Ivey v. United National Indemnity Company, 15601.

• Decision Date: 09 September 1958
• Docket Number: No. 15601.,15601.
• Citation: 259 F.2d 205
• Parties: Everett D. IVEY, Appellant, v. UNITED NATIONAL INDEMNITY COMPANY, a corporation, National Fire Insurance Company of Hartford, Connecticut, a corporation, and Trans-Continental Insurance Company, a corporation, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

259 F.2d 205 (1958)

Everett D. IVEY, Appellant, v. UNITED NATIONAL INDEMNITY COMPANY, a corporation, National Fire Insurance Company of Hartford, Connecticut, a corporation, and Trans-Continental Insurance Company, a corporation, Appellees.

No. 15601.

United States Court of Appeals Ninth Circuit.

September 9, 1958.

Alexander, Bacon & Mundhenk, W. C. Bacon, Herbert Chamberlin, San Francisco, Cal., for appellant.

Boyd & Taylor, M. K. Taylor, Frederic G. Nave, San Francisco, Cal., for appellees.

Before HEALY, POPE and HAMLEY, Circuit Judges.

POPE, Circuit Judge.

The appellant Ivey is a physician and surgeon practicing his profession at Oakland, California. In 1946, and the years following, he purchased tracts of land in Colusa County, California, which he proceeded to develop as locations for duck hunting. He installed gates and other means for controlling the water which he collected on the land and constructed duck blinds and bunk sheds for the use of hunters. This started as a hobby, but by 1953 it had become a business enterprise as he was then charging for the privilege of shooting on his land. He was the sole owner of this business enterprise.

Prior to 1953 Dr. Ivey had carried liability insurance with the appellee United National Indemnity Company, a corporation of the State of New York, covering the use of his automobiles. This was extended to cover his home, his office, and some other properties by amendments and additions to the initial automobile policy. His claim, which gives rise to this lawsuit, is that the original automobile liability policy, which was renewed for one year on January 15, 1953, was extended to cover liability for property damage in connection with his duck hunting business. This is denied by the appellee,¹ which brought the action below against Ivey for the purpose of procuring a declaration of non-liability.

The occasion for the controversy arose out of the fact that in October, 1953, water from a ditch used in connection with the duck ponds caused flooding and damage to rice crops on the adjoining lands of one Brian. Brian recovered a judgment against Ivey in the sum of $33,000 on account of this damage. Involved here is the insurance company's responsibility for satisfaction of that judgment.

Attached to the basic policy, which is entitled "Comprehensive General Automobile Liability Policy", is a rider or endorsement bearing the same date as the policy entitled "Individual As Named Insured (Including Personal Liability Coverage for Named Insured and Family)". The named insured is Dr. Ivey, and included in the so-called "Insuring Agreements" is an undertaking stated as follows: "To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, and as damages because of injury to or destruction of property, including the loss of use thereof."

Appellant claims that the quoted provision was intended to cover the operations of his duck hunting property. The appellee calls attention to certain qualifying language in the endorsement which it says makes it plain that the occurrence relating to the flooding of the Brian lands was not covered. Such was the view of the trial judge who found the company's policy did not provide property damage insurance coverage for the duck hunting property and entered judgment for the appellee.

At the trial the appellant introduced the testimony of one Knudsen who was his insurance broker and also an agent writing insurance for the appellee company. This tended to show that in procuring the insurance policy and its endorsements, the broker notified the company that appellant wanted both property damage and bodily injury liability coverage on the duck hunting property; and that he, the broker, understood from the appellee that such coverage was provided by the policy, and that he had so informed the appellant.

This testimony of Knudsen was received over the objection of the appellee company and was subsequently stricken on its motion. The appellant contends that the evidence was properly admissible and should have been taken into consideration by the court for two reasons: first, that the policy as written and issued to him was ambiguous; and second, that this evidence tended to prove appellant's claim that the insurance company is estopped to deny that it provided this property damage coverage.

The language used in the policy itself and in the endorsement referred to, is so involved and so intricate in its phraseology as to be well calculated to confuse the ordinary reader. The company appears by its choice of phraseology to have cast the policy in words barely escaping unintelligibility. Thus the endorsement contains a provision that it is agreed: "1. The policy does not apply to any business pursuits of an insured, except (a) in connection with the conduct of a business of which the named insured is the sole owner, and (b) activities in such pursuits which are ordinarily incident to non-business pursuits." This seems to say that it does apply to the conduct of a business solely owned by the insured, except that it has no application to those things that are done in the conduct of the business.

The insuring agreements, the first of which is quoted above, are proceeded by the following recital:

"Except as it applies to the conduct of a business of which the named insured is the sole owner, the policy is amended as follows: * * * 1. Insuring Agreement 1 is replaced by the following:"

Insuring agreement No. 1 in the original policy is one which covers (a) bodily injury liability generally; (b) property damage liability arising out of the ownership and use of an automobile; and (c) property damage liability generally. This part of the policy showed that item (c) was not covered. Of course item (b) is not related to anything but liability arising out of use of an automobile; but item (a) covers bodily injury liability generally including that arising out of the conduct of "a business in which the named insured is the sole owner." Obviously the trial court's view was that insuring agreement No. 1 was not replaced by the liability clause including property damage first quoted above.

We find it unnecessary for the purposes of this opinion to pass upon this question. In reaching our conclusions here we assume that there is no ambiguity in the terms of the policy, and that a painstaking reading of the policy so shows. The other question raised here still remains: whether in view of the testimony of the insurance broker Knudsen, mentioned above, the appellee is estopped to deny that the policy provided the coverage which Knudsen understood that it did. Of course if proof of the existence of the elements commonly constituting an estoppel would be insufficient as a matter of law to hold the company liable, then the court below properly struck from the record the Knudsen testimony. We proceed to a consideration of that question.

A multitude of cases might be cited for the proposition that an insurance company may be estopped to claim a breach of warranty or a breach of condition in an insurance policy. In fact there are many cases to the effect that such defenses may be waived by certain conduct amounting to something less than a technical estoppel. These are generally cases where the insurance companies have relied on a forfeiture of a contract for breach of warranty or of a condition. In such cases if the companies have led the insured to understand that such breaches would not be insisted upon, then the companies have been prohibited from asserting those defenses. In some of those cases this doctrine is called one of estoppel and in others it is referred to as waiver. For a collection of such cases see the note in 113 A.L.R. 857, annotating Washington National Insurance Company v. Craddock, 130 Tex. 251, 109 S.W.2d 165, 166.

But as the note just referred to indicates, most of these cases draw a distinction between a claim of estoppel to assert breach of warranty or condition, and a claim of estoppel to prevent the insurance company from maintaining that certain risks are not covered by the policy. The distinction is referred to in the Craddock case, supra, through quotation of 32 C.J. 1317, as follows: "A waiver cannot operate to bring within the terms of the policy a loss which is expressly excepted therefrom or supply a failure of proof that a loss was covered by the policy." See also, 45 C.J.S. Insurance § 674. The language quoted refers to "waiver" but similar language has been used with reference to the claims of estoppel,...