Iowa-Des Moines Nat. Bank v. Insurance Co., 71-1435.

• Decision Date: 11 April 1972
• Docket Number: No. 71-1435.,71-1435.
• Citation: 459 F.2d 650
• Parties: IOWA-DES MOINES NATIONAL BANK, Administrator of the Estate of David Mallon, Deceased, et al., Appellees, v. INSURANCE COMPANY OF NORTH AMERICA, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

459 F.2d 650 (1972)

IOWA-DES MOINES NATIONAL BANK, Administrator of the Estate of David Mallon, Deceased, et al., Appellees, v. INSURANCE COMPANY OF NORTH AMERICA, Appellant.

No. 71-1435.

United States Court of Appeals, Eighth Circuit.

Submitted February 16, 1972.

Decided April 11, 1972.

H. Richard Smith, Des Moines, Iowa, for appellant; Ahlers, Cooney, Dorweiler, Allbee & Haynie, Des Moines, Iowa, of counsel.

William J. Koehn, Harlan D. Hockenberg, Stephen W. Roberts, Jon T. Griffin, Des Moines, Iowa, for appellees; Thoma, Schoenthal, Davis, Hockenberg & Wine, Des Moines, Iowa, of counsel.

Before MATTHES, Chief Judge, and LAY and ROSS, Circuit Judges.

LAY, Circuit Judge.

Midwest Mutual Insurance Company (hereinafter Midwest), policyholder on the life of Jules Jackson Mallon,¹ and others claiming to be beneficiaries, recovered $50,000, the face value of a group travel accident policy issued by Insurance Company of North America. The trial court submitted to the jury interrogatories respecting the various claims of the parties and on the basis of the answers returned entered judgment for the plaintiffs. On appeal the insurer asserts basically that the trial court erred in submitting to the jury the issue of the parties' intention respecting coverage, and alternatively, since the jury found there was no ascertainable mutual intention there could be no recovery under the policy. We affirm.

Midwest solicited through an independent insurance agent, Richard J. Noyce, bids for a group travel accident policy covering its employees. The evidence conflicted as to the respective intents of the parties at the time of the policy's issuance. Plaintiff's officials testified that although Midwest did not own a plane at the time of the initial application, Preferred Risk Mutual, another insurance company with which it had close ties, did own one. Mallon, the deceased, was a pilot as well as an executive for both companies and at times flew this plane on Midwest business. Noyce testified that he made specific inquiry as to whether Midwest owned their own plane since it affected the coverage and if full coverage was desired, an increase in the premium would be necessary. Noyce did not recall his conversation with a Midwest official in which he allegedly assured him that there would be coverage for company employees flying as pilots on Midwest owned or operated aircraft. His notes did reflect there was some mention of Mallon being a pilot but he stated his understanding was that Mallon would fly only on Preferred Risk business. The policy was thereafter issued.²

Some time after the policy was issued Midwest purchased Preferred's plane. Noyce then wrote INA and inquired whether there was coverage. An INA group manager replied:

"Our interpretation would read as I have underlined on this copy. It is not our intent to provide coverage in aircraft that is owned or operated by the Policyholder. I agree that the wording is confusing, but it sic the one that I have to live with."

This communication occurred on February 28, 1969. Shortly thereafter Noyce wrote to Midwest informing them of no coverage for those riding in the company plane. Noyce notified Midwest that if accidental death coverage was desired on the company owned plane the premium would have to be increased. The additional coverage would have increased the premium approximately ten times. It was conceded by an officer of Midwest, Robert D. Meyer, that both he and Mallon were apprised of INA's position. However, Midwest officials told Noyce that they construed the above clause as providing coverage for the privately owned plane piloted by their own personnel. On August 2, 1969, Mallon was killed while piloting the Midwest owned plane.

The court instructed the jury:

"The Court has instructed you that you could find in this case that the parties here had different intentions at the time of the making of the contract as to the meaning of the language used in Schedule II thereof.

"Section 622.22 of the Iowa Code provides as follows:

`When the terms of an agreement have been intended in a different sense by the parties to it, that sense is to prevail against either party in which he had reason to suppose the other understood it.\'

"Section 622.22 imposes upon the parties to a contract the duty of acting in good faith. One party cannot go ahead upon its own theory and understanding of the terms of a contract with notice that the other party understood the contract in an entirely different manner and then, after a contract has been entered into or after a loss has been incurred, advise the other party for the first time that it was mistaken in its understanding of the terms and conditions of the contract.

