintiff argues that blanket bonds indicate wide coverage and should be construed broadly in favor of the insured; thus since the insurance contract covers 'abstraction or removal from the possession' without a qualifying requirement that dishonesty must also be involved, the loss plaintiff incurred due to their employee's failure to note the account restriction is covered by the bond.

While the general rule concerning bonding contracts is that when ambiguous they will be construed against the bonding company, the company's liability cannot be extended beyond the terms of the contract. State ex rel. State Dept. of Public Health & Welfare, Division of Welfare v. Hanover Insurance Company, 431 S.W.2d 141, 143(3, 4) (Mo.1968); Jordan v. United Equitable Life Ins. Co., 486 S.W.2d 664, 666(1, 3, 5, 7) (Mo.App.1972). In addition, before such a presumption favoring the insured can operate, the language in the contract must in fact be ambiguous and thus susceptible to different constructions; unequivocal words must be given their plain and ordinary meaning. State ex rel. State Dept. of Public Health & Welfare, Division of Welfare v. Hanover Insurance Company, supra at 143(1, 2). But it is also clear that in Missouri insurance contracts must be reasonably construed consonant with the apparent objectives and intent of the parties. Jordan v. United Equitable Life Ins. Co., supra at 667(8). And finally, we note a pertinent elementary contract principle--in construing a contract, its component parts must be taken together and construed in relation to each other to determine the true intent and meaning. Mathews v. Knoll Associates, Inc., 388 S.W.2d 529, 532(1) (Mo.App.1965).

Admittedly, no specific language in the bond requires the 'abstraction or removal' to be a dishonest one. The terms, however, must not be read in isolation from the other terms of the clause and the other clauses of the contract in ascertaining the parties' intent. The other clauses of the bond include protection from fidelity losses due to a dishonest act of an employee, losses of office furnishings, supplies, and equipment due to criminal acts, losses in transit, losses through frogery, and losses due to fraud. Each of these categories of losses, however, if not dishonest by its very nature, is specifically limited by qualifying language in the relevant clause to acts involving dishonesty. Thus from an overview of the entire bond and the fact that the insured was a savings and loan association, it would seem the purpose of the contract was to secure protection from dishonest, fraudulent or criminal acts.

A bond provision identical to section (B) of the bond in question here was similarly interpreted in a New York case. Although the New York case was specifically concerned with the 'misplacement or mysterious disappearance' language, the analysis is the same. Neither phrase, 'misplacement or mysterious disappearance' or 'abstraction or removal', when viewed alone, requires the element of dishonesty, yet the court reached that conclusion when the terms are used in the context of the bond.

'A banker's or broker's blanket bond, such as that involved in this suit, is not, * * * broad insurance against the risk of loss in its banking operations. No degree of construction of alleged policy ambiguities can broaden the scope of the coverage beyond what a reasonable reading of the insurance...