"In this case if you find from all the facts and circumstances as shown by the evidence that one of the parties here knew or had reason to know that the other party intended, at the time of the making of the contract, a different interpretation of Schedule II thereof than that intended by the other party and failed to communicate its knowledge of such differing intention to that other party, then that other party\'s intention prevails as the intention of both parties as to the meaning of the language of Schedule II.

"If you find that one of the party\'s intentions as to the meaning of the language employed in Schedule II prevails in this case due to the requisites of this instruction, you will so indicate by placing the proper mark as hereinafter instructed on Interrogatory No. 4."

The trial court submitted the interrogatories to the jury and the following answers were received:

"1. Not relevant.

"2. Do you find that it was the mutual intention of Midwest Mutual Insurance Company and Insurance Company of North America, at the time they entered into the contract of insurance, that coverage was to include travel in aircraft owned or operated by Midwest Mutual Insurance Company and include pilots?

"Answer: . . . `no\'

If your answer to Interrogatory No. 2 is `No', proceed to Interrogatory No. 3.

"3. Do you find there was no ascertainable mutual intention on the part of Midwest Mutual Insurance Company and Insurance Company of North America, at the time they entered into the contract of insurance, because their contractual intent was not in harmony; that is, they did not intend the same result with respect to the coverage for loss arising from the operation of aircraft owned by the policyholder or coverage for pilots?

"Answer: `Yes\' . . .

If your answer to Interrogatory No. 3 is `yes', proceed to Interrogatory No. 4.

"4. We, the jury, having found that there was no ascertainable mutual intent at the time the parties entered into the contract now find that the intention of the party indicated by our mark in this form controls, because of the requisites of Instruction 12.

x Midwest Mutual Insurance Company, policyholder

Insurance Company of North America, defendant."

The initial complaint on appeal is that the trial court erred in submitting the interrogatories to the jury since there exists only one reasonable interpretation of the policy in question, to-wit, that coverage is not provided for pilots operating company owned planes. We disagree. The plain meaning of the clause in question is not only confusing to a reasonable person standing in the shoes of the insured, but the language is admittedly confusing to the insurer as well. The syntax of the sentence structure is so befuddled that any number of meanings could be read into it. We find as one reasonable interpretation, that the passengers are covered on any aircraft; that pilots or crew members are not covered "on any transport aircraft operated by the Military Air Transport Service (MATS) of the United States of America or by the similar military air transport service of any other country; or on any civil aircraft, except one owned or operated by an insured. . . ."³

We do not find this construction to be unnecessarily strained. We agree that this is not the only interpretation and that the insurer's interpretation is a reasonable one as well. Clearly, the insurer and its agent, Noyce, considered it as not providing coverage and submitted a lower premium for the risk involved. According to the evidence Midwest officials understood it otherwise.

It is conceded Iowa law governs the case. In Iowa construction of the terms of an insurance policy is a question of law for the court. Brammer v. Allied Mutual Insurance Co., 182 N. W.2d 169, 172 (Iowa 1970); General Casualty Co. of Wisconsin v. Hines, 261 Iowa 738, 156 N.W.2d 118, 122 (1968). Iowa courts will apply rules of construction only where the policy is ambiguous in offering more than one reasonable interpretation. Mopper v. Circle Key Life Insurance Co., 172 N.W.2d 118, 124 (Iowa 1969); Randolph v. Fireman's Fund Insurance Co., 255 Iowa 943, 124 N.W.2d 528, 529 (1963). In each case the court is required to construe the policy according to the intention of the parties at the time the contract was entered into. Bjork v. Dairyland Insurance Co., 174 N.W.2d 379, 383 (Iowa 1970); Youngwirth v. State Farm Mutual Automobile Insurance Co., 258 Iowa 974, 140 N.W.2d 881, 883 (1966); Iowa National Mutual Insurance Co. v. Fidelity and Casualty Co. of New York, 256 Iowa 723, 128 N.W.2d 891, 893 (1964). Where the words of the policy cannot be interpreted on their face without the policy being subject to more than one reasonable interpretation, the court may turn to extrinsic evidence to ascertain the meaning of the parties. Charles Weitz's Sons v. United States Fidelity & Guaranty Co., 206 Iowa 1025, 219 N.W. 411 (1928); Transport Indemnity Co. v. Dahlen Transport, Inc., 281 Minn. 253, 161 N.W.2d 546 (1968); cf. Hamilton v. Wosepka, 261 Iowa 299, 154 N.W.2d 164, 168 (1967). If this evidence is conflicting it should be resolved by a jury. Brammer v. Allied Mutual Insurance Co., supra, 182 N.W.2d at 172-173; General Casualty Co. of Wisconsin v. Hines, supra, 156 N.W.2d